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

Powell was much more dovish than most people expected, so gold and the rest of the PM sector rallied. But does it really change anything regarding the bearish trend? It doesn’t.

The USD Index moved briefly below the rising support line based on the June 9 and August 4 lows, and it then moved back up. At the moment of writing these words, it’s trading right at this line, so I don’t view this line as broken.

Besides, that’s not the key thing here. The key thing is that the inverse head-and-shoulders pattern had been verified previously and that it wasn’t invalidated today. This means that the USD Index is still likely to rally profoundly in the following weeks. And whether it moves lower for a few days beforehand is not really that important.

Gold is higher today, silver is higher as well (without a breakout back above its previous 2021 lows in terms of the closing prices), and miners are rallying too. The move higher in the GDX and GDXJ might seem like a big deal, but please keep in mind that both ETFs are still relatively close to their previous 2021 lows while gold is just close to its August highs. In fact, the GDXJ is still below the previous (March 30) 2021 low in terms of the closing prices. So, is today’s rally a game-changer? It’s not.

Also, remember when I wrote about the 4% - 8% corrections that happened in the mining stocks in 2013 after breaking below the neck level of the very broad head and shoulders pattern? The move up in the HUI Index this week is ~6.4% and it’s ~6% in case of the GDX ETF, which means that it’s in perfect tune with what we saw during the biggest decline of the past decades. As such, it doesn’t seem to be a game-changer at all.

Consequently, the outlook for the precious metals sector for the following weeks and months remains bearish.

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

Thank you.

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