USD US Dollar and GOLD Daily Charts

The direction of the dollar is driving the gold price as would be expected but there are some twists and turns. During the late February and March stock market crash, the US dollar leaps higher. Gold sinks with the stock market. The dollar then weakens in late March as the Federal Reserve promises to print easy money forever. Isn't it comical that there are idiots that think capitalism actually exists? Stocks and gold rally higher.

During April-May, the dollar goes into a sideways pattern. It is a sideways consolidation flag in a two-leg bear flag pattern. The first leg is down from 103.6 to 98.5, a drop of 5.1 points. Then the consolidation flag forms with a slight upward bias in price and the dollar shows this textbook behavior. The second leg down then starts at 100.6, and is confirmed as it breaks down through 99. The downside target is 95.5 (100.6-5.1).

The US dollar tagged the 95.7-95.8 area in early June now down to 96.37. The dixie, DXY, is currently trading at 96.43. So price is down in this landing zone of the two-leg bear flag; it's close enough for government work to call the pattern satisfied. In the coming days we will see if price wants to kiss the 95.5 exactly and may even want to test the 95.0 from March.

So the dollar forms that second down leg which pumps commodities higher, that have lagged, and provides lift to the stock market, but gold keeps moving sideways. Gold was sideways with the sideways move in the dollar in April-May but then even with the weakness in the dollar, gold moved sideways. This tells you that there is buying interest in gold and why not? Every 10 minutes a new business television evangelist appears telling investors to buy gold for insurance. Even former Fed Chairman Greenspan, the Lizard King, who had to shun his earlier positive writings on gold to get the job, is probably sitting on pallets of gold bars in his basement. Everybody and his bro recommends gold. There are no gold bears.

The US dollar then goes into another sideways pattern it is in right now. However, gold explodes higher. Keystone's 80/20 Rule is that prices on the way up that cross 8 usually go to 2 and prices coming down if they fail at 2 usually go down to 8. Gold hinted that it wanted the 1820 number after 1780 and it is received. It is key now that gold bears smack price lower from here, if not, the gold bulls will ride to victory. Several closes above 1800 will hint that 2200 is on tap in the future.

Since the dollar move is not creating as much upside in gold, it is mainly due to the hype. The purple stars show the dollar at the same relative low numbers in the mid-90's. The corresponding gold prices are 1675, then 1730 then 1820; up, up and up. Gold moves higher and higher not on a weaker dollar but instead on pundit praise, euphoric joy, the thinking that gold is an easy hedge to own, and the belief that in a down move in stocks, gold will remain resilient. What folks will likely realize in the days and few weeks ahead, as the stock market sells off, gold will likely follow equities down as well like the March action (dollar higher).

So keep an eye on the dollar here on out. Gold is a good short here forward. If the dollar falls through 95.8, the trade will not look so good, then if the dollar falls through 95, the gold short trade will be busted and exited with losses. However, if the $USD starts moving higher above 97.5, the multi-week slide in gold will likely begin. Technically, gold should sell off for a few weeks. The mojo from this week may create a week or two of stutter-step sideways stuff but a move lower is expected. Gold may be saved by negative news and positive news may act as a catalyst to begin the gold selloff. The action is dicey. The expected outcome is for both the stock market and gold to sell off for a few weeks ahead. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.