The USD Index moved lower on Friday (below the short-term support line) and since it is one of the most important things that precious metals investors need to monitor right now, we believe that sending an update will be helpful. So, here we are.
The Euro Index close the week more or less at the declining support line that we commented on in the latest Premium Update. Therefore, the short- and medium-term case for the currency remains bearish. The opposite can be said about the USD Index.
The bearish factor for the USD Index is that it moved below the short-term support line. Two more closes are required for the breakdown to be confirmed and that would still not change the picture to bearish in the medium term. The long-term support line is at 82 level and USD Index is clearly above it. Consequently, the case for the USD Index is still bullish in our view.
Dollar's short-term moves were quite erratic at the end of the week, so let's take a look at the weekly price changes - that should help to get rid of "the noise".
Gold closed the week $13.70 lower despite the fact that the USD Index declined 0.33 during that time. Silver moved 6 cents higher so it was basically flat and the HUI Index moved lower 4.41. Metals' underperformance is a bearish sign.
The general stock market rallied on Friday, which was an unlikely event based on Thursday's move well below previously broken resistance line. Since the previous breakout was not verified, this is another attempt. Financials moved higher at the end of the week, but still declined more than 6% during the whole week - the sector continues to underperform other ones and this makes the situation on the whole stock market a bit (nothing more) more bearish than not.
There were no changes in the long-term charts, including TSX Venture index (juniors) and precious-metals ratios (especially the Dow:Gold ratio) and the case remains bearish.
As far as short-term outlook is concerned, silver invalidated the breakout above the 50-day moving average, which means that the short-term outlook for the white metal is currently more bearish than it was on Wednesday. The situation on the GDX ETF remains bearish as well - miners moved a bit higher on Friday, but they are still below the declining short-term resistance line that we commented on in the latest Premium Update.
Summing up, what we wrote in Wednesday's Premium Update remains up-to-date.
We continue to believe that being out of precious metals with at least part of long-term investments and betting on lower mining stock prices with speculative capital are both good ideas right now.
Our next Premium Update is scheduled for Friday, August 10, 2012. Naturally, we will keep you notified via Market Alerts if the situation requires it.
Sincerely,
Przemyslaw Radomski
