Gold rallied, silver rallied, and mining stocks rallied. That’s how one can summarize yesterday’s session. The volume was huge, so it appears that a major upswing has just begun. But is this really the case? As always, just because things look encouraging and the emotions are high, it doesn’t mean that anything changed. One needs to step back from the day-to-day price and volume changes and look at the factors that are in place right now without any biases. No hopes, no “feelings toward the market”, and no worries about missing the boat. Just facts and logic. Let’s start with gold (charts courtesy of http://stockcharts.com).

Gold moved higher and the volume was significant. Right. But, what does it change? Did the price increase to the levels that imply a change? Was there an important breakout? Did we see an invalidation of a breakdown? No. Nothing like that happened. Gold moved temporarily above its 50-day moving average and it didn’t even move to its late-August highs.

The price action didn’t change anything. But maybe the size of the volume did? Nope. Price increase on big volume that takes place during a consolidation pattern quite often marks the end of the consolidation… And declines. Mid-April top (which was the 2018 top in terms of the intraday prices) was accompanied by huge volume and we saw big volume levels at practically every daily rally that preceded the big declines. The volume spikes (considering only those that took place when gold moved higher) that we saw in the second half of May, the mid-June one, and early-July one suggest that what we saw yesterday might actually be viewed as a bearish sign. Some may argue that it’s too far-fetched, and even if you choose to think that it is, it’s definitely enough to prove (!) that yesterday’s big-volume upswing was not bullish.

But gold rallied along with the USD Index!

It did, and that’s mostly interesting because of the decline in the EUR/USD exchange rate. But, is this really something major? Did it change a lot? The best way to check is to examine gold’s price in terms of the euro.

The above chart shows two important facts: