Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

How Does U.S. Dollar Weakness Impact Gold and Silver Investors?

Commodities / Gold and Silver 2010 Jan 12, 2010 - 01:29 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleDuring the past week we've sent a Market Alert to our Subscribers, in which we commented on the current developments on the precious metals market, and indicated what action appears to be profitable under those conditions, and in the following essay we would like to elaborate on one of the points raised in that particular message.


One of the factors that we mentioned was the USD Index, which was (and still is) very close to the cyclical turning point, as suggested by the previous analysis. Consequently, we believe it would be useful to comment on the performance of this important driver of gold and silver prices (charts courtesy of http://stockcharts.com.)

Reviewing the big picture before digging into details is particularly useful when signals are mixed - which appears to be the situation today. Signals coming from the longer time-frames are generally stronger than those from daily charts, so beginning with these types of charts allows us to see what are the main, long-term tendencies and then look for confirmation (or lack thereof).

This time, this approach let's us put the current move down in the USD Index into proper context. The U.S. Dollar moved from below 75 to over 78 in just a few weeks, so a correction was likely (as we mentioned back then). Still, please keep in mind that the current upswing (since early December 2009) is itself a correction of much bigger (March 2009 - December 2009) decline that took USD Index from almost 90 to almost 74. This is a huge move that took most of the year to form, and 2-weeks of a rising prices are not very likely to fulfill the role of a correction.

In other words, it is doubtful that two weeks and correction of 27% or so of the size of the preceding move have already caused people to turn bullish / close out their short positions in the USD Index. The upswing was sharp, which makes me assume that many speculators perceive this phenomenon as very temporary (quick upswing followed by even quicker downswing). Consequently they have not closed their short positions yet, and once they do, USD Index is likely to move higher. As a digression - it is these types of psychological phenomena that make the whole chart analysis work.

Moreover, the current small (last few weeks) decline has been very calm compared to the previous upswing - which is exactly what consolidations look like. Additionally, the USD Index is correcting in the form of a flag, which is a typical formation of continuation (price is likely to move in the same direction as it did before it entered the formation).

The current correction caused the whole preceding rally to become less steep, which leads to the change in the time/price combination that is likely to contain the next local top. As usual, we've marked this area with red ellipse, and it is still around the 80 level, with the only difference being that it is now more likely to take place near the end of the month.

We've additionally marked the last few weeks with the red rectangle to emphasize the fact that recently PMs have been moving exactly in the opposite direction on the USD Index. Therefore, if the USD Index moves higher from here - possibly to the 80 area, gold and silver are likely to move lower at the same time.

Before summarizing, let's take a look at one of the ETF designed to track the performance of the U.S. Dollar - the PowerShares DB US Dollar Index Bullish Fund (UUP) - this will allow us to analyze volume.

The red and blue lines on the chart above represent the direction in which the price and volume moved. Based on the changes in the direction we may recognize five time frames. The dashed vertical time lines mark the turning points in terms of price/volume behavior.

Before mid-October value of the USD Index declined along with rising volume, which means that people were more and more scared that the plunge would never end and sold more and more quantities of the currency. In mid-October situation changed as some investors jumped back on the long side of the market and many others followed. The move up took place on a very large volume indicating that this is not just a coincidence, and it signaled that a bigger move up might appear in the future. At the beginning of November, USD declined once again, but this time it moved lower on declining volume - which is normally neutral signal, but given the fact that the volume was rising during the previous part of the decline, it should make one at least suspicious.

Finally, early December was the time when the bottom was put and prices began to increase. The noteworthy fact is that it moved higher on an enormous volume, which means that this is not likely to be just a small blip on the radar screen. Since mid-December the value of the USD Index has been sliding lower, but this has been taking place on a small volume, which once again indicates that this is just a correction, and the next move in the USD Index will be up. The full version of this essay includes analysis the short-term USD chart, gold, silver, PM stocks, general stock market, rankings of top gold/silver juniors and much more. 

Summing up, the USD Index has been moving lower in the past few weeks, but there are several points that suggest that this move is just a pause within a bigger move up. This means that gold's and silver's upswing may be postponed.

To make sure that you are notified once the new features (like the newly introduced Free Charts section) are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today 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 Radomski 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

6 Critical Money Making Rules