Gold Resists Soaring USD - The Show's Not Over Yet / Commodities / Gold & Silver 2020

Theprecious metals market didn’t do much yesterday, but – what may seem surprising- that’s quite bullish. It’s bullish, because the USD Index rallied to newyearly highs and this “should have” caused the PMs and miners to decline. Itdidn’t, which suggests that the decline is not yet ripe for continuation.

Inthis case, the most likely scenario is that we’ll see another rebound ingold, silver, and mining stocks as soon as the USD Index corrects. Then,PMs could form their final top, and the big decline could begin.

Alternatively,this cycle of back and forth movement could continue a bit longer. Gold couldspike, but only if the coronavirus scare gets much worse, aswe outlined yesterday. If that happens, silver and miners are notlikely to be affected to the same extent as gold – just like what happened in2014 during the ebola scare.

Theabove might be confusing so let’s put it in other words, simplifying.

PMsshowed resilience yesterday, suggesting that they are likely to rally once USDXcorrects.

Whenthe USDX corrects, PMs are likely to rally and silver might outperform gold atthat time, as that might be the final part of PMs’ rally.

Whatmay or may not be related to the above is the peak interest in (fear of) thecoronavirus. When people get extremely scared of the coronavirus,gold would be likely to rally higher and to outperform silver andmining stocks.

Ourplan here is to take profits (…) <trading plan is reserved to subscribers> When we do, it will mean that gold is getting close to its local high.

Ok,so, when could the USD Index correct triggering another move up in the preciousmetals sector?

USDIndex Has Momentum

Quitelikely relatively soon. The USD Index broke above its declining resistance lineand moved to a new yearly high yesterday. The momentum is strong so it couldreach its November 2019 high as soon as today.

Now,based on the recent local high (the one that was just broken), we can estimatehow high the USD Index is likely to move in the next few weeks. This can bedone thanks to the Fibonacci extensions technique. In short, it meansmultiplying the size of the previous rally by 1.618.

Inpractice, we can do it by using the Fibonacci retracement tool, but drawing it in a way that anchors the start of the retracement at theinitial bottom, and then placing the 61.8% Fibonacci retracement at the initialtop. The 100% “retracement” now points to the target. Why would the“retracement” work in this way? Because 100% / 61.8% = 1.618 (approximately)That’s one of the very specific properties of the Phinumber. Others include that 1 / 0.618^2 = 2.618 (approximately) andmany more.

Butthe math behind it is not that important – what is important is that it veryoften works.

Inall cases that we marked on the above chart, this technique pointed toimportant short-term tops. Currently, it points to a top being likely at about99.24. This is the 2019 high, which makes this level very likely to stop theUSD Index… for some time. After all, the USD Index is in a powerful uptrend –it’s likely to exceed its previous highs despite short-term pullbacks.

Sowhy do you mention the November 2019 high, while it is THE 2019 high that’slikely to be reached?

Becausethe USD Index might not rally to the 2019 high without an intermediatecorrection. Please note what happened in the cases that we applied theFibonacci extension to. In all cases, except for the July rally, the USD Indexfirst formed an initial high, corrected, and only then moved to theFibonacci-extension-based target.

TheNovember high is the next strong (from the short-term point of view) resistanceand it’s confirmed also by a short-term inversehead-and-shoulders pattern.

Thetarget is based on the size of the head of the pattern and it quite clearlyconfirms the target based on the November 2019 high.

Summingup, the USD Index is likely to correct after reaching about 98.5 (the November2019 high), which is likely to trigger a very short-term upswing in gold andsilver. Then the greenback is likely to rally once again and PMs might fall(unless the coronavirus scare peaks, in which case gold could move higher onceagain for several days).

Wehope you enjoyed reading today’s free analysis. The full version thereofincludes also our trading plan and the estimations regarding when the nextrally and top in gold are likely to take place. If you’d like to read it, we inviteyou to subscribe to our Gold & Silver Trading Alerts. If you’re not readyto subscribe, we encourage you to sign up for our daily newsletter - it's freeand if you don't like it, you can unsubscribe with just 2 clicks. You'll alsoget 7 days of free access to our premium daily Gold & Silver Trading Alertsas a starting bonus. Signup for the free gold newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE

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