Here's Why Gold Recently Moved Up / Commodities / Gold and Silver 2021

Gold moved higher as the USD Indexmoved lower in today’s pre-market trading. Before providing you with mythoughts on why that happened and what the implications are, let’s see exactlywhat transpired.

Figure1 - USD Index

In yesterday’s (Jan. 19) analysis , I commented on the above USD Index chart in the following way:

TheUSD Index is after a major breakout above the declining resistance lines andthis breakout was confirmed. Consequently, the USD Index is likely to rally,but is it likely to rally shortly? The answer to this question is beingclarified at the moment of writing these words, because the USD Index movedback to its rising short-term support line that’s based on the 2021 bottoms.

Ifthe USD Index breaks below it, traders will view the 2021 rally as a zigzagcorrective pattern and will probably sell the U.S. currency, causing it todecline, perhaps to the mid-January low or even triggering a re-test of the2021 low.

Ifthe USD Index performs well at this time and rallies back up after touching thesupport line, and then moves to new yearly highs, it will be then that tradersrealize that it was definitely not just a zigzag correction, but actually themajor bottom. In the previous scenario, they would also realize that, butlater, after an additional short-term decline.

Theweak performance of mining stocks that we saw last week, and relatively strongperformance of silver (up by 1.24%) compared to gold (up by 0.34%) in today’spre-market trading suggest that PMs are very ready to slide right now. This –as markets are interconnected – might make the strength in the USD Index morelikely than not. In this case, the second above-mentioned scenario would berealized, and the price moves that I’ve been describing for some time now,would gain momentum quickly.

Ineither case, it seems that the outlook for the precious metals market remainsbearish for the short and medium-term. It is only the immediate and very shortterm that have any notable differences. Therefore, it seems to make sense tokeep the short positions in the mining stocks intact.

The USD Index moved lower, and at themoment of writing these words, its trading slightly below the rising supportline. Is the more bearish (on a temporary basis) forecast for the USDX and morebullish forecastfor gold being realized?

Let’s take a look at gold.

Figure2 - COMEX Gold Futures

Gold is rallying today, but overall, itremains in a back-and-forth consolidation pattern, which continues to besimilar to what we saw in November after a very similar (yet smaller) sharpdecline.

Gold moved slightly above its Septemberlow in intraday terms, but not in terms of the closing prices.

Figure3 - VanEck Vectors Gold Miners ETF (GDX)

Miners were barely affected yesterday.They moved slightly higher, but it seems to have been just a pause, similar towhat we saw in mid-November – nothing more than that.

Ok, so that’s what happened. Beforestating that the USD’s breakdown and gold’s strength today are game changersfor the very short term, let’s think about the possible explanation for theseprice moves. Is anything special happening today that makes today’s session atleast a bit different than other sessions? Something that could be affecting theUSD Index and gold?

Of course, there is something like that!It’s the U.S. President’s inauguration day!

In any case, such a day could affect thetemporary market movement, but this year it’s particularly the case, because ofthe recent Washington D.C. riot and popular conviction that “something mighthappen” that would prevent the inauguration and effectively allow Donald Trumpto remain the U.S. President.

As I explained previously, I think thatthe probability for seeing the above is extremely low, but at this time, themarkets and investors might be worried that this really is something that’s atleast somewhat possible. If so, then the USD Index should be moving temporarilylower and gold – being a safe-haven asset – is likely to be moving higher. Ofcourse, only temporarily, because it will soon become clear that theinauguration takes place without any major obstacles. There might be some localprotests etc., but nothing that would change the situation in any meaningfulmanner. Consequently, this is most likely the day when the uncertainties andtension regarding the transfer of power in the U.S. start to decrease. At thesame time, it’s likely that they will peak right before decreasing. Therefore,what we’re seeing in the USD Index and gold right now is perfectlyunderstandable and natural. And likely temporary.

This means that the breakdown in the USDIndex could be invalidated soon – perhaps even tomorrow (or later today) andthe opposite would be likely in the case of gold and silver’s strength. Theymight fade away quite quickly. Either way, the outlook remains bearish in myview.

Thank you for reading today’s free analysis. Its full version includes details ofour currently open position as well as targets of the upcoming sizable moves ingold, silver and the miners. We encourage you to sign up for our free goldnewsletter – as soon as you do, you'll get 7 days of free access to our premiumdaily Gold & Silver Trading Alerts and you can read the full version of theabove analysis right away. Sign up for our free gold newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE

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All essays, research and information found aboverepresent analyses and opinions of Przemyslaw Radomski, CFA and SunshineProfits' associates only. As such, it may prove wrong and be a subject tochange without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Przemyslaw Radomski, CFA and his associates do not guarantee theaccuracy or thoroughness of the data or information reported. The opinionspublished above are neither an offer nor a recommendation to purchase or sell anysecurities. Mr. Radomski is not a Registered Securities Advisor. By readingPrzemyslaw Radomski's, CFA reports you fully agree that he will not be heldresponsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.

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