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Sunny Gold Outlook Means Lower Dollar

Sunny Gold Outlook Means Lower Dollar < News < Bet On Markets

The Dollar Index turned higher yesterday after making a low just 0.38 points from a hidden-pivot target at 82.72 that we’d been anticipating since September. If it had happened in a vacuum with no other evidence to consider, I’d tell you to fasten your seat belts and get ready for a wicked ride into the low 90s. But there is just one problem with this bullish scenario for the dollar, and it can be found in gold’s chart, which shows nothing but blue skies and clear sailing for the December contract to at least $459, and more probably to $460 and above.

I’ve reproduced the chart below. It shows the provenance of some of the major bull-cycle targets for the continuous weekly gold contract. You can quibble with the targets themselves, perhaps adjusting them up or down by nickels and dimes, or even by a dollar or two on the daily and monthly charts. But that would not alter the fact that the futures have already done the heavy lifting, so to speak, by surpassing the «midpoint pivots» associated with their fully extended ’D’ rally targets.

Each of the two unachieved targets shown is the point ’D’ objective of a C-D rally leg that itself is part of a larger A-B-C-D pattern. Also, each C-D sub-leg has a «midpoint pivot» that represents a formidable rally obstacle. But as you can see, gold has not merely breached those midpoint pivots (X1 and X2), it has left them behind in the dust. As such, it would be highly unusual for the futures to stall before reaching $459.30, the lower target, at the very least.

Considering the foregoing, I strongly doubt that the dollar is about to stage a major bear rally. This will occur sooner or later, of course, but my guess is that it will begin from 77.60 or perhaps even lower, rather from yesterday’s bottom at 83.10.

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