In today’s first alert we wrote that while the medium-term outlook for gold remained bearish, there were indicators that the next short-term move might be up. Briefly, today’s rally is in tune with it - the short-term move is up, while the medium-term trend remains down. Gold didn’t move above the declining medium-term resistance line and it has only temporarily moved above the 38.2% Fibonacci retracement based on the March - November decline.
Please note that while gold moved sharply higher today and it seems that the rest of the precious metals sector followed, it’s important to note that gold stocks didn’t move above their recent short-term high. The HUI Index moved to 180 and didn’t even touch its 2013 low. Please recall that it was mining stocks’ strength that preceded the last few weeks of higher prices in the precious metals sector - at this time we are seeing the opposite, which could indicate declines (while not necessarily immediately, then it’s still a bearish sign for the short term).
Silver moved above its declining short-term resistance line just before its cyclical turning point. This is actually a bearish combination. Silver is known to flash fake buy signals (often in forms of various breakouts) just before taking another dive. This could be the case also this time.
Moreover, the USD Index declined to the upper border of the previous flag pattern without moving below it. At this time, the short-term outlook remains bullish - today’s big (on a day-to-day basis) decline didn’t change anything (at the same time, the potential for further rally remains limited).
Overall, the situation after today’s rally is still rather unclear. It was too unclear before today’s session to have any positions opened (with both: bullish and bearish signs present the situation was more bullish than not, but not very bullish) and this is also the case at this time. We will have more information after we see where the markets close today and we will keep you informed, should the situation becomes bullish or bearish enough (in our opinion) to justify opening any speculative positions.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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