Questions on Gold
November 13th, 2009Warning: This is not a recommendation to buy, sell or hold any financial instrument.
Some readers are asking for my thoughts on gold.
At this time, my analysis from October 29th remains current. I’ll quote the key sentences below:
The medium term picture on the dollar should concern dollar bears with shorter time horizons. Technically, the dollar started an uptrend in early 2008 that remains intact. Additionally, there is a lot of support below the current action on the dollar. I have indicated several of those supports with green lines.
While the dollar may continue lower, it would be an imprudent bet to fight those supports, from a short to medium term technical perspective.
Here’s an updated daily chart of the U.S. Dollar Index. Shorter term dollar bears and gold bulls, that upper channel line is your line in the sand.
U.S. Dollar Index, Daily Interval
Short to medium outlook dollar bears and gold bulls: Stay the course as long as the downtrending channel on the USDX remains intact. Keep in mind, however, that a move up and out of the downtrending channel on the USDX above could mean substantial pain in the weeks and months ahead for dollar bears and gold bulls.
Traders with longer term outlooks should just look away and ignore the howls and squeals about any dollar rally that materializes.
I’ll say it again: I’m in the process of accumulating U.S. Dollars to balance out my positions in anticipation of a dollar rally. Key word: balance. My goal is merely to remain flat to up a bit and I’ve been overweight things that rise in value when the dollar falls.
Do I see any fundamental reason for the dollar to rally?
Hell no. The fact that it’s viable at all is absurd from a fundamental perspective.
However, I never trade based on what I think I know about fundamentals, and past experience tells me not to fight multiple horizontal support lines near an all time low and an up trending support line all in the same price area. That’s just me. Your Magic 8 Ball and chicken entrails may vary.
Is it possible that the dollar could slice down and through all of that support and keep falling? Absolutely. Just keep an eye on that upper channel line.
For Technicians Only: Gold might be about to BARF.
Yeah, gotta watch that buck. According to Zero Hedge today the little rally was a little dog and poney show to prop up the latest bond sale. A little extra inventory here, a little storng dollar Geithenr talk there and voila, you have the $POP.
It all comes back to an article I think I read last year, “Who’s more screwed?” The U.S. Euro zone or Asia.
big al says the dollar is extremely oversold (carry trade exposure). gold is the bubble of the moment. It made me wondered why silver or other commodities aren’t going up as fast.
The only real conclusion I can come to is I don’t trust any of the information. Any of it. Even the ‘0’ hedge guy. He’s F***ing paranoid, though he may be right, but how am I to know?
I navigate by using charts. One man’s star is another man’s navigational becon.
I am a cave man living in the 21st century.