The USD Index soared and precious metals declined after surprisingly good data and a few hours before the FOMC minutes’ release. The question is if the outlook deteriorated enough to justify moving back to the speculative short positions. In our opinion, this is something that day-traders might want to take advantage of, but we don’t plan to do so at this moment.
The reason is that the strong resistance in the USD Index is very close to its current value (102.13 vs 101.76) and we can say the same about strong support levels for gold (61.8% Fibonacci retracement - $1,172 with gold being at $1,193 at this time) and silver ($16 and slightly below it with silver being at $16.30 at this time). If these levels are reached, a corrective upswing back to $1,200 or so would be likely, so we would probably be able to re-enter short positions at better prices than what we have right now.
In terms of relative strength, today’s moves are not particularly bearish for PMs - gold declined only $19, while the USD Index moved higher by more than 0.80. Consequently, the medium-term trend remains down, but the short-term outlook is rather unclear at this time. If mining stocks underperform gold significantly today, it could make the outlook more bearish or a combination of other factors could make the outlook more bearish, but at this time it appears that today’s moves could have been more or less random or even artificial. Regarding the latter - it is quite often the case that the market reverses right after some fundamental news is released (“buy the rumor, sell the fact”) and thus having a position open before news is released (like today) without strong technical confirmations is particularly risky. Consequently, in our opinion, the risk (as indicated above) to reward (proximity of strong resistance and support levels) ratio doesn’t favor opening any speculative positions at this time.
