Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Prospers After Break From the U.S. Dollar

Commodities / Gold and Silver 2010 Apr 30, 2010 - 02:16 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleThe Technical Trader’s view:



WEEKLY CONTINUATION  CHART

The story of gold and the dollar is clearly a historical one of close association with only occasional divergence (for example in early 2009) but the divergence that began in February this year is dramatic and enduring.

Basically the relationship of Dollar strength and  Gold weakness has fallen apart.

Can this move be sustained – or more specifically, the concern of this note is whether Gold is vulnerable to continued Dollar strength?

WEEKLY CHART

This market doesn’t look vulnerable.

The market was already well set up before the February divergence with Gold.

And the beginning of the divergence coincided with the completion of the bull falling wedge.

 

 

 

 


 

DAILY CHART

Since the completion of that wedge we can see that another continuation Head and Shoulders pattern has completed - minimum target 1250 or so.

The current bullishness of Gold is even more impressive because of the context of recent Dollar strength.

Watch for great additional strength on a break up through 1170.70.

The Macro Trader’s view:
The Greek debt drama has continued to dominate most markets this week. Last Friday the Greek prime minister sought to activate the rescue package negotiated a couple of weeks earlier, only to find accessing the funds promised wasn’t that simple.

When the deal involving the EU, Euro zone and IMF was struck a couple of weeks earlier, the impression was given that the funds were readily available if Greece needed them.  As part of the negotiating process Greece had to agree to a tough austerity package, leading markets to assume that as soon as a request for help was made, the Funds would flow.

But that soon proved not to be the case, as Greece and the markets found out at the end of last week. Germany sought fresh tough measures and assurances. With the German Government needing to pass legislation through parliament to provide its share of the funds, they were aware that German public opinion wasn’t supportive of bailing Greece out.

Although the German Government understood that failing to fulfil the terms of the agreement would do the Euro serious damage. But still they needed to persuade the Public and opposition that the rescue wasn’t just for the benefit of Greece but also necessary for the credibility of the entire Euro zone and Euro.

It now appears the Germans will be able to pass a bill through Parliament next week enabling the funds to be released. But the delay has come with serious costs.

The Greek sovereign credit rating has been downgraded to Junk. Portugal has seen its Sovereign credit rating reduced by two notches and Spain by one. The Euro was sold off hard against the dollar and equity markets took a hammering.

The odd thing was that Gold rallied –unlike its reaction in other periods of risk aversion driven by Greece, Previously, Gold was driven lower as traders bought the Dollar and Yen as safe-haven trades. This time traders still bought sought those safe haven trades, but with markets fearing a contagion effect, Gold has emerged as a stronger safe haven trade.

The main reason for this new gold reaction is that the major developed economies are all running large budget deficits and high debt to GDP ratios. And although the assumption is the US and UK will to a degree generate enough economic growth to make these deficits manageable, there are still risks.

In the US the Obama administration still plans big government spending that some analysts fear will push the debt to GDP ratio through 90%, a level regarded by most US analysts as the point where growth and productivity begins to suffer.

In the UK a general election campaign is underway and the outcome is unclear with a hung Parliament looking likely. The policy result could be that the new government adopts a slow path to correcting the budget deficit and shrinking the debt, rather than the Conservative intention of tackling the problem more aggressively if they win an overall majority.

So while the situation in Greece is far worse than any of these other cases, traders are aware that sovereign debt is no longer the gilt- edged investment it used to be and gold stands out as the one store of wealth independent from any one nations policies, either economic or monetary.

The result is clear: gold is likely to rally further regardless of the direction of the Dollar.

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead 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