|
Gold jumped up to a six week high this week. The ongoing U.S. dollar dive has finally given gold a boost. And it now looks like the dreary days of June are behind us.
The dollar index and the gold price normally move in opposite directions. But there are times when one leads the other, or they even move together for awhile, but they always eventually go back to their normal state, moving in opposite directions.
Most interesting is their relationship this year. Note how gold resisted twice near the $1300 area while the dollar continued its tumble. Gold fell back in June in a decline we call 'B.'
Gold has now regained its posture, bouncing up from its July 7 low, and it happened during the last fall in the dollar. Currently, it looks like gold's weakness is over, or just about over. And it's time to keep an eye on $1300.
The only time gold surpassed $1300 for a while was during the Brexit jump to last year's August highs. You could say, if it wasn't for this jump, gold would've probably resisted near this level.
This means that once gold breaks clearly above $1300 it'll be breaking out of this year's stalemate situation. Gold would then be moving up in a 'C' rise, which is the strongest cyclical rise, and it would be very bullish above last August high.
In other words, it's time for gold to 'catch up' to the weakness in the dollar.
Meanwhile, gold shares just don't want to fall further. It’s also very interesting to note that this turn of events is coinciding with a four-year head and shoulders bottom in the HUI Gold Bugs index.
This bottom has been evolving since 2013 and it’s still forming. And based on this technical pattern, if the index eventually breaks above the neckline (NL), the bottom will be complete and confirmed, and gold shares could soar. So this is something we’re watching closely.
For now, gold is looking good and its profit potential is very positive for the months ahead. This is a good time to buy and then enjoy the ride.
| 
