Sunday, February 01, 2009

Gold Ignores Strength In The Dollar

Since November Gold has been trending higher making a series of higher highs and higher lows. If you look closely at the above chart you'll notice something very interesting that has taken place over the last few weeks.

We are all aware of the inverse relationship between gold and the dollar. As the dollar moves lower gold will rally. As the dollar moves higher gold will typically move lower. Notice what has taken place in the above chart between points (A) and (B). The dollar is moving higher and so is Gold! Gold should be moving lower in the face of a rising dollar but it's not. The means that gold is rallying on its own fundamentals and in my opinion is bullish for the price of gold. If the dollar sells off here, we could see Gold breakout above the high from last September. This market is definitely worth keeping an eye on.


Jason said...

Don't you think this could be explained by the idea that the dollar is the "best" out of a bunch of bad currencies? If people think that all currencies are going to lose value then gold should go up. Since the dollar is priced priced relative to other currencies, it's not really reflective of it's relationship to gold. Even if it is losing value against gold, it could be gaining against other currencies, hence it has been gaining over the past couple of months. Nonetheless both Gold and the Dollar have made interesting moves lately. Nice post

Anonymous said...

i think gold is going down and the dollar is king

Anonymous said...

if japan's economy is this bad and their gdp deficit the worst since ww2,then i expect the yen to where will the flight to quality be?both the dollar and the precious metals.looks like the head of an inverse head and shouulders pattern is just being completed in looks like another shoulder to go with support at around 850 dollars.and then a year and a half journey to whoo..i wonder how high gold is going upto.any thoughts?of course we'll soon know in he next week or two if this is right
also i understand the importance of confirmation but have usually got whiplashed out when i get in after i usually get in at a comfortable zone with low risk of a whiplash..a ride that my emotions can hold


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