Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Shows Increasing Relative Strength Amid US Dollar Strength

Commodities / Gold and Silver 2015 Jan 09, 2015 - 12:07 PM GMT

By: Jordan_Roy_Byrne

Commodities

The current trendy reason for the mainstream to dislike Gold is strength in the US Dollar. On the surface it makes quite a bit of sense. Gold is priced in dollars. Dollar strength automatically pressures the Gold price. However, this popular view reveals a total lack of introspection. Since the end of 2013 Gold is essentially flat (positive by a fraction) while the greenback has gained a whopping 14.9%. Better yet, since Gold’s early November low it has gained 6.0% even while the US$ is up 5.8%. This type of relative strength within the context of an aging bear market may be another sign of a major trend change brewing under the surface.


Gold has a history of leading the buck at important lows. It makes sense because if Gold is going to rebound strongly it should do so in real terms and not just as a mirror of the buck. The chart below plots weekly line charts of Gold and an inverted US$ index. In blue we plot important bottoms in Gold with the corresponding bottoms in the inverted US$ in red. Note how Gold started to rebound at least a few months before the inverted US$. We should also note that during 1976 Gold bottomed in August while the US$ didn’t peak until December.

Turning to the present, Gold is on the cusp of a mini breakout but we’d really like to see it show more strength against equities. We’ve recently noted that Gold has broken out to a 16-month high against foreign currencies and a 17-month high against commodities. Yet it has remained weak against global equities.

Below we plot Gold, Gold against the S&P 500 and Gold against the MS World index (world excluding the USA). If Gold can push above $1220 in the coming days then it could rally up to $1270-$1280. Gold is very close to an important breakout against global equities (ex USA) but still has work to do against the S&P 500. 

Though Gold has been flat over the past three months it has quietly gained important relative strength. It recently touched a 16-month high against the Euro and a 17-month high against commodities. It has rallied even as the US$ has rallied. These are some very positive signs that hint that the worst could be over. In my opinion, the last thing Gold needs to do for bulls to win the argument is break its downtrend relative to the S&P 500. That negative correlation has killed Gold throughout the bear market and a reversal in favor of Gold would be very significant. We are long select juniors as we believe at worst, a decent rebound in the sector has begun. Time will tell if it evolves into a new bull market Consider learning more about our premium service which includes a report on our top 10 juniors to buy for the coming bull market.  

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2014 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2022 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