Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24
Managing Your Public Image When Accused Of Allegations - 25th Apr 24
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Falls as U.S. Dollar Rises, But Are These Moves Significant?

Commodities / Gold & Silver 2009 Oct 27, 2009 - 07:46 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticlePrecious metals moved lower this week, which was accompanied by a decline in the general stock market and a small rally in the USD Index. The situation in the main stock indices is still rather unclear, so this week I would like to point your attention to the U.S. Dollar as it provides clues invaluable to anyone involved in the precious metals sector. After all, there is a clearly visible negative correlation between USD Index and gold, silver and PM stocks.


Let’s begin with the chart (charts courtesy of http://stockcharts.com) featuring the USD Index in the medium term, and after that I will move to the short-term analysis.

The U.S. Dollar is trading in the area marked with a red elllipse, as I indicated a week ago, and has been mostly trading in its lower part. This, however, changed this week, as USD moved higher, to the upper part of the ellipse, and touched its resistance near the 76 level. Consequently, we have seen precious metals move lower.

The RSI indicator is moving toward the 50 level, which marked local tops since June. Will history repeat one more time? It’s impossible to tell, but given the reliability of this particular signal in the recent past it is likely.

Taking the shape of the recent downswing into account may suggest that the USD Index is now near breaking out to the upside, but before going long this market, please note that until the breakout takes place, the trend remains down.

The short-term chart reveals that apart from the support and resistance levels that suggest that USD is to trade sideways for several days, there is one more interesting pattern that is worth analyzing. I’m referring to the short-term seasonal tendencies that have been in place in the past several months – I’ve marked them with black, vertical lines on the above chart.

The remarkable fact here is that since June, more or less the beginning of each month marked some kind of extreme on the dollar market. Most times it was bottom after top, and top after bottom, but two previous times marked local tops, so it is difficult to tell which of these two extremes is more likely to take place at the beginning of November. This, however, does not mean that this observation is totally useless.

As I stated earlier, once we decisively break below the 75 level, the value of the U.S. Dollar is likely to move much lower (possibly below the 72 level) as there are no strong support levels between these two values. Since there is very little time before the end of October, and USD did plunge yet, I don’t expect the big move to take place this month. This, combined with the previous analysis implies that either a top / bottom is likely to take place in a week or so, but it is likely to be a local one. By that I mean the price action similar to what we’ve seen in the last weeks of September.

Therefore, if it is a local bottom that is to take place, it means that a small rally would follow, that would ignite a correction in metals – meaning that a local top in USD would be put several days later. If a local top is to emerge, then the metals are likely to correct even sooner. Consequently, although it is not clear what is most likely to happen in the USD Index, the implications for the precious metals are that they correct rather soon, or even sooner, which is in tune with what other charts suggest at the moment. Based on the price action from the beginning of this week, it seems that the correction in the precious metalst is underway.

Summing up, the trend for the U.S. Dollar remains down, which is a positive factor for the precious metals market in the long run. However, from the short-term perspective, it seems that gold, silver, and corresponding equities need to take a breather to correct their post-$1,000-breakout rally. This is likely to correspond to a consolidation in the USD Index, which will probably take place at least for several more days.

To make sure that you get immediate access to my thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski 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, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, 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 RadomskiArchive

© 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