Exactly. The dynamic is different than it used to be.
It’s Not the Dollar — It’s the Reaction That Matters
The USD Index is now trading sideways close to its April low. It had already reversed in September, and right now it appears to be forming the right shoulder of the inverse head-and-shoulders pattern with a broad (July-September) head.
But it’s not USD’s performance itself that is most important – it’s the way miners and silver react to it.
And – again – silver is strong today (the white metal appears to be disconnecting due to the 100 reasons supporting it), and miners declined.
Interestingly, platinum soared today, but this could be based on how near its resistance is.
The 2011 highs are just ahead, and many traders might have expected platinum to go to at least there, creating a self-fulfilling prophecy.
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See all Silver forecastsCrypto Flashes a Warning Signal
To balance the technical signs, we have a sell signal from the flagship anti-dollar asset – bitcoin.
The ‘king of cryptos’ moved below its rising support line.
Why is this important? Because this ends the monthly flag pattern, and bitcoin appears ready to slide once again.
Our short position in bitcoin is likely to benefit from that move – in a big way. The reason is the fact that flag patterns tend to be followed by price patterns that are similar to the ones that preceded them, and the thing is that…
The move that preceded the flag was a decline from above $120k to almost $80k. If bitcoin declines by over 35% again, it can slide all the way down to $60k – in perfect tune with my previous target area.
Bitcoin might be the canary in the gold mine – a declining anti-USD asset, could be the sign that the real USD is about to move higher, which would also affect the precious metals sector.
Silver is on the roll, which might protect it for some time (perhaps until the rally burns itself out in the short term based on the targets discussed previously), but the rest of the sector is very vulnerable – and likely to decline without additional significant rallies. Our positions reflect that.
Thank you for reading today’s analysis – I appreciate that you took the time to dig deeper and that you read the entire piece. If you’d like to get more (and extra details not available to 99% investors), I invite you to stay updated with our free analyses – sign up for our free gold newsletter now.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief
