Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

How Does U.S. Dollar Weakness Impact Gold and Silver Investors?

Commodities / Gold and Silver 2010 Jan 12, 2010 - 01:29 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleDuring the past week we've sent a Market Alert to our Subscribers, in which we commented on the current developments on the precious metals market, and indicated what action appears to be profitable under those conditions, and in the following essay we would like to elaborate on one of the points raised in that particular message.


One of the factors that we mentioned was the USD Index, which was (and still is) very close to the cyclical turning point, as suggested by the previous analysis. Consequently, we believe it would be useful to comment on the performance of this important driver of gold and silver prices (charts courtesy of http://stockcharts.com.)

Reviewing the big picture before digging into details is particularly useful when signals are mixed - which appears to be the situation today. Signals coming from the longer time-frames are generally stronger than those from daily charts, so beginning with these types of charts allows us to see what are the main, long-term tendencies and then look for confirmation (or lack thereof).

This time, this approach let's us put the current move down in the USD Index into proper context. The U.S. Dollar moved from below 75 to over 78 in just a few weeks, so a correction was likely (as we mentioned back then). Still, please keep in mind that the current upswing (since early December 2009) is itself a correction of much bigger (March 2009 - December 2009) decline that took USD Index from almost 90 to almost 74. This is a huge move that took most of the year to form, and 2-weeks of a rising prices are not very likely to fulfill the role of a correction.

In other words, it is doubtful that two weeks and correction of 27% or so of the size of the preceding move have already caused people to turn bullish / close out their short positions in the USD Index. The upswing was sharp, which makes me assume that many speculators perceive this phenomenon as very temporary (quick upswing followed by even quicker downswing). Consequently they have not closed their short positions yet, and once they do, USD Index is likely to move higher. As a digression - it is these types of psychological phenomena that make the whole chart analysis work.

Moreover, the current small (last few weeks) decline has been very calm compared to the previous upswing - which is exactly what consolidations look like. Additionally, the USD Index is correcting in the form of a flag, which is a typical formation of continuation (price is likely to move in the same direction as it did before it entered the formation).

The current correction caused the whole preceding rally to become less steep, which leads to the change in the time/price combination that is likely to contain the next local top. As usual, we've marked this area with red ellipse, and it is still around the 80 level, with the only difference being that it is now more likely to take place near the end of the month.

We've additionally marked the last few weeks with the red rectangle to emphasize the fact that recently PMs have been moving exactly in the opposite direction on the USD Index. Therefore, if the USD Index moves higher from here - possibly to the 80 area, gold and silver are likely to move lower at the same time.

Before summarizing, let's take a look at one of the ETF designed to track the performance of the U.S. Dollar - the PowerShares DB US Dollar Index Bullish Fund (UUP) - this will allow us to analyze volume.

The red and blue lines on the chart above represent the direction in which the price and volume moved. Based on the changes in the direction we may recognize five time frames. The dashed vertical time lines mark the turning points in terms of price/volume behavior.

Before mid-October value of the USD Index declined along with rising volume, which means that people were more and more scared that the plunge would never end and sold more and more quantities of the currency. In mid-October situation changed as some investors jumped back on the long side of the market and many others followed. The move up took place on a very large volume indicating that this is not just a coincidence, and it signaled that a bigger move up might appear in the future. At the beginning of November, USD declined once again, but this time it moved lower on declining volume - which is normally neutral signal, but given the fact that the volume was rising during the previous part of the decline, it should make one at least suspicious.

Finally, early December was the time when the bottom was put and prices began to increase. The noteworthy fact is that it moved higher on an enormous volume, which means that this is not likely to be just a small blip on the radar screen. Since mid-December the value of the USD Index has been sliding lower, but this has been taking place on a small volume, which once again indicates that this is just a correction, and the next move in the USD Index will be up. The full version of this essay includes analysis the short-term USD chart, gold, silver, PM stocks, general stock market, rankings of top gold/silver juniors and much more. 

Summing up, the USD Index has been moving lower in the past few weeks, but there are several points that suggest that this move is just a pause within a bigger move up. This means that gold's and silver's upswing may be postponed.

To make sure that you are notified once the new features (like the newly introduced Free Charts section) are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules