Gold and silver prices surged up today because of the Bank of Japan's surprisingly hawkish decision to leave its monetary policy unchanged. Many analysts had been expecting a hefty dose of stimulus from the central bank which could have weakened the Japanese yen and strengthened the U.S. dollar. Instead the dollar plunged, and this gave a strong boost to precious metal prices.
It is starting to look like gold and silver both started new cycles in late March/early April, and if so they could be turning very bullish. The rally today pushed both metals close to their April 21 highs. If prices exceed these levels now we could see the rally continue into May 10 (which could be another turning point for a reversal) before any significant correction. On the other hand, if today's surge was just a temporary "knee-jerk" reaction to the BOJ's announcement then we could still see gold and silver prices turn down now (especially if one exceeds its April 21 high but the other does not - intermarket bearish divergence). Everything depends on the U.S. dollar.
The U.S. Dollar Index is now close to critical support in the 93 area. If that support breaks, we could see the dollar start to melt down and precious metal prices soar. If 93 holds and the dollar starts to rally again we will likely see a significant correction in gold and silver either now, in May or early in the summer. It is best to be on the sidelines until the cycle pattern becomes more clear. Out of both gold and silver for now.
The Bank of Japan's hawkish tone may have spooked equity markets today as the broad stock market tanked with the DOW losing 210 points. This was good news for our short position. This may be the start of the significant correction that we've been waiting for. If April 20 was the medium-term cycle high for both the DOW and S&P 500 then we could now see a sharp correction down over the next several weeks (possibly longer) to the cycle bottom. It is too early, however, to say for sure if the correction is starting. If today's plunge was just a temporary reaction to the BOJ news, we might see equities creep back up. Holding my short position in the broad stock market for now.