From the first nanosecond of the opening bell there was no doubt that thanks to another fresh four-year low in the US dollar, that gold bugs were going to dictate today’s action.  It may sound redundant to always reference that gold moved up/down due to the influence of the US dollar, but that’s reality and today was another classic representation of such.  The dollar is at four-year lows and is the driving force behind gold, but why is the DX slumping?

Wakness in the DX is related to many factors including but not limited to:  a weakening economy, lousy job market, government deficits, poor consumer confidence, decreasing equity markets, reduced foreign investment, and of course the threat of lower rates, among other variables.  However, it’s certainly not a gloom and doom picture for the DX.  The DX is falling from levels that were perhaps inflated to begin with, a la the NASDAQ circa 2000, and at some point the weaker dollar will stimulate exports.

As we’ve always stated, day-by-day action is basically impossible to predict so try to remain focused on the macro picture, and right now that picture reveals the US dollar in a downtrend and gold in an uptrend.  Earlier this week we were suggesting that corrections in gold could offer openings to establish a bullish posture, and we did get a small pullback and I know some of you bought near 341 as I took the orders!  However, we certainly didn’t anticipate the surge today, but that just reiterates the difficulty of short-term forecasting.

Prices are well above moving averages but technicals are getting increasingly overbought.  If indicators were signaling overbought conditions yesterday, those conditions have been magnified today.  Prices are top-heavy for the moment and odds would favor a correction to repair the indicators and help to attract fresh buyers.  As a caveat though, indicators are not foolproof as overbought/sold conditions can persist and prices can continue to advance/decline.  Volume and open interest are following prices higher although they are also exhibiting signs of peaking.  If long with TradeScope, notice that we’re raising our stops again.  Our near term target of 347 was emphatically breached and the overall trend is undeniably bullish.  If long, don’t rest on your laurels, pull some profits off the table, prepare for a swing lower and get ready to add at better prices.  Remember, with futures and options one can be short or long, feel free to contact me to discuss trading strategies.  Each contract/option = 100 ounces, a $1 move in a futures contract = $100.

To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com.  Visit www.altavest.com to request a Free Starter Kit.  Keep in mind that there is risk of loss in all trading.
 
July Silver:  Close = 480.2, +6.0-cents

Silver bulls, along with gold, received a blessing from the plunge in the DX today.  This week we reached a peak last seen in early February and if the fire remains under gold we’ll see the recent high near 484 shattered soon.  Look for 468 as the next support level, but mostly look for silver to ape gold.  Each contract/option = 5,000 ounces, a 1-cent move in a futures contract = $50.  Contact me anytime to discuss strategies to fit your needs.

To open an account and receive trading recommendations on silver futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com.  Visit www.altavest.com to request a Free Starter Kit.  Keep in mind that there is risk of loss in all trading.

-- Posted Thursday, 8 May 2003 | Digg This Article