The USD Index moved to the rising, medium-term support line based on the June 2014 bottom and the October 2015 bottom. It also moved very close to its late 2015 lows, but the former is more important in our opinion. Is the bottom in the USD in? That’s very likely the case. If it isn’t the case and we see a confirmed breakdown below 97.5 then the odds are that USD will fall significantly more.
Gold moved a bit above the declining resistance line, the 200-day moving average and the 61.8% Fibonacci retracement level based on the Oct - Dec 2015 decline, but the session is far from being over, so we still could see a close at or below these levels.
The size of the move higher in metals and miners seems very big, but it’s not as big as the move in the USD Index and if the latter is going to bottom here, the metals could still reverse right away or shortly. The final resistance level for gold is at about $1,145 (the declining resistance line based on the January 2015 and October 2015 tops).
Consequently, we are once again moving the stop-loss level higher, but this time only a bit higher - to $1,152 in gold and $15.07 in case of silver. We are not adjusting the stop-loss levels for GDX, which remains at $15.47. We do not plan adjusting these levels again - if they are reached, the positions will be closed as higher prices in the very short term will become much more likely. In this case we would probably re-enter short positions at higher prices (similarly to what we’ve recently done in case of crude oil) after getting additional bearish signs.
If it wasn’t for the level that was reached in case of the USD Index, we would have not moved our stop-loss levels, however at this time this decision seems to be justified.
Summing up, since it seems that a local bottom was just formed in the USD Index, it seems to be justified to move the stop-loss levels in gold and silver a bit higher - above the final of the near resistance levels.
As always, we will keep you informed.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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