Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Apocalypse Not Yet?, Gold and Silver Trend Update

Commodities / Gold & Silver 2009 Sep 15, 2009 - 01:50 AM GMT

By: The_BullBear


Best Financial Markets Analysis ArticleThe recent move in gold and silver may be an important top and the corresponding decline in the US Dollar may be a bottom in the making. On the other hand...


As I write this I am hearing Bloomberg announce that "10 of 12 gold analysts are predicting that gold will appreciate 20% this year against a weaker dollar". A prior report expressed firm confidence that the trend in the Dollar will continue to be down. And the report preceding that added to the growing chatter calling for the dollar to assume the role of the Japanese Yen as the world's "Carry Trade" currency.

As a contrarian, I look for such moments of consensus to consider the other side of the trade. This approach helped me spot the bottom of the equities market in March. When the consensus was that a global financial collapse and Greatest Depression were inevitable, from a contrarian perspective this marked a screaming buy.

At this time the bullish consensus on precious metals and the bearish consensus on the dollar appears to have reached an inflection point comparable to March 2009 for the stock markets. Either it really is Apocalypse Now for the greenback and the long awaited moonshot for gold and silver...or it's not. And with these markets set up and fully loaded for a dollar Armageddon a failure to fulfill that expectation may very well produce a dramatically contrarian result.

Gold and silver are stalled at major resistance and RSI is at a level which has produced significant selloffs in the past. GLD did manage a weekly close above the key 98 level. A gap down open below that level may trigger trading stops. How such a scenario plays out may tell us a lot about the nature of this move. Support at the top of the green triangle is key. If price fails below the apex of the triangle on a weekly close then much lower prices are coming. A recovery to new highs will likely spark a strong bull run.

Silver's setup is similar to gold's having also closed over a key technical level. It is similarly overbought on the daily chart.

Gold and silver are commodities. The commodities market is showing clear signs of being in a bear market. How likely is it that the precious metals will diverge from the entire commodities complex and surge higher? Wouldn't commodities in general be rising if the U.S. dollar were on the verge of collapse or even a major market move? The chart of the CRB can only be viewed bullishly with substantial mental gymnastics.

Objectively these are charts of a market that is now in a bear trend after a speculative bubble. The near term and long term for CRB is sideways to down.

Could crude oil break out from here? Sure. But it is trading up against its long term uptrend line which has rejected price three times already. RSI is in a downtrend. Equities have made much higher highs but crude oil has not. Crude is teetering on the brink of breaking its uptrend and losing both its 50 and 200 EMA.

Copper is also trading against heavy resistance and may be ready to retreat.

Even after the massive money printing by central banks and Keynsian spending by governments worldwide that we have seen in the last year commodity prices are not keeping pace with equities. While stocks continue to surge higher, commodities are lagging, particularly since June. The CRB: SPX ratio is showing a definite bear trend.

I might be more enthusiastic about the prospects for a sustained precious metals bull run if the commodities complex were confirming the moves in gold and silver. But they are not only not confirming, they are casting contrary indications. Also troubling is the absolute silence about the charts I am presenting here. The absolute faith in a commodities bull market seems to be entirely unquestioned. It is possible that commodities will suddenly rally sharply and play catch up as the dollar breaks down.

The Dollar, which generally trades against gold may actually be showing signs of bottoming. The minor break of its descending wedge is the kind of technical failure which almost always invites a strong move in the opposite direction if the break does not elicit follow on selling soon after. The failure of key multi-decade support at 78 has yet to produce strong follow through. It is very true that a solid breakdown out of this descending wedge would likely be a signal that a significant downside acceleration is in progress. It is also true that a reversal and breakout from the wedge would be very bullish for the dollar and potentially bearish for the precious metals.

Potentially the dollar might find the first leg of its rally as equities undergo a selloff and money goes to cash. The next phase of any dollar rally might result as the economic growth story takes hold.

This drama may play itself out as "Apocalypse: Not Yet" for the U.S. Dollar and an aborted space launch for the metals. Or not! But something tells me we will not have to wait very long. Stay tuned!

By Steve Vincent

The BullBear is the social network for market traders and investors.  Here you will find a wide range of tools to discuss, debate, blog, post, chat and otherwise communicate with others who share your interest in the markets.

© 2009 Copyright Steven Vincent - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


15 Sep 09, 15:51

All these trend charts are all well and good to plot likely trends in commodities in the future based on what has happened before and in the short term of course, commodities could weaken as easily as they rise. What is important to remember though is the long term (the next 5 years from now)- that we are entering a period in US history where things will dramatically change like never seen before.

This change will come about from higher and higher inflation due to rampant money printing that hasn't worked it's way through the economy yet. Once this happens, gold and silver are set to break well through the 1980 highs. IMHO

Post Comment

Only logged in users are allowed to post comments. Register/ Log in