Asia stocks climb tracking Wall St rally; Nikkei hits record high, China GDP beats
Today’s analysis will be brief, as there’s only one thing that I’d like to update compared to Tuesday’s comprehensive issue and my gold forecast for November.
Namely, I’d like to point out the fact that the precious metals market is not only reacting to what the USD Index is doing – it’s very sensitive to it.
Market Sensitivity on Display
Two things stand out based on the above chart:
1. The mining stocks rallied earlier today, only to then decline in the following hours.
2. The decline in the USD Index (the UUP ETF at the bottom part of the chart serves as a proxy for it) didn’t cause a bigger rally in GLD or SLV.
The second point is a bearish short-term sign, but it doesn’t tell the whole story, as gold and silver futures moved higher before the U.S. session started. USD’s decline triggered gold’s and silver’s rallies and USD’s comeback triggered moves lower in both metals.
This is important because it shows that the precious metals market is willing and likely to react to USD’s further rallies with declines.
This, in turn, is important because the USD Index – trading close to 100 – is on the verge of a major breakout and launching a rally that will finally be clear for everyone.
I’ve been writing for months that when the USD rally becomes clear, the precious metals market is likely to slide, and it looks like this is about to take place.
GDXJ Reversal Reveals Bearish Pressure
The intraday reversal in the GDXJ – proxy for junior mining stocks suggests that the bearish forces are strong and that there’s a lot of nervousness among the investors right now. This suggests that the declines can be particularly volatile.
