Gold is making a new weekly (and cycle) high today while silver is not. This gives us a bearish divergence signal and the possibility of both metals turning down now; however, there are other technical signals that are bullish - especially for silver. We are approaching a reversal zone specifically for the precious metals later this week (July 9-17) which is also overlapping with our strong general reversal zone for all markets (July 13-21). The precious metals need to start falling now if we are to see a significant cycle bottom in those reversal zones. If prices keep edging up into the end of this week and next, we will probably see a top instead and then a turn down moving to the cycle bottoms later in the month. Either way, our primary trading strategy now will be to buy the final cycle bottoms, hopefully near the target prices mentioned in yesterday's blog ($16.20 in gold and $15 - $17 in silver).
If the broad stock market turns down soon (as we are expecting), it could easily take the precious metals into a similar sharp correction. Traditionally, gold and silver are considered to be a hedge against a falling equity market, but the "crash" of 2008-2009 showed us that nervous investors are prone to sell "everything" during an equity market sell-off and will probably do so if we have another one. Although the correction we're expecting now in equities is probably not yet the "big one" (that may be a little later this year), it could be enough to push gold and silver into our target areas. The bottom line here is that both the precious metals and the broad stock market could either rise into next week's strong reversal zones for a cycle top or fall into a cycle bottom. We are primarily interested in buying both markets at their bottoms.
The U.S. Dollar Index which usually (but not always) moves opposite the precious metals has been falling, but it is close to a strong support zone between 96 - 97. If that support holds, a new rally could start which would most likely drive gold and silver prices lower. We will watch for this.