The new month is here, and the new short-term trend in the USD Index arrived as well – exactly as it was likely to happen.
Due to that, there’s little that I can add to what I already wrote. Quoting my previous analysis:
Yes, while I have been writing about USD Index’s likely strength and bullish outlook overall, this kind of resilience is surprising even to me. I thought that we’ll see a bigger correction now – after all, the USDX soared by 8 index points without a bigger decline.
We don’t see it now, which could mean that it will still happen in the following days, or that the momentum for the USD is so remarkably strong that it will just consolidate and trade sideways here instead of really correcting.
Either way, after this week, the USDX could be back in the rally mode due to the monthly turning point (vertical, dashed line). My Monday’s comments on it remain up-to-date:
“Will we see a correction shortly? That’s quite possible. After all, no market moves up or down in a straight line without periodic corrections.
Will the correction in the USDX trigger a rally in gold and miners? I wouldn’t say that’s necessary. The most recent boost that both markets got was based on geopolitical turmoil (a new type of rocked used by Russia), and those tend to have only temporary impact on prices. Today’s move lower in gold and USDX confirms this. So, it is quite possible that we would see a decline in gold and the USD Index at the same time. “
So, yes, the pullback is taking place, which means that the monthly turning point can play out exactly as I had described it earlier – it could push the USDX higher once again. This would likely contribute to declines in the values of precious metals and mining stocks.
Interestingly, the USD Index first declined to my previous downside target and then moved back up.
Here’s today’s price action – please note the move slightly below the upper dashed line based on the early-2023 high and the mid-2024 high.
And here’s a chart that I featured on Nov 21 (and in the previous days), when I wrote about taking profits from the previous long position in GDX:
So, yes, the target was reached, and since it’s the final trading day of the month, based on USD Index’s turning point, we’re likely to get another rally.
The USD Index is up by about 0.59% at the moment of writing these words, so it seems that the above is playing out exactly as I had outlined. And the metals and miners?
Gold, silver, and miners are down today, exactly as one would expect them to be given the USD Index’s move-up.
Interestingly, GLD and GDX are both after tiny (but still) breakdowns, while the UUP ETF (a proxy for the USD Index) is after a very short-term breakout.
In other words, we have even the very short-term confirmations that the tide has most likely turned.
Copper declined today as well, and the FCX – copper and gold producer – declined in a quite significant way.
Let’s keep in mind that FCX consolidated in the second half of November – the size of today’s decline might be suggesting that it’s ready to move lower once again. This time, the move lower might be really big, as the yearly head-and-shoulders pattern could be completed very soon, which would in turn likely mean a decline to $30 or lower. Which means that it’s another opportunity to profit from the upcoming price moves (just like the decline in the GDXJ is).
In other words, it seems that the profits from the current short position in junior miners will grow in the following weeks.
All in all, while there remain some opportunities to gain something extra on gold investments in the long run, the outlook for the precious metals market remains bearish for the following weeks. And the profits from our short position in junior miners are likely to grow further.
Thank you for reading today’s free analysis. For specific profit-take levels (likely to be reached later this month), I encourage you to join my Gold Trading Alert subscribers today – while this move is still in its infancy and profit potential is big.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief