The outlooks for the USD Index and the precious metals market are exactly the same as they were yesterday. PMs are likely to decline significantly in the medium term, but they are likely to rally in the very short term.
The USDX moved up and PMs moved down yesterday, which might seem to contradict the above, but it doesn't.
In the last 24 hours, the USD Index moved higher and then declined less than it had rallied.
At the same time both gold and silver moved lower, and then rallied more than they had declined.
PMs are showing exceptional short-term strength relative to what the USD Index is doing. Just as gold and silver are providing ridiculous amounts of very strong indications that the are going lower in the following months, they are providing ridiculously strong signals that they are not going to decline far unless they rally first.
The very short-term decline in the USDX and the very short-term rally in the PMs wasn't cancelled - it was just slightly delayed.
Let's take a look at the details.
Short-Term USDX and PMs Dynamics
The above 4-hour chart (for those who are new to technical analysis - 4-hour chart means that each candlestick represents 4 hours - not that the entire chart covers the last 4 hours) shows that the USDX is finally starting to roll over, but that this move is tiny so far.
The move in the PMs (the above chart features silver futures) is already relatively visible.
Also, please note that silver just once again refused to decline below the 61.8% Fibonacci retracement level based on the December - January rally. If anyone doubts the usefulness of the Fibonacci retracements, the above serves as a good example thereof.
What was the USD Index doing while silver was refusing to move visibly below $17.50?
Longer-Term USDX and PMs Dynamics
It's been rallying! PMs refused to respond to dollar's near-vertical upswing. Why would they do that? Because they are not ready to decline just yet. They need to correct to the upside one more time (at least) before being ready to slide. And that's in perfect tune with what happened after other huge-volume tops - similar to the January 2020 one.
It seems that we might not get more than one corrective upswing before the big plunge after all. At least that's what the mining stocks are suggesting.
The Immediate PMs Outlook
Miners' performance was relatively weak recently compared to the one of gold, indicating that the early part of the upswing is well over and that we are now in its final round. The only thing missing is silver's sudden outperformance. Based on how silver is responding to even a tiny decline in the USDX, it seems that we won't have to wait for this final sign for much longer.
The outlook for the next few days for the precious metals sector remains bullish and the profit-take level that we disclosed to ourremains up-to-date.
Thank you for reading.
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager