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
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
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

US Dollar Rally to Fail Before USD 80, Gold Correcting First Phase of a Major Up

Commodities / Gold & Silver Dec 03, 2007 - 12:30 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleSome readers may have seen a trades list produced by Goldman Sachs recommending that investors short gold next year. This report has been allocated to the circular filing along with the government inflation statistics.

With the dollar rally predicted on www.clivemaund.com early on Thursday getting underway immediately afterwards, the question is how far this rally will carry, and how much further gold and silver will react as a result.


As set out in that article, while the current dollar rally could of course stop in its tracks at any time, it is likely to be significant for the reasons then given, which briefly were the non-confirmation by Stochastics of the recent new low, the large gap between the 50 and 200-day moving averages, and the evidence of rather aggressive buying in the candlestick pattern over the past several weeks, in addition to which sentiment regarding the dollar has been so negative in recent weeks that it could hardly get worse - a situation which typically precedes a rally.

However, we can be reasonably sure that any rally won't get above 79 - 81 on the index, which is the important multi-year support level that the dollar broke decisively below 2 to 3 months ago, and which is now a strong resistance level. Furthermore, all rally attempts so far this year have stalled out in the vicinity of the 100-day moving average, which is now below 79, so taking both these key factors into consideration, it seems most unlikely that the current rally will get any higher than 79. It is important to remember that this is viewed as the MAXIMUM that the dollar can achieve over the short to medium-term, and that the overall picture remains very bearish, with all moving averages falling, and key multi-year support having failed. Thus this rally, which in any case will only be due to a bout of panic short-covering following a period of extreme bearishness, can be expected to be followed by renewed decline which should take the dollar to new lows.

We will turn now to consider how much further gold is likely is likely to react in the event that the dollar continues higher over the short to medium-term, and for this purpose we will use a 3-year chart in order to maintain an overall perspective.

The first and most important point to make is that the strong advance by gold throughout September and October and into early November involved a breakout from a consolidation pattern lasting approximately 15 months, and is regarded as the FIRST UPLEG of a major uptrend. This being so the current retreat is viewed as a reaction, not a top, so the only question is how far it runs before gold takes off again to the upside. As with the major uptrend of late 2005 - early 2006, the price should at intervals test support in the vicinity of its 50-day moving, as it is doing now, and this average can be expected to maintain a fairly large gap with the 200-day until the advance has run its course, which is believed to be a long way out yet.

So, bearing in mind what was written about the dollar above, and gold's propensity to “telegraph” action in the dollar, how much further is it likely to react before the advance resumes? The answer is about $765, with $10 leeway either way, and it will have to be watched closely because once it reverses to the upside it is likely to be fast. If gold does drop back to the $765 area there is likely to be a sharp but brief shakeout in Precious Metals stocks, which should prove to be a significant buying opportunity.

By Clive Maund
CliveMaund.com

© 2007 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 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