Gold And Silver’s Stormy September

There were only a few analyses that we started with a quote, and there were even fewer that we began by quoting a song. It may even be the first one ever.

I am the storm and I am the wonder
And the flashlights, nightmares
And sudden explosions

–  Royksopp, “What Else Is There”

And you will have all the above in September. At least if you’re going to pay attention to gold, silver and mining stocks.

We warned that the key factors had been in place for a long time and those who were willing to listen, have already positioned themselves accordingly. The multiple bearish confirmations, like the steady rise in the gold to silver ratio and the underperformance of mining stocks, have been repeated over and over again. And it looks like PMs are ready to take the main dive. Yes gold will very likely soar to new highs, but not before an epic decline. Are you prepared?

In the early part of the previous week, the USD Index moved lower, while the precious metals sector moved higher. But, right before the end of the week, we saw that it was just a trap for those who really wanted to see gold rallying instead of objectively observing what was going on and unemotionally acting on the observations. Let’s take a look at the facts, starting with the USD Index chart (chart courtesy of http://stockcharts.com).

Breakdown? You Mean Breakout?

The objective fact is that the USD Index closed the week above 95, so from the weekly point of view there was no decline. Despite the early decline, overall, the USDX moved higher by 0.02 last week. And it never really invalidated the breakout above the neck level of the reverse head-and-shoulders pattern.

Moreover, from the very short-term point of view, we just saw a breakout above the declining red resistance line and the USD rally continues in today’s pre-market trading (95.55 at the moment of writing these words). The outlook for the USD Index remains very bullish, not only from the long-term point of view, but also due to medium- and short-term signals.