Gold and silver are behaving somewhat erratically this week. There was a possibility this week of a sharp rally from an isolated low in both metals from last week. Silver threw off this pattern by plunging to a new weekly low yesterday ($16.78); however, gold did not plunge with silver which created a strong case of bullish divergence and put the rally back on track. We can't be sure how high this rally will go, but technical signals show that it should peak by next Tuesday (and could top out any time between now and then) and be followed by a correction. We are still looking to get long in both metals and may do so at the bottom of that correction if it happens. On the sidelines of gold and silver for now.
Today's surge in precious metal prices was triggered by a steep drop in the U.S. Dollar Index. The dollar has finally broken below what was a critical support level at 90 - 91 and it looks like it will close the day just a bit above 89. As I've mentioned in previous blogs, the breach of this support could be bad news for the dollar. If the dollar can't break back above that 90 - 91 area soon, the greenback could be headed a lot lower very quickly. Such a scenario would propel a strong rally in the precious metals.
Crude oil prices have rallied to a new high this week, most likely following the bullishness of the broad stock market. Last week's dip was not low enough to be a sub-cycle correction so we will wait for a deeper correction off this new high or any higher high between now and the next reversal zone (the first week of February). That reversal zone could coincide with the bottom of a correction, and if so, we will buy then. There is some resistance for crude around $66 - $67 so that may contain the current rally. Still on the sidelines of crude.