Business

Reading Tea Leaves of Gold's Upcoming Move

First of all, we just saw a bearish sign from the general stocks market.

The Sign from Stocks

Reading Tea Leaves of Gold's Upcoming Move

And by “moved lower yesterday,” we actually mean, they reversed in a way that’s quite profound in case of the S&P 500 futures.

Reading Tea Leaves of Gold's Upcoming Move

Also, please note the increase in volume on the previous chart – we saw the same thing at two April highs. Perhaps we’re seeing yet another high, instead of a beginning of a new upswing. We shall know soon enough – stocks are trading between the price gaps and they are likely to break out or break down sooner rather than later.

The USDX Bidding Its Time

Reading Tea Leaves of Gold's Upcoming Move

As you can see in the lower part of the above chart, gold moved higher yesterday, but it moved up rather insignificantly. Gold futures were up by precisely $11.20, which means thatthey didn’t erase Monday’s decline.

Meanwhile in Precious Metals

Reading Tea Leaves of Gold's Upcoming Move

Consequently, the implications of yesterday’s session – and this week’s developments in gold – are bearish.

Reading Tea Leaves of Gold's Upcoming Move

Silver moved higher right after forming the daily reversal and it even moved above the intraday high earlier today. Silver is clearly outperforming gold. In case of the gold-to-silverratio that’s based on futures, we saw a move slightly below 100, and in case of the ratio based on the spot prices, the ratio just touched the 100 level a few hours ago, and then it moved back up.

Reading Tea Leaves of Gold's Upcoming Move

On one hand, the breakout above the 100 level in the gold to silver ratio seems to have been just verified, and it’s bullish.

On the other hand, silver reversed slightly above $18, which doesn’t correspond to a major resistance level. This means that the white metal could still move higher before topping.

If the USD Index is bottoming and the general stock market is topping, then the above is very doubtful. In fact, silver’s relative strength on its own makes the short-term picture for the precious metals market rather bearish, because silver usually plays major catch-ups with gold in the final part of the rally. It definitely happened already and the extent to which silver outperformed gold, was clear and loud.

Consequently, the top might already be in after all, as the 100 level in the gold to silver ratio is more important than any of the above-market individual silver resistance levels. his leaves us with the bullish implications of yesterday’s move in the mining stocks.

Reading Tea Leaves of Gold's Upcoming Move
Reading Tea Leaves of Gold's Upcoming Move

So, is miners’ “strength” really “strength” to the full extent of this word’s definition? Given all the other points made today, this still seems doubtful.