We just replied on a question that we received to our e-mail inbox and we thought that you might also be interested in reading it. The question was how could the USD rally unless the FED changes its stance from dovish to hawkish.

Our reply is that there were only a few new comments from the Fed in the previous months (and the rates were not increased) and yet USD rallied from about 80 to 100. Consequently, it can certainly rally several more index points without the rate increase.

The additional comment was:

“Precious metal stock’s action today appears to be anticipating more easing by the FED, probably via a "leak."”

Our take is that the miners - USD action could be caused by the above-described mechanism, but it could also be the case that those who already know the future statement from the Fed pushed the miners higher / and USD lower to force others out of their positions and they aim to re-enter them right after these moves to profit on the reversal. Both theories are speculative. What we know for sure is that USD declined substantially today (without a major, confirmed breakdown) and gold didn’t respond by rallying and miners moved only a little higher (yes, relative to USD’s move it is a small rally). Moreover, the long-term resistance in case of the HUI Index is only a few index points above the current value (190 vs. 187), so we would consider opening short positions here if we didn’t have them already. In our opinion, the outlook remains bearish.

As always we’ll keep you - our subscribers - informed.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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