Gold’s indicator: Bitcoin’s slide is important but USD’s breakout is the real deal

Bitcoin is the first crack in the dam, and also one that’s getting bigger not just each day, but even ever hour now. Will gold follow suit?

Bitcoin was just above $100k (and we shorted it slightly above $104k), and it already touched $80k earlier today. If this kind of performance repeats next week, we’ll see a breakdown to new lows.

Such a breakdown would be a major technical development, likely leading to another sell-off. That’s why I’m moving out profit-take and stop-loss levels for the short position in bitcoin lower, effectively locking in gains while letting them grow.

The stock market declined significantly yesterday, right after a brief intraday rally. Today, we’re seeing a breather, which is normal, as the stock reached support provided by previous highs.

The dot-com 2.0 bubble may be bursting

Still, it could be the case that the dot-com 2.0 bubble has already burst.

None of the above is likely to hold up well when the USD Index rallies.

And the thing is that the USD Index looks ripe for a major rally. The USD Index futures closed above 100 for the second day yesterday, and it seems that they are going to do the same thing also today.

Three consecutive daily closes plus a weekly close would mean that the breakout is fully confirmed, creating a perfect set-up for next week’s rally.

Mining stocks have already declined significantly yesterday, heralding declines across the board. So far, gold declined modestly before today’s session, and silver declined in a more volatile way.

Silver still sits at new weekly lows

Both recovered, but the white precious metal is still trading at new weekly lows.

Is this the beginning of another slide, or did silver just form an important intraday bottom?

Despite the 100 reasons for silver to move higher, it seems to me that the former is more likely (even if the decline is NOT starting today – as silver was able to recover almost the entire intraday decline). The situation in bitcoin, stocks, and – most importantly – the USD Index, creates an environment in which silver might have trouble rallying. Yes, it’s still likely to soar in the following years, but bigger declines seem more likely in the near and medium term.

Naturally, the same goes for mining stocks.