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US dollar at resistance: gold, silver, stocks, up

Commentaries & Views

Tuesday, I wrote, “My base case is that metals get flushed down between now and the end of the week as the ratio and DXY hit their resistance and sputter out. If gold were to hold $1885 as the ratio and dollar top, I would consider that a signal for a long trade in metals”. Yesterday, both gold and especially silver were once again aggressively lower in the pre-market, but bulls stepped in. Both metals paired a significant chunk of their losses intraday, and today, they are following through higher.

The gold to silver ratio reversed with the metals price, just as the ratio tagged resistance.

Silver bounced off of support and is following through higher with conviction as of this morning. Traders might pull the trigger on a tranche of a long position with a target for silver back at the top of the range, or higher following a breakout. The whipsaw reversal type action could make it hard for traders to pull the trigger; of course, without a crystal ball, the only choice is to pick a spot to enter and manage risk.

I’m not sure whether metals are ready to take off in a straight line, but the weight of evidence suggests the probability that at least a short-term low is in.

The DXY hit 105.4 and is cooling off.

Gold looks like the pennant it’s been forming is preparing for an upside breakout. The prudent course may be to wait for gold to prove the sector is on the move with said breakout before overweighting.

Thanks and good luck

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.