Gold, Oil and the U.S. Dollar All Nearing Key Levels
July 19th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
Gold and oil are both locked and loaded for a major breakout from previous ranges. The dollar’s move down has been fast and astonishing, even to people like me who have no confidence in the thing.
If the U.S. Dollar Index was a gun battle, 80 represents the point at which guys would be fixing bayonets to their rifles. I don’t know who’s defending the dollar at this stage, but they will have to fight to the death to stop the decline at 80. Will They be able to hold 80? I tend to doubt it. But They will be able to cause one hell of a dead cat bounce at that level, as suckers try to believe that a bottom is in. Crashes are always punctuated by sucker bounces. That’s a critical point to keep in mind as you take in the big picture.
Look at a year chart on gold. See that triple top ahead? Folks, when that resistance finally cracks, my guess is that you’ll be kicking yourself if you’re not on board that thing. Of course, it might bounce off that $680-$690 range again to form a quadruple top. HA. There’s no point in trying to put a percent chance on outcomes, but I’d say that there’s a better chance of gold breaking higher than breaking down substantially.
Now that’s just the mumbo jumbo technical trader talk, which may or may not have anything to do with anything. I don’t bother with the fundamental arguments much, because, well, fundamentals don’t matter as much when leverage is involved. But is this the point at which the gold fundamentals are going to come home to roost? You never know. I wouldn’t count on it, but it wouldn’t surprise me if they did.
This is my plan: I’m going to wait for a sucker bounce (Plunge Protection Team) on the U.S. Dollar, which will knock gold down a fair whack. I’ll be standing by the pull the trigger long on more gold when the headlines start talking about “The Comeback of the Dollar” and “Overbought Gold.”
Of course, the above plan assumes nothing blows up. If you think event risk is real and imminent, you shouldn’t wait. In times of disequalibrium in the market, I can tell you from experience, you want to be in before the panicked sheep figure it out. If you wait to try to chase a move after the news hits, you’ll probably botch the entry badly. Waiting for clarity never pays, and with trading, it never never pays.
Concentrate on silver. Gold is a sapling, silver is an acorn. More people that you will eventually trade with will be able to buy and trade with silver than with gold. Think of your potential rather than safety alone. Silver is both.
I believe the $US price of gold will go up.
I don’t know how how other currencies will fair as I expect their currencies will appreciate against the $US