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Gold, Silver and the Dollar’s Next Big Move

Commodities / Gold and Silver 2011 Jan 13, 2011 - 03:20 AM GMT

By: Chris_Vermeulen

Commodities

Best Financial Markets Analysis ArticleThere is a potentially big setup in precious metals sector along with the dollar which looks like its about to unfold. Since mid-October of last year gold started to show signs of distribution selling. Only a month later in November silver started warning us that some big players were taking some profits off the table also. Distribution selling is easy to spot on the charts. In short you will see heavy volume selling accompanied with strong moves to the downside.


Now if we look at the US Dollar chart we see the exact opposite price action. We see sharp rallies during October and November of last year. It’s normal to say that gold and silver move inverse to the Dollar so this price action makes perfect sense.
The interesting thing with the US Dollar is that in Nov-December it rallied breaking through a key resistance level and has been consolidating above support ever since. If this bullish pattern (bull flag) plays out, then it’s just a matter of time before the dollar makes another strong rally upwards, which will put downward pressure on stocks and commodities.

Take a look at the charts below…

US Dollar Daily Chart
The 50 period moving average has provided key support/resistance levels for the previous trends and if it holds true going forward then we are not far from another rally in the dollar.

Gold Futures Daily Chart
Gold moves inverse to the dollar so if we get a higher dollar then look for gold to have a stair step pattern lower.

Silver Futures Daily Chart
Silver looks about ready to do the same thing as gold.

Precious Metals and Dollar Trading Conclusion:
In short, we could see a major shift in momentum from up to down in both precious metals and the equities market. Keep in mind the market has a way of dragging out patterns/moves so whilethe chart looks bearish and I think a reversal is near, things could just chop around for another month or so before a definitive breakout is made. This is why you don’t want to anticipate moves (pick a top).  Currently I am neutral on metals and the dollar waiting for a setup which must have clear risk/reward characteristics.

If you would like to get more of my daily analysis to join my newsletter at www.GoldAndOilGuy.com

By Chris Vermeulen

Chris@TheGoldAndOilGuy.com

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.  

Chris Vermeulen Archive

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