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So here we are in 2017, and the U.S. dollar has fallen 10% since January.
This is the most the dollar has declined since it plunged in 2009-2011.
That also marked the end of the third major sell off in the dollar since it
went off the gold standard. (The bottom of Chart 1
shows the dollar to illustrate how it moves opposite to the gold price.)
That is, the dollar’s moves have directly affected the gold price since
gold began to trade in the free market.
Note when the dollar had its major legs down within the mega downtrend
since 1972, it coincided with a strong bull market rise in gold, in the 1970s
and in the 2000s. The 1990-95 period was the only exception to this now 46
year pattern.
Most impressive today are the red lines. These are the 5-6 year
contra-trends when gold declines while the dollar rises. The last one was in
2011 to 2016. The dollar rose steadily while gold fell in its latest
bear market decline.
The turnaround year has been underway since 2016. That is, a gold
turn from a bear market to a new bull market has been in process. And
it is coinciding with the start of a new bear market in the dollar. Now
that gold has recently started a rise we call a C rise, it’ll be helpful to
see how this turnaround is doing...
What will confirm the end of the turnaround?
Chart 2A will guide us as we go along. Gold has
recurring intermediate moves. For example, the As and Cs identify
intermediate rises in gold, and the Bs and Ds identify the declines.
The A and B moves tend to be moderate, while the C and D moves are normally
more volatile.
In a bull market, the C rise tends to be the strongest rise in the phase,
and gold will usually reach new bull market highs.
On the upside, it’s important that gold recently jumped above its previous
A peak near $1300. This tells us the C rise is gaining steam.
The strongest obstacle now is the prior C peak last August near
$1380. This also happens to be the C peak at the end-2013, which makes
it a strong, important resistance area.
For now, a clear rise above $1380 would clear all obstacles for a very
strong C rise. This would also move gold into a stronger bull market.
The long-term leading indicator (B) is bullish too
because it’s above both the zero and the moving average. This is a solid
technical sign gold is headed higher.
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Mary Anne & Pamela Aden are well known analysts and editors of The Aden
Forecast, a market newsletter which provides specific forecasts and
recommendations on gold, stocks, interest rates and the other major markets.
For more information, go to www.adenforecast.com
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