U.S. Dollar and Gold Trends into 2010

Commodities / Gold & Silver 2009 Dec 29, 2009 - 03:39 PM

By: Douglas_V._Gnazzo

The dollar finally broke through resistance at 23, which has turned into support. Price is backing up and testing support.

The CCI index at the bottom of the chart has gone from overbought (+200) to 89. When an asset moves from being this overbought to back below 100, it often signals a consolidation/correction is likely.

The Fibonacci levels overlaid on the chart are possible targets. The open gap looks like it may be filled. A short term overbought pullback in the dollar, if it were to occur, would give gold a breather.

As reported last week, some commodities have been harder hit than others: gold and oil receiving the short end of the stick. This week, however, oil spiked up almost 5%, while gold stabilized. The daily USO (oil) chart shows a positive MACD crossover with the histograms turning up into positive territory as well.

However, it remains to be seen if price keeps advancing, and if so, how far. Upper trend line support and the 50 dma at 39 offer significant resistance.

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Gold

Gold was down slightly on the week, but its recent fall at least stabilized for the time being. The daily chart shows gold bouncing off support near 1075.00. Notice that price is still below its 50 dma (1114). Resistance resides above near 1125.00.

The CCI indicator at the bottom of the chart has moved from oversold back across -100, which sometimes signals a bounce back rally. Much will likely depend on the dollar’s action. RSI remains below 50 and will have to move higher if any rally is to be sustained.

Gold stocks (GDX) gained 1.73% for the week, outperforming the physical metal. Some of the individual stocks were up 3-5% (the stronger chart patterns from last week’s stock watch list). The question is whether this was an oversold bounce; or the start of something more.

The chart shows that support held and that resistance lies directly ahead. Notice the band of overhead supply that goes back to Oct. – Nov. CCI has moved from oversold back towards zero (-51); and ROC is near the zero line. A lower high was made, although it was outside the rising price channel, which has since been regained. The weight of the evidence remains neutral.

The above is an excerpt from the full market wrap report available at the Honest Money Gold & Silver Report website. Stop by and check it out. A free trial subscription is available by emailing your request to: dvg6@comcast.net.