With the negative medium-term link between the USD Index, commodities, and precious metals remains intact, even though it may not always work in the short run.
In particular, gold might have its own safe-haven-buying rallies. However, the geopolitical-uncertainty-based rallies tend to be temporary, and the negative correlation with the USD Index is likely to return in case of the bigger moves.
The thing is that it looks like the USD Index is ready to launch another bigger move – higher.
The USD Index verified the move above its 2023 high – twice. The RSI indicator based on it is close to the middle of its trading range, suggesting that the USDX is ready to make a bigger leap. Such a leap would likely be detrimental to the prices of mining stocks, silver, and gold. This could also lead to a sell-off in the stock market (less competitive exports for the U.S. companies), which would hurt silver and miners as well.
While we’re on the topic of the USD - I received an interesting chart recently (thank you, Martin). It compares what the USD Index did around Trump’s previous victory.
Based on it, it might seem that the dollar’s rally is over.
From my point of view, while the above is interesting, I wouldn’t attribute too much meaning to it – this is just a single case without other analogies. The rally is already taking longer than previously, and given that this time, the USD Index has already confirmed an important point (above the 2023 high), it’s likely to rally further.
Now, there’s something particularly interesting going on in copper.
The second-best electricity (and heat) conductor’s price rallied, but it seems that the rally is over as I’m typing this – very, very close to being over.
Copper touched its 61.8% Fibonacci retracement, and this level already worked in late 2024. This price level is also where copper topped in July and in late April. The resistance is strong, and it seems that whatever rally we see from here is going to be invalidated shortly – just like the late 2024 one was.
Given this kind of daily rally in copper (which came on top of last week’s significant short-term rally), one might expect FCX (copper and gold producer) to rally as well.
Nope.
FCX did move higher, but very modestly so – by just 1.1%. It remains below its previous 2025 high (as well as the entry price for our short positions in it – they remain profitable).
More importantly, this relative weakness (compared to copper) is a strong sign suggesting that both copper and FCX are about to turn south. This, plus copper’s resistance level that was just reached, suggests that this might be the final call to enter short positions in FCX before the decline returns. If one has been waiting for a second chance to enter this position – it’s here (in my opinion).
This weakness in FCX confirms that this is most likely a great stock to be shorting right now.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief