Today’s session was quite volatile, so we don’t want to keep you waiting until tomorrow and we are sending a brief commentary right away.

In short, it seems to have been just another daily correction and not a game-changer. It’s very likely the case, not only because of the level reached by the USD Index. It’s also the case because of how mining stocks performed relative to gold and silver.

In today’s regular Gold & Silver Trading Alert, we wrote the following about the USD Index:

Unless the USD closes below the neck level of the previously confirmed inverse head-and-shoulders pattern (currently at about 95.9), the outlook will remain bullish, and the short-term decline will be nothing more than a correction within an uptrend.

Today, the USDX moved lower in a visible way, but the intraday low was 96.20 - there was definitely no breakdown back below the neck level of the inverse head-and-shoulders patter in terms of the intraday prices, let alone in terms of the closing prices. Since the inverse H&S pattern was not invalidated, it continues to have very bullish implications going forward. This means that the implications for the precious metals sector remain strongly bearish.

As far as the relative performance of the mining stocks is concerned, please note that gold and silver moved more or less to their late-October highs. But not mining stocks. The GDX ETF is only halfway back up. This is a clear sign of underperformance, even though on a stand-alone basis, miners’ price move doesn’t appear bearish at all - it rallied over 3%. But, it should have rallied about twice as much given the size of the upswing in gold and silver, and given today’s upswing in the main stock indices. It didn’t and thus, today’s rally didn’t show strength of the mining stocks, but their weakness. Again, we realize that viewing a rally as something bearish may sound absurd, but this is really the case - monitoring strength of the rallies and comparing it with the strength that should have been seen is one of the most reliable and stable (over time) signals that we have for the short term.

Consequently, even though today’s upswing appeared bullish, it doesn’t change anything regarding the outlook, which remains bearish.

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

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager