It is not the value of the ratio that is currently extraordinary, but the volume (the ratio of volumes, to be precise). Spikes in this ratio indicate extraordinary interest in the price of the white metal and there were many cases in the past when this served as an indication of much lower prices in the following weeks and months. This signal doesn’t say anything about the short term, but the medium-term implications are bearish.
The same kind of implications are provided by the Dow to gold ratio. It moved higher and more than confirmed its breakout above the previous highs. The last time when we saw a major breakout in this ratio was in early 2013 and it meant that gold’s price was about to slide for hundreds of dollars.
Still as far as the short term is concerned, the USD Index also points to a reversal only after an additional rally.
The breakout above the neck level of the reverse head and shoulders pattern is more than confirmed, so another rally appears very likely to be seen this week. The target at about 96 level (precisely 95.89) is supported by the declining red resistance line and the 38.2% Fibonacci resistance level. Both are based on a clearly visible, medium-term move, so they are important.
Now, let’s consider the follow-up action.