Gold and copper prices just soared – and then they reversed, just like the USD Index. So, are they rallying or sliding?
Let’s start with context first. Enter the USD Index.
Here’s what’s happening right now. The U.S. currency index moved lower, slightly below its June low, and now it’s moving back up. Even though it was barely visible, the above is an immediate invalidation of a breakdown, which is a bullish sign.
What’s even more bullish about it is the fact that the reversal happened after the USDX moved to its mid-2022 bottom. This level triggered reversals throughout 2023, so it’s very likely that we either saw the bottom right now or we’re about to see it shortly.
Interestingly, at the moment of writing these words, the USDX is pretty much where it was at yesterday’s close.
Meanwhile, here’s what’s happening in copper.
It also reversed, and it did so in a very meaningful manner. The important clue here is that it is visibly below its yesterday’s closing price.
Copper, being one of the most versatile commodities, is a good proxy for what is likely to happen next in the sector in general – and its performance tends to be linked to one of the precious metals (not always, often enough for it to be interesting to precious metals investors).
The fact that copper is underperforming USDX and that it too invalidated a small breakout above its recent short-term high is a bearish indication not just for copper itself but also for gold, silver, and mining stocks.
Besides, please take a look at what happened after we saw a clear shooting star candlestick in June – copper declined visibly in the short term.
One of copper’s main producers, FCX, also showed weakness recently.
I don’t mean just the fact that it invalidated its small breakout but also the fact that it declined below the rising, dashed support line and verified this breakdown by closing below it for three consecutive days.
While FCX moved back up, the volume was relatively low and declining, which adds to the bearish picture for it, for copper, and for the precious metals sector as well.
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Sincerely,
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief