Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

US Dollar Rally to Fail Before USD 80, Gold Correcting First Phase of a Major Up

Commodities / Gold & Silver Dec 03, 2007 - 12:30 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleSome readers may have seen a trades list produced by Goldman Sachs recommending that investors short gold next year. This report has been allocated to the circular filing along with the government inflation statistics.

With the dollar rally predicted on www.clivemaund.com early on Thursday getting underway immediately afterwards, the question is how far this rally will carry, and how much further gold and silver will react as a result.


As set out in that article, while the current dollar rally could of course stop in its tracks at any time, it is likely to be significant for the reasons then given, which briefly were the non-confirmation by Stochastics of the recent new low, the large gap between the 50 and 200-day moving averages, and the evidence of rather aggressive buying in the candlestick pattern over the past several weeks, in addition to which sentiment regarding the dollar has been so negative in recent weeks that it could hardly get worse - a situation which typically precedes a rally.

However, we can be reasonably sure that any rally won't get above 79 - 81 on the index, which is the important multi-year support level that the dollar broke decisively below 2 to 3 months ago, and which is now a strong resistance level. Furthermore, all rally attempts so far this year have stalled out in the vicinity of the 100-day moving average, which is now below 79, so taking both these key factors into consideration, it seems most unlikely that the current rally will get any higher than 79. It is important to remember that this is viewed as the MAXIMUM that the dollar can achieve over the short to medium-term, and that the overall picture remains very bearish, with all moving averages falling, and key multi-year support having failed. Thus this rally, which in any case will only be due to a bout of panic short-covering following a period of extreme bearishness, can be expected to be followed by renewed decline which should take the dollar to new lows.

We will turn now to consider how much further gold is likely is likely to react in the event that the dollar continues higher over the short to medium-term, and for this purpose we will use a 3-year chart in order to maintain an overall perspective.

The first and most important point to make is that the strong advance by gold throughout September and October and into early November involved a breakout from a consolidation pattern lasting approximately 15 months, and is regarded as the FIRST UPLEG of a major uptrend. This being so the current retreat is viewed as a reaction, not a top, so the only question is how far it runs before gold takes off again to the upside. As with the major uptrend of late 2005 - early 2006, the price should at intervals test support in the vicinity of its 50-day moving, as it is doing now, and this average can be expected to maintain a fairly large gap with the 200-day until the advance has run its course, which is believed to be a long way out yet.

So, bearing in mind what was written about the dollar above, and gold's propensity to “telegraph” action in the dollar, how much further is it likely to react before the advance resumes? The answer is about $765, with $10 leeway either way, and it will have to be watched closely because once it reverses to the upside it is likely to be fast. If gold does drop back to the $765 area there is likely to be a sharp but brief shakeout in Precious Metals stocks, which should prove to be a significant buying opportunity.

By Clive Maund
CliveMaund.com

© 2007 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund 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