I've gotten a lot of questions regarding the timing of yesterday's EE raid on gold and silver. "Why yesterday" and "how did it start". I believe your answer, and your clue to what happens next, are in these charts.
The first is a 120-minute USDX chart. Note that from the peak last week at 81.52, the USDX decline had been orderly. When the index snapped up through that channel at 10:00 EST yesterday, Blythe picked up the ball and ran with it. It started with a quick, EE-inspired, $6 takedown from 1428 to 1422. From there, the algos took over and every USDX uptick was met with commodity downticks. Recall that not just gold and silver were retreating. For example, crude declined from 90+ to 87. As you know, the real criminal damage was done on the Globex at about 3:30 but there's no need to plow that ground again and get all worked up.
What does this chart tell us about the near-term future. Well, you can see why the PMs found a bottom a few hours ago as the USDX backed off from resistance. If this is it, and we now roll over, back through 80 and down toward 79.40, the PMs will rally back more. If we can generate enough downside momentum, 79.10 will give way and we'll be right back in the down channel we broke out of yesterday with a test of 78 in sight. If that happens, you can bet your booty that gold will be back up near 1425 and silver over 30.
For a longer term perspective, here is your daily USDX chart. I think it's self-explanatory.
DecUSDX 80.08 0.34 off its highs
Feb11 gold $1384.30 12.20 off its lows
March11 silver $28.46 0.45 off its lows
Jan11 crude $88.45 1.12 off its lows
March11 wheat $7.84 0.18 off its lows
Jan11 beans $12.96 0.30 off its lows
So, at least in the very short term, watch that USDX. A breach of 80 and then 79.90 would be great as it would mean we're headed to at least 79 and the PM selloff is already over.
Have a great afternoon and evening. I'll try to do my usual evening posting later today. TF