To say that gold’s weekly volume was big is like to say that snails are not the fastest animal. You can't say that it’s a lie, but it doesn't really convey the entire truth, either. Gold’s weekly volume was highest ever. Yes, ever. There was not a single week – not ever during the 2011 top or when gold declined in 2008 – when gold moved on volume that was higher than what we saw last week.
Is this significant? You bet! The chart below provides details (charts courtesy of http://stockcharts.com).
Breaking of the record is important, but it’s just an exclamation mark behind the implications that apply based on the analogy to other huge-volume weeks.
We marked situations with extreme weekly volume using vertical red dashed lines. There were 2 in 2008, one in 2009, one in 2011 (THE top), one in 2013, and one in 2016. All of them were followed by declines and 5 out of 6 confirmed a major top. The remaining case was during the 2013 decline.
Based on the above analogy, since we are definitely not in the middle of a short-term decline right now, it seems very likely that we are at a major top. The above-mentioned exclamation mark means that the top is indeed meaningful.
What could be meaningful about yet another $1,350-or-so top? There were quite a few of them in the past few years. It might be meaningful because that’s the top that starts the final slide in gold. That’s exactly what many other factors are pointing to, so such scenario seems quite realistic.
Having discussed the key gold chart for the key precious metals, let’s check what’s happening in the currency market. We explained the situation in detail and we provided updates during the previous week, so if you haven’t had the chance to read the last few alerts, it might be a good idea to do so today. Since we now have the weekly closing prices, it’s time for a weekly update.
The USD Crisis
The USD Index closed slightly below the highest of the key support lines (2009 high of 89.11) and above 3 remaining support levels (the 2010 high of 88.71, 50% Fibonacci retracement based on the 2011 – 2017 rally and the 61.8% Fibonacci retracement based on the 2014 – 2017 rally).
The additional detail here is that in today’s pre-market trading, the USD Index has already moved to 89.27, which is more above the 2009 high than Friday’s close was below it. In other words, the tiny breakdown was already invalidated.
What does this tell us? It tells us that the USD Index is highly likely right after a critical bottom. Even if it was just one of the very important levels that would be reached, the situation would already be bullish in light of the very oversold situation in the RSI indicator. But it’s not just one extreme support that was reached, but 4 of them.