By The Gold Report
Source: Clive Maund for Streetwise Reports 09/11/2017
Technical analyst Clive Maund charts the relationship between gold and the U.S. dollar.
Gold continues to build towards its breakout from a massive 4-year long
base pattern. This is likely to occur when the dollar breaks down from
its topping pattern, and is expected to lead to a bull market that will
dwarf the last one from 2001 through 2011, and may be given a tailwind
when the cryptocurrency Ponzi scheme implodes. In some quarters gold is
being described as having broken out already, as are gold stocks, but
they haven’t yet, as we will see, and we will also look at evidence that
points to the probability of a short- to medium-term dollar bounce and a
pullback in the precious metals sector before the big breakout occurs.
On gold’s 10-year chart we can see its fine giant 4-year long
Head-and-Shoulders bottom approaching completion, with the price rising
up in recent weeks to the broad band of quite strong resistance at the
top of the pattern, partly due to tensions over North Korea. These are
expected to ease, which will make a short-term correction back more
likely. Before leaving this chart note the volume build on the rally out
of the Right Shoulder low of the pattern, and the strength of the
volume indicators shown, especially the Accum-Distrib line, which rather
amazingly is already at new highs. This certainly bodes well for the
longer-term outlook.
We will now look at some of the big reasons that the dollar could rally
soon. On the 8-year chart for the dollar index we can immediately see
one of themthe dollar has now arrived at the lower boundary of a
large Broadening Top pattern in an oversold state, and while it is
believed to be destined to break down from this pattern in due course,
it looks likely that it will bounce of its lower boundary over the
short to medium-term to correct the oversold condition before going on
to break down later.
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Chart courtesy of www.sentimentrader.com
Those who think that the dollar will plunge because Nicolas Maduro of Venezuela has announced that his beleaguered country will stop selling in oil in dollars
are likely to be disappointed. President Maduro would be well advised
to look up what happened to Saddam Hussein after he proposed doing the
same, and we must assume that either he doesnt know his history, or is
tired of being president of a failed state and is contriving a way to be
forcibly removed from office.
We have seen how copper, known as Dr. Copper because it tends to lead the
economy and lead the metals, has been in the vanguard of the recent
metals rally. Thus it is interesting to observe on its 6-month chart
below how it suddenly dropped hard on Friday having become overbought,
which is thought to presage a dollar rebound and a near-term drop by
other metals, like gold and silver.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years’ experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
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Disclosure:
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
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Charts provided by the author.