2. The cup-and-handle formation, to which I've referred in the past, seems to be completed -- and the handle, which formed during June, is now clearly visible. Ideally, I'd like to see the volume shaped similarly to the way price shaped during the mid-February to June timeframe, as this would perfectly confirm this bullish formation.

But that isn't the case. The volume was much higher in the middle of the February top than it was at the beginning of June.

Still, the lowest volumes were in mid-April during the bottoming process, and the volume declined during the “handle“ phase. I therefore decided to include this formation in my analysis. Volume isn't ideally confirming this bullish formation -- but it's also not invalidating it.

3. Summing up, gold's likely to take a small pause here, which will also correspond to the summer doldrums. But based on the current charts, it seems that this move will be insignificant, so I don't plan to trade it myself.


Click to enlarge.

4. The silver market (SLV) appears to have bottomed as well. We saw the pattern in the stochastic indicator, which is usually visible during bottoms, and we touched the support level on high volume. The silver chart confirms the points raised earlier -- the most probable direction for price to go is up.


Click to enlarge.

5. As I indicated last week, the correlation between USD Index and the precious-metals market has weakened recently, and, for the past few weeks, they've been trading somewhat independently from each other. Since I first wrote about it, the correlation has become even weaker. Although that's a short period of time on which to base any conclusions, it might tell us that uncertainty about the short-term outcome in the USD market doesn't automatically need to translate into uncertainty in the gold market.

The precious metals sector is still in a favorably technical and fundamental situation, and it doesn't “require“ the dollar to plunge in order to move higher.

Summary

The historical tendencies favoring the summer-doldrums scenario may not play out this year, as many significant developments -- such as the tremendous increase in the money supply -- suggest higher prices ahead. The traditional negative correlation between the dollar and precious metals has become barely visible in the past 2 weeks, but that doesn't seem to matter much: Gold, silver, and mining stocks are likely to rise -- even without significant influence from the USD Index.

Still, we may experience a pause in the rise of gold prices.