Today gold and silver both made new lows for the year and our stop loss parameters for our gold long position were triggered (silver breaking below $15.18 and gold making a new low after Aug. 7). While there is a chance these metals could bounce from these lows and start a significant rally, it is more likely they will fall lower into our next reversal zone for precious metals Aug. 20 - 28. I am therefore going to sell my long position in gold at tomorrow's market open. We are fairly close to our buy price around $1220 so our loss should be minimal, especially if the market opens higher than today's close. We were prepared for the possibility of this price breakdown in the metals which is why we had avoided buying silver. We will still be looking for a significant cycle bottom and potential buy spot for both metals in that next reversal zone. Out of both gold and silver for now.
Apparently last Friday's breakout by the U.S. Dollar Index above a strong resistance line around 95.5 spooked the precious metals market. A reversal zone for currencies ended last Thursday without the greenback rolling over so this dollar surge could be significant. Even if the dollar is about to embark on a significant rally, however, that doesn't necessarily spell gloom and doom for gold and silver. As I have mentioned on the site before, there are times when both the dollar and precious metals can rise together. A major turn down in equities, for example, could trigger a hand in hand rally in precious metals and the U.S. dollar.