Gold is at a major inflection point and the next few trading days will be critical. Prices are at $1356, and it would take little effort to punch through the January $1365.40 high. The next level to overcome resides at $1,377.50 (the 2016 high). That too is within striking distance. A high volume move above these levels would register a breakout and confrim a new bull market in gold.
Two factors could facilitate a breakout in the coming days.
- A weaker dollar. The dollars cycle peaked just 5-days ago. Prices should continue to weaken, and that should send gold higher.
- Gold bottomed only 5-days ago, and prices are already attacking the previous cycle high. The prior cycle lasted 39-trading days, so there is plenty of time for this cycle to advance.
The setup for a meaningful breakout is before us. Now we just need to see if prices will follow through. If gold breaks above $1365 and $1377, I’d expect to see an explosive move in miners as prices play to catch up. If gold fails to breakout by next week, then the potential for a decline into March will be restored.
-US DOLLAR- The dollar confirmed a cycle top and prices should break below the January low. The weaker dollar should support higher gold prices.
-GOLD- The daily cycle bottomed 5-days ago, and we could see a break above $1365. The trend looks strong. Miners will likely surge higher if gold rallies decisively above the green trendline. Prices would have to decline back below the 10-day EMA to discredit the current cycle.
-SILVER- Prices are struggling at the moving averages. The structure in silver is less encouraging, but we could see an upsurge if gold breaks sharply above its long-term green trendline.
-HUI:GOLD RATIO- The ratio reversed sharply and closed back above the December low. Additional strength and closing above the spike high (0.1406) could signal a powerful reversal in miners. The same setup occurred just before 2016’s explosive rally in miners.
-GDX- Miners traded lower in the morning but recovered most of the losses by day end. Closing above Wednesday’s $23.15 high should extend the rally to the $23.45 gap (at least). If gold breaks out above its green trendline, miners could rally sharply as they play catchup to gold. I may add to my positions if/when GDX closes above $23.15. Closing below today’s low ($22.63) would be the first sign of a breakdown.
-GDXJ- Juniors recovered the early losses and ended slightly positive. I see the potential for an explosive rally if gold breaks decisively above its trendline. Closing below today’s low will damper the short-term bullish potential.
-JNUG- Prices are at short-term resistance. The next few days will be decisive. Upside follow-through could spark a sharp advance. However, closing below today’s low ($14.90) could lead to prices rolling over.
-USLV- Prices are at short-term resistance. Silver (USLV) could move sharply higher if gold breaks above the green trendline. If prices fail to follow-through to the upside, then prices will rollover and decline.
-SPY- Stocks are in the resistance zone. If prices rollover here then we could see a retest of the 252.92 low. Worst case scenario, prices could decline to the alternative March target box if prices close consecutively below the 252.92 low. However, at this point, the odds favor a significant bottom at 252.92.
-WTIC- Oil is bouncing, and prices are approaching resistance. Prices should sink to test or break the intermediate trendline (around $56.00) before bottoming. However, if prices begin to invalidate our analysis, I’ll exit the SCO trade.
-SCO- Prices are pulling back and closed below the 10-day EMA; I’ll give the trade a little more leeway. I may exit the position if prices don’t quickly show signs of improving. Our target is $27.00+ if WTIC satisfies our expectations.
The trend is volatile, so I’ll remain cautious. I’ll alert members and buy more JNUG and USLV if prices follow through to the upside.