The bullish cup-and-handle formation is still intact, even though the “handle” is now considerably bigger. This doesn't change the overall bullish implications this chart has on gold prices. Additionally, the stochastic indicator -- which has proven a valuable tool in timing local bottoms in the past -- is also suggesting that the bottom is rather near. I'll provide you with one more chart from the premium version -- one indicator suggests that higher prices are likely in the future.



The SP Short Term Gold Stock Bottom Indicator flashed a “buy” signal on Friday, as it turned up after having declined below the dashed horizontal line. In the past, similar action meant that a bottom is already in, or that it will be in rather soon. Last time it was the case at the end of June, and the HUI Index has indeed put a local bottom. Currently, it may mean that precious metals are still vulnerable in the immediate term, but they're not likely to consolidate much longer.

Summary

The long-term situation remains inflationary and favorable for the precious-metals sector; however, the short-term situation is rather cloudy. In the very recent past, precious metals have taken the general stock market’s lead, while the dollar has been trading sideways without a decisive breakout or breakdown from its trading range. The long- and medium-term trends are down for the USD Index, so a breakdown from here is more likely than another countertrend upswing. Still, a significant plunge in the general stock market may negatively affect prices of gold, silver, and corresponding equities.

Investors who are already in the market and plan to keep their positions for  at least several months don’t need to trade the rest of the downswing. Short-term speculators might want to wait a little longer before opening a long position in the precious-metals market.


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