PRECIOUS METALS
Gold has not met the standard conditions to form a 6-month low; silver has. Which metal should we follow? Well, the gold sector is much bigger, and trades like a currency, whereas silver is viewed as an industrial metal (I disagree). Therefore, we regard gold as the principal driver behind the sector. The current gold cycle supports lower prices in June.
POTENTIAL OUTCOME
If OPEC successfully prolongs or reduces production, general stocks and energy should advance. We could see sector rotation into energy stocks and a breakout in the SPY. Precious Metals could lose interest if the stock market rallies to new highs. That would blend nicely with our forecast for lower prices into June. Conversely, a negative OPEC result or dovish FED minutes could strengthen the metals.
-US DOLLAR- The dollar fell even further on Friday. That was the 38th day of this cycle, if prices are going to bottom, they need to do so early next week. The next swing low should mark a bottom.
-GOLD WEEKLY- The May 2016 6-Month Low was abnormally shallow, registering only one red candle close beneath the 10-Week EMA (two or more is standard). Nonetheless, prices closed lower four week’s consecutively and declined below the previous low at $1,206. That was enough to enable the 6-Month low.
Currently, there has only been one red candle close beneath the 10-Week EMA. Prices declined for just two weeks before reaching $1,214.30. Furthermore,prices didn’t breach the prior daily cycle low. Consequently, it is highly unlikely gold reached the 6-Month low in May.
-GOLD DAILY- I’d like to say prices reached a top at $1,265 but they are yet to form a swing high. It’s our opinion that prices need to break the daily cycle trendline and decline below $1,214 (prior daily cycle low) before registering a 6-Month low.
-SILVER WEEKLY- The COT numbers improved even more for silver with just 57,377 commercial net shorts. Prices have met the requirements for a 6-month low, but gold prices haven’t. Gold is the cyclical driver behind precious metals. Consequently, we should see lower silver prices as gold slides into the 6-Month low.
