Precious metals are moving sharply lower today, so we're sending an update.

In short - we are still bullish on the precious metals sector in both: short- and long term.

The whole sector moved lower - yes. But did this price movement invalidate important support levels? No; at least not at the moment of writing these words (with gold at $1,600, and silver at $28.8). Gold moved to its previous low and silver moved lower but remains above the rising support line (and well above the recent low). Silver is right before its cyclical turning point which suggests a move higher very soon.

The move lower has been particularly visible in the mining stocks - HUI moved below 500, but is this the place where we mentioned it could go just a few weeks ago. Naturally, this is unfavorable move for longs (including your Editor), but it’s not something that makes us change our mind regarding the situation. We were bullish when the price was higher and since the move lower did not invalidate key support levels, we still are. The situation was very oversold and now is extremely oversold.

Now, the situation in the XAU Index doesn't look bullish because it moved below the very long-term support line. However, with a multi-year support, it would take at least (!) a close on Friday below the above-mentioned support to suggest that a breakdown is underway.

Summing up, at this point it seems that the precious metals sector is forming a bottom. Double-bottom in case of gold and silver, and please note that these double-tops/bottoms are not that rare in the precious metals sector - in fact, we have seen a double-top in gold just a few weeks ago.

As always, we'll keep you updated if anything changes.

Thank you.

Sincerely,
Przemyslaw Radomski