The USD Index seems to have topped as it’s already more than one index point below this week’s high and gold’s reaction was… Less than spectacular to say it politely. To be precise – gold did almost nothing and the reaction was very boring. No action = no implications? Wrong. The above tells us quite a lot.

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The euro plunged, the USD Index soared and gold… just stayed put. There was no meaningful action except for the big intraday volatility that ended in a rather small decline. Can one infer anything at all from the above combination of factors? Yes, if one knows where to look.

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Gold is moving back and forth around the $1,300 level without a decisive breakout or breakdown, while the cyclical turning point approaches in case of the mining stocks. How is the latter likely to impact the precious metals’ prices given the unclear very short-term direction and amid increased tensions between USA and North Korea and in the light of renewed trouble in Europe?

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In the previous alerts, we wrote that the precious metals market was likely to reverse on Wednesday and Thursday based on the triangle apex turning points and thus a rally was possible. The possible upside target area was between $1,303 and $1,309. Gold just topped at $1,306 – right in the middle of the above estimate. Was this really the final top? Mining stocks showed great strength indicating bigger rallies on the horizon. Will we see them shortly? Context is king in any market situation, so in order to answer this question, we’ll have to consider it first.

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If Aerosmith was recording their hit song Crazy today, they might get a lot of inspiration from yesterday’s performance of the precious metals sector. Gold reversed after moving to new intraday high, silver took a dive and miners soared. This doesn’t make sense at the first sight. While soaring silver and underperforming stocks were bearish, the opposite is probably indicating higher prices, right?

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