Just a quick update as things are moving quite fast in the PMs.

I warned you that gold might still move higher in the near term and that today is the day when gold has its triangle-vertex-based turning point. In order for gold’s reversal to be a bearish phenomenon, it has to rally first. Consequently, today’s strength is not as bullish as it seems to be at first glance. Besides, please note that the June 14 and August 4 sessions were also accompanied by intraday rallies and that was right before the huge declines started.

In today’s main analysis, I emphasized the importance of the breakout in the USD Index and the breakdowns in practically all parts of the precious metals sector except for gold.

Now, after such moves it’s not out of ordinary to see a corrective countertrend moves before the main moves continue. And it seems that we see exactly that today. Various proxies for the mining stocks moved in different ways, but the key one – the HUI Index – moved to about 250 today (at least that’s where it’s trading at the moment of writing these words). The early 2021 low in terms of the closing prices is exactly 250. Consequently, what we see today is a verification of the breakdown to new yearly lows.

If the HUI Index manages to close the day at or below the 250 level, the breakdown will not be invalidated, and thus today’s rally will have no implications whatsoever with regard to gold miners’ bearish outlook for the following weeks.

What’s the underlying action here? A move to new highs in the S&P 500 index, and a daily decline in the USD Index. The session is more than 3 hours away from being over, so quite a lot could happen, but so far the USD Index is slightly below its previous 2021 high (in terms of the closing prices) and practically right at the support line provided by the March and July highs. If the USD Index declines more, it might spell trouble for the U.S. currency in the near term (but not in the medium term). If it rallies back and closes at or above the March high in terms of the closing prices (93.32), the bullish outlook for the short term will remain fully intact. If the USD Index closes between its current value (93.06) and the above-mentioned 93.32, the short-term implications will be unclear. The medium-term outlook will remain bullish either way.

Consequently, it seems likely that today’s intraday upswing doesn’t change the outlook for the precious metals sector and the latter remains strongly bearish. Corrections are normal even amid most bearish trends, and it seems that the profits on our short positions in junior miners will grow substantially in the following weeks/months.

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

Thank you.

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