Best of the Week
Most Popular
1.Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - Nadeem_Walayat
2.Gold And Silver – A Reality Check - Michael_Noonan
3.The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - Nadeem_Walayat
4.Stock Market S&P 500 Volatility-Based Price Probability Range - Richard_Shaw
5.A Stocks Bear Market Is Now More Likely Than Not - Richard_Shaw
6.Money Supply and the Fed’s Serious Inflation Risks - Zeal_LLC
7.More Selling for Stock Market, Gold? - Brad_Gudgeon
8.Gold, Silver Precious Metals: a Critical Week Ahead - Rambus_Chartology
9.Gold Price Change in Character - Gary_Savage
10.Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - TLSReport
Last 5 days
The Real Reason for the Refugee Crisis You Won’t Hear About in the Media - 8th Oct 15
US Stocks: The [Trend]Line Between Bull and Bear Market - 8th Oct 15
Bundesbank “Reassures” Re. Gold Bullion Reserves as Deutsche Bank Shocks With €6 Billion Loss Warning - 8th Oct 15
How Our Aversion To Change Leads Us Into Danger - 8th Oct 15
Moving Stem Cell Research Forward: Bernie Siegel of the Genetics Policy Institute - 8th Oct 15
Stock Market VERY IMPORTANT Turn Date - 7th Oct 15
The 5th Convergence…An Economic & Financial Superstorm That Will Devastate America - 7th Oct 15
Summers Grades Janet Yellen's Fed Performance 'Incomplete' - 7th Oct 15
Gold Versus Central Banks Paper Ponzi - 7th Oct 15
QE3 is Over Get Ready for QE4 - 7th Oct 15
How to Profit from Government Mandates in Biofuels - 7th Oct 15
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15
Gold And Silver – A Reality Check - 3rd Oct 15
Stock Market Primary IV Still, or Primary V Underway? - 3rd Oct 15
The Oil Industry’s Day of Reckoning - 3rd Oct 15
U.S. Interest Rate Hikes Keep On Slippin' Into the Future; Treasury Yields Sink Again - 3rd Oct 15
China's Stock Market Crashing; Time for Panic or Restraint - 3rd Oct 15
SPX Stocks Bulls Struggle to Regain the Upper hand... - 2nd Oct 15
The Two Faces of Stock Market Volatility - 2nd Oct 15
Money Supply and the Fed’s Serious Inflation Risks - 2nd Oct 15
Stock Market How Bad Can This Get, And How Fast? - 2nd Oct 15
A Worrying Set Of Recession Signals - 2nd Oct 15
Negative Jobs Report Sents SPX, TNX Lower - 2nd Oct 15
Don't be Fooled by the Recent Equity market Rallies. Its a Bear Market, Stupid! - 2nd Oct 15
US Bond Market - How to Fix This - 2nd Oct 15
Survival Secrets from Colorado Resource Investing Front Lines - 2nd Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Gold from the Non U.S. Dollar Perspective

Commodities / Gold and Silver 2012 Dec 21, 2012 - 10:52 AM GMT

By: P_Radomski_CFA


This was a week of declines for precious metals, very strong ones, indeed. It seems that the main culprit was not the U.S. dollar, that should have actually helped the whole sector, as it declined heavily too, but the fears concerning the “fiscal cliff”, that we discussed some time ago, and the lack of any solutions from the government so far. We believe that as soon as the problem is solved, the whole sector will rally strongly. That is even more likely, as gold and silver are currently extremely oversold, as we’ll see in the technical part of this essay. To see the true magnitude of the plunge, and try to guess where we can go from this point, we’ll have a look at the yellow metal from the perspective of different currencies. But first things first – we’ll start with the usual long-term chart of gold priced in USD (charts courtesy by

In the chart, we see that prices have moved below the important 300-day moving average (the blue slope in our chart). If prices close the week below this level, which appears likely, then we will have an increased probability of significant declines. If prices do move much lower, it will be a huge buying opportunity and the RSI levels around 40 confirm this. Many times in the past, major bottoms have been seen with the RSI level near 40.

Having seen how the situation looks from the U.S. perspective, let us move on to the first chart of gold priced in other currency, namely in the Canadian Dollar.

In this chart, we see gold’s price has just moved a bit below the long-term resistance line. The move has not yet been confirmed. This type of price move has not been seen since late 2008 but with RSI levels extremely oversold, the bottom seems either to be in already or at least very close.

Now, let’s have a look at the yellow metal from the perspective of the Australian Dollar.

Here, the extremely low values for the RSI are a somewhat bullish sign. This value level has only been seen a few times in past years and each marked a major bottom in gold priced in the Australian dollars.

This is a very long-term chart so a few more days of declines will make little difference. It seems that a medium-term bottom is quite close or perhaps already in.

To finish off, let’s take a peek at gold priced in euro.

Once again, extremely oversold RSI levels are present in the chart, as they have moved below 30 and are approaching 20 for this ratio. This has not been seen for many years. Gold priced in euro also moved below its rising support line, but this breakdown has not been confirmed, so little weight is placed on this move. It is a bearish development, however.

Before summarizing, here’s the question about gold that we received this week along with our reply:

This positive correlation with the dollar is beyond strange and highly unnerving. Is this an indication of some fundamental change in gold?  It almost seems impossible. Any light you could shed on why gold now tracks the dollar's every move would be greatly appreciated. This seems to negate the purpose we entered the PM market in the first place.

We doubt that it's some kind of fundamental change in gold. Why could this be the case fundamentally? Possibly Europeans could be thinking that the worst is over and that the European economy is going to improve in the coming months and are now selling their gold to get back euros. Technically speaking, gold priced in euro is correcting significantly.

The most important thing is to check if we have ever seen anything like this during this bull market or if this is something completely new. And this is precisely what we do when looking at the gold:XEU ratio or gold priced in the euro. There have been times when gold declined along with the dollar and this resulted in sharp declines in the ratio and moves lower in the momentum indicators that are based on it, such as the RSI Indicator. The situation is now extreme and history tells us that the relationship is likely to return to normal very soon.

Another thing that is somewhat related to gold from the non-USD perspective is the SP Gold Bottom Indicator - especially the long-term version. The moment when the indicator moves below its signal line generally corresponds to extremes in the gold-USD link. The indicator is about to flash a buy signal, but it was not yet the case. The suggestion here is that the simultaneous decline in gold and the dollar might to be over just yet.

Summing up, the situation for gold has deteriorated this week. Multiple signals on many charts show the situation to be extremely oversold in the short term, especially from a non-USD perspective. A local bottom is probably close, however, given this week’s volatility and the fact that in general oversold assets could become more oversold on a short-term basis before the price trend reverses, we could see additional weakness in the price of gold.

Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You’ll also receive Market Alerts on a daily basis and when the trial expires, you’ll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.

Thank you for reading. Have a great and profitable week

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website -

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, 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

© 2005-2015 - 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

Biggest Debt Bomb in History