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
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold, Dollar and Stock Markets Decoupling!

Stock-Markets / Financial Markets 2010 Nov 30, 2010 - 12:01 PM GMT

By: Anthony_J_Stills

Stock-Markets

Best Financial Markets Analysis ArticleI’ve received a number of e-mails over the last week asking me, better yet warning me about decoupling. The principal culprits are gold and the Dow as well as gold and the dollar. Bloomberg and CNBC go on and on about gold moving inversely to the dollar and everybody listens to them as if it were gospel. What they don’t know is that these TV experts are years behind the curve. There is no doubt that gold is rising in terms of every major currency in the world, but what is less known is that it rallies with or against the dollar. With respect to the supposed link between gold and the US dollar I want you to focus your attention on these two charts. First let’s look at an eleven month daily chart for gold:


and now the same chart for the US dollar:

You can see that gold rallied nicely from early February and on into June as did the dollar. The dollar then staged a sharp decline while gold consolidated. Lately the US dollar turned up in November and gold is also trading higher. The idea that gold can only move inversely to the greenback is a myth, and I could show you good examples going all the way back to 2005 where gold rallied with the US dollar.

Now let’s take a good look at the same eleven month daily chart for the Dow:

Here you can see that the Dow rallied sharply from early February until late April as did gold! The Dow also rallied sharply from September into November just like gold did. On the other hand the Dow turned sharply lower from May through July while gold crept higher. Finally over the last two weeks the Dow has weakened while gold is clawing its way higher. Many investors are worried about what will happen to the price of gold if the Dow collapses. The worst case scenario is a knee-jerk reaction to the down side as investors scramble for liquidity, but gold is a safe haven and a store of wealth, so it must head higher if the Dow falters.

Now I want to continue discussing the Dow in relation to what happened yesterday and what is going on this morning. The Dow topped on November 5th with an 11,444.08 closing high.  It came exactly seventy-five days for the July bottom and is a derivative of the 90-day cycle that has dominated the stock market for years. Once we saw that top we informed readers that there was a chance the market could decline to November 29th, completing the 90-days, and then turn up again. Yesterday just happened to see the intraday low for the fifteen day move down at 10,929.28 and may have completed the 90-day cycle.

Both the Dow and the Transports made lower lows early in yesterday’s session and then at 10:30 am the Transports began to slowly climb higher. The Dow meanwhile stayed fairly close to its intraday low at 10,929 until 1:30 pm. I should add that the Transports topped at their November 8th closing high of 4,924.46 and then followed the Dow lower but not with the same conviction. Yesterday after being down as much as 2% they turned and were in positive territory by 3:30 pm, closing out the session at 4,896.10 and within 28 points of their November 8th closing high. As the Transports hit positive territory yesterday the Dow came all the way back to finish the day at 11,053 and more than 100 points above its respective intraday low. With all of this in mind I am now watching a number of things including:

  • I want to see if the Dow can close below the November 16th closing low of 11,023.50,
  • Will the Dow be able to move below yesterday’s intraday low of 10,929.28 on the sixteenth day (or later),
  • Can the Transports make an unconfirmed new closing high above 4,924.46 and what does the non-confirmation mean, and
  • Will today turn out to be a higher low in the Dow.

If the Dow fails to move lower here and now then I could make a very good case for a continuation of the run up to the next level of resistance at 12,246.

There is the possibility that the Transports could make a higher unconfirmed high and then both the indexes could turn down. Today the Transports again fell with the Dow, but not as much, and now they are both edging higher. With that said it’s early and the close is what really matters. I am convinced we are at a crossroads today with stocks. If yesterday’s intraday low holds stock prices should go higher for a month, commodities prices will go with them, and gold goes a lot higher. If stocks break lower here today, or tomorrow at the latest, commodities go down with them, the dollar and bonds move somewhat higher over the short run, and gold goes higher. Either way gold wins, it’s just a question of degree.

Meanwhile at 10:15 am EST the spot gold is up 16.70 at 1,384.00 while commodities are mixed to lower, the Dow is down and the dollar is higher yet again. If you listen to Bloomberg gold should be down 20.00 today but fortunately gold doesn’t own a TV and if it did it would more than likely be watching the fishing channel. 

Anthony J. Stills
analyst@theablespeculator.com

www.theablespeculator.com

© 2010 Copyright Anthony J. Stills - 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.


© 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