Gold & Silver Trading Alert: How Will We Know That the Bottom Is In?

Briefly: In our opinion speculative long positions (half) in gold, silver and mining stocks are justified from the risk/reward perspective.
Yesterday, gold closed higher than it did in the previous several weeks, which seems like a very bullish development for the entire precious metals market until one realizes that miners are still close to their most recent lows.
In short, in our opinion, the answer to the title question is that miners could rally some more in the short term, but we don’t expect the rally to be significant. We expect to see significant rallies after the final bottom is reached (in a few weeks – months), but not before that – at least not based on the information that we have available today. Furthermore, it seems that the next local top will be reached shortly, but that it’s not in just yet.
Why? The USD Index is likely not done declining and the long-term resistance lines in gold have not been reached. What we wrote about these markets yesterday and on Friday remains up-to-date. Still, we would like to show you the latest short-term USD chart as we have added a target area to it (charts courtesy of The target area is relatively close in terms of both time and price. Most of the decline is probably behind us. We have previously written that we expect the USD Index to correct to the 38.2% Fibonacci retracement level and the biggest unknown is what the retracement should be based on – the May-Oct. or Jul.-Oct. rally. The former seems a bit more likely because the 38.2% based on the May-Oct. rally coincides with the 50-day moving average (blue line on the above chart).

This post was published at GoldSeek on 21 October 2014.