Recent frightening events in the news (Hurricane Harvey, a North Korean missile test over Japan) are fueling volatility in many financial markets right now. This can be readily seen in the precious metals as gold and silver prices (which are perceived as safe haven investments in times of disaster) have taken off this week. We had been expecting gold to rally and had been waiting for a lower entry point which, unfortunately, did not come. I don't like chasing rallies, especially volatile ones like this, but we may not have to. Short-term technical signals are suggesting a possible top with today's highs, but even if prices push higher into the end of the week, next week will bring us into another reversal zone for precious metals. There is also a strong resistance area for gold from $1,330 - $1,370 which could keep a lid on this rally. Bottom line: we continue to wait for a corrective dip to buy both gold and silver as the trend in precious metals seems to be turning bullish.
The U.S. Dollar Index shows that the greenback is still in trouble and continues to look vulnerable to a serious plunge. A detailed technical analysis of the Dollar Index chart shows a strong support level at 92 (that is being challenged today). If that breaks, there is a secondary line of support just above 90. Any break below 90 would likely lead to a serious plunge in the dollar. Such a plunge could ignite a fire under the precious metals and send prices much higher. That said, we could still see a short-term bounce in the dollar from the current support, but any rally would probably not get very far before turning back down again to challenge that 90 -92 area. The dollar would have to break above 93, and then 94 to even be considered slightly bullish right now. Can the dollar recover from here?
It doesn't look good, but with today's crazy and volatile markets (and political climate), I don't want to rule anything out. Any short-term bounce in the dollar could push gold and silver prices down a bit and give us an opportunity to go long in both metals.