Another False Dawn in Metals?

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We’re getting a nice pop in Gold and Silver today, but not so much in the miners. My concern is that Gold was neither extremely oversold or positively divergent ahead of this rally. We didn’t get a positively divergent lower low ahead of the rally in Silver either. These rallies could be just a wave B before heading lower again in wave C. At the same time, DXY is hovering above short-term support, but we didn’t get a negatively divergent higher high of note, like we did in March, prior to this drop, which means it could be a short-term correction before higher again. Now, an extreme RSI and/or divergence is not required for a peak or trough, but it certainly increases confidence in such turning points.

DXY

GOLD

Key resistance in Gold is at $2,000. Until that is broken, the risk remains down, and even then, there’s no guarantee that the bottom is in until we take out $2,055 on a closing basis.

SILVER

Silver needs to close above ~$24.40 in order to increase the probability that the bottom is in. Whereas if we do drop down to a positively divergent lower low first, this would provide far greater confidence that we’re going to test the high of $26.23 next.

The fact that GDX and SILJ are not following suit is not too big of a concern because they can lag the metals initially in both rallies and reversals.

My concern remains that if the Bullion Banks want to draw in as many buyers as possible before dropping the hammer on the metals, this is precisely the way to do it. Create enthusiasm, fear of missing out, and then pull the proverbial rug from under them.

Then there is the FOMC and the ECB rate decisions coming next week. Will they follow the Bank of Canada and Australia and hike? Until we get that out of the way, there is little in the way of clarity in the short-term.

But, once again, whatever the low of these corrections turns out to be, it will be followed by a gargantuan rally imho, much like the bottom at $1,272 in Gold on May 2, 2019.