Are gold prices and silver prices finally on the mend after a steep, multi-month selloff? Or, did gold stocks like the SPDR Gold Trust (GLD) and stocks of gold miners like Newmont Mining Corp. (NEM) and Goldcorp Inc. (GG) simply throw investors a headfake on Monday with a sharp and surprising gain?

Given the severity of the downtrend we’ve seen from gold and silver prices since late-2012, it would be easy to dismiss yesterday’s jump from GLD, GG, NEM stock and all the rest as nothing more than more of the same volatility. The fact of the matter is, though, Monday’s rally may well be the beginning of a trade-worthy uptrend.

Gold Prices and Silver Prices Really Are in Rebound Mode

For perspective. silver prices were up 7.3% yesterday, with the metal closing at $16.65 per ounce. That was the highest close since October 29th. Meanwhile, gold prices jumped to $1219.1 per ounce on Monday … a gain of 4.5% and also the best close since October 29th.

While it was obviously a step in the right direction for owners of silver and gold stocks and silver and gold miners, truth be told, similar moves have ended up going nowhere. Is there any real chance this one could turn out differently?

As a matter of fact, there is.

The clues are subtle, and perhaps a little subjective. They are there, however. The most telling of these clues suggesting silver prices have already hit a significant bottom is the volume surge — most of it bullish — from the beginning of November.

High volume indicates that more futures contracts than usual are changing hands, which tends to happen when sellers believe silver prices have fallen as much as they’re going to, and when the would-be buyers decide the same and are willing to wade into new positions.

In fact, if you look closely at the chart of silver futures below, a volume surge in late June ultimately served as a pivot from an uptrend into a prolonged pullback. The most recent big-gain days were very strong volume days, and new gains are now materializing on increasingly higher volume.

The same idea applies to the chart of gold futures. Trading activity has been unusually high since the beginning of last month when gold prices stumbled to new multi-year lows, but the three biggest daily advances since then were also three of the four highest-volume days for that period. The bulls were piling back in before Monday’s big jump.

Here’s what these charts mean for silver and gold prices in the future…

The Time is Right For a Reversal

Even without the budding bullish volume, gold and silver prices were apt to recover here judging from the market’s bullish response to what was superficially bearish news.

On Sunday, the Swiss populace voted to not force the nation’s central bank to buy back all the gold it sold between 2000 and 2008 and then mandate that the government bank never sell any of its gold again.

Had the law passed, it would have translated into a 7.5% uptick in gold demand over the course of the next five years and presumably pushed gold prices upward that whole time. While the pre-voting polls never suggested the referendum actually had a shot at becoming law, at least some gold traders were quietly thinking the proposal would indeed be approved by Swiss voters.

Though the measure was clearly destined to fail from the beginning, it’s the kind of let-down that the market usually treats as surprising bad news. Not this time, though — the bulls came out of the woodwork despite the superficially bearish announcement, bidding gold prices up anyway.

That movement is a sign that a bullish mindset has been building for a while … a mindset that’s willing to ignore details that may conflict with a bullish opinion.

Simultaneously, what has largely been overlooked about the selloff on gold stocks and gold mining stocks since July is how it has coincided with, and mostly been caused by, a rally in the value of the U.S. dollar. That rally seems to be running out of gas, though.

As the comparison of the U.S. Dollar Index and GLD stock illustrates below, although the sawbuck isn’t falling yet, the advance stopped in early November and the index has only moved sideways in the meantime. It’s just one bad day from breaking below a key floor at $87.50 though, and should that happen the greenback’s selling floodgates could open wide in a hurry.

Gold traders seems to sense this, and though the dollar has yet to implode, such a pullback seems more likely than a renewal of the dollar’s uptrend.

Outlook for Gold Prices and Silver Prices

By this point in time, precious metals traders should know anything that can happen will eventually happen with gold and silver prices; nobody can afford to get married to their position. To the extent gold prices and silver prices can be feasibly handicapped though, the recent bullishness suggests there’s likely to be some decent near-term upside for both.

On the gold front, the $1300 mark would be a good, first-checkpoint target. A move above $1300 could be plenty catalytic. As for silver prices, the former floor at $18.20 should have become something of a ceiling in the meantime. If that ceiling fails to hold silver down, however, a move to $22.50 could unfurl with surprising ease.

In both cases, the rally will largely depend on a falling U.S. dollar.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.