Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

US Dollar Getting Ready to Rally Implications for Gold

Commodities / Gold and Silver 2017 Oct 24, 2017 - 11:27 AM GMT

By: The_Gold_Report

Commodities

Technical analyst Clive Maund discusses the outlook for the U.S. dollar and its implications for gold.The dollar is getting ready for a sizable rally, and that means that gold and silver are going to be knocked back again. Longer term however, the outlook for the Precious Metals could scarcely be better, as we will see.

In last weekend's update it was pointed out that gold's gap breakout from its steep downtrend shown on its latest 6-month chart below was probably false and that it was expected to drop back as the dollar advanced, which it duly did last week. Bearing in mind that the dollar has about completed its Head-and-Shoulders bottom, it is now clear that a parallel Head-and-Shoulders top is completing in gold as shown on the chart. This chart projects a breakdown beneath the nearby support level to be followed by a drop targeting the quite strong support in the $1200–$1215 area.


Gold’s latest COT chart still looks more bearish than bullish, with a lot of room for improvement, such as would be occasioned by a drop to the $1200–$1215 area.

Click on chart to popup a larger, clearer version.

On gold's 8-year chart it continues to look like it is in the late stages of a giant Head-and-Shoulders bottom pattern. The buildup in volume over the past 20 months certainly looks positive, especially over the past several months, all the more so because it has driven volume indicators higher, notably the Accum-Distrib line, which is not far off making new highs—exceeding its level at the 2011 peak. Once gold breaks above the resistance level approaching $1400 it will be on its way, although it will then have to contend with another important band of resistance in the $1510–$1560 range. A near-term retreat by gold to the $1200–$1215 area in the face of a dollar rally will not damage this long-term technical picture.


The Market Vectors Gold Miners, GDX, which functions as a gold stocks index, is marking out a giant Head-and-Shoulders bottom that roughly parallels the one completing in gold itself. A near-term decline to $20-$21 in GDX will be viewed as presenting another important buying opportunity for the sector. The volume pattern during the build out of this base pattern is very bullish, with big volume on the rise out of the low (Head) of the pattern, tailing off steadily as the Right Shoulder has formed.


The latest 6-month chart for GDX shows an upsloping Head-and-Shoulders top completing which parallels the one completing in gold itself. This pattern targets strong support in the $20-$21 area following the expected breakdown.


Over the past several weeks the dollar has behaved exactly as predicted in recent updates, as it has dropped back to complete the Right Shoulder of its Head-and-Shoulders bottom, and last week started to advance towards the upper boundary or "neckline" of the pattern in readiness for the upside breakout and advance. This Head-and-Shoulder bottom targets the 97 area as shown, near to the falling 200-day moving average…


Our prediction made many weeks ago that the dollar would rally off the lower boundary of its big bullhorn pattern shown on the 4-year chart below to break out above its restraining Dome has proven to be correct, and a projection has been drawn on this chart showing roughly what is expected to happen. As we saw above on the 8-month chart, the base pattern now approaching completion targets the 97 area approx. This is the "swansong rally"—the dollar's last rally before it "hands in its dinner pail," and should present a wonderful last opportunity to accumulate the better gold and silver stocks, before the dollar does an about face, and breaks down from the large Broadening Top pattern into a severe decline.


The Hedgers chart has been warning for weeks that the dollar will reverse and rally, as has been pointed out repeatedly. The latest chart shows that the rally is still ahead of us—which is congruent with the dollar having completed a valid Head-and-Shoulders bottom.

Chart courtesy of www.sentimentrader.com

Finally, it is a matter of conjecture what will drive a dollar rally over the medium-term, but one possibility is an escalation of the Catalonia crisis, with the Madrid government attempting fascist style repression of the Catalonian's drive for independence leading to conflict. Both Madrid and the European Union have an interest in crushing the Catalonians, since both profit from centralization of power. Thus to whatever extent the Catalonians are successful, it will inspire other would be breakaway regions across Europe, further undermining the European Union and thus putting pressure on the euro, hence a dollar index rally, as the dollar index is made up approximately 57% of the euro.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent articles with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Clive Maund: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies referred to in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts provided by the author.


© 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