A fantastic question from another valued reader.
PT asks?
“Some time back you spoke of what readers wished to hear. So I thought I’d question a true professional. As a forex novice, my query pertains to gold, silver, and its shares.Where do you see the DXY in the intermediary term (3-6 months)? I know your trades often only last hours, but what is your “change” or expectation for the dollar going forward?”
Kong says:
We’ve seen the decoupling of the traditional relationship / correlation of “lower dollar = higher
gold” right? Or have we?
Pull a 25 year chart of gold and see that this “massive correction” isn’t really that massive at all.
Compared to any other asset / chart you see on the 25 year for example….this is ( Elliot boys
chime in please ) some kind of “wave 4” maybe…..but not a change in trend!
Gold_Bull_Market_Fine_Forex_Kong
I have no change in expectation for the dollar ( as I expect it to essentially go to zero ) but will
be wary / watchful for correction “just like we see in all asset classes” when the time comes.
Knowing full well “nothing moves in a straight line for long” sure…..the buck will “buck us bears”
at some point…..as the correction in gold has equally “bucked the bulls”. This shit happens every
day, in one asset or another…..one chart or another.
What most people fail to understand is that “every single pivot / zig and zag” doesn’t play out/correlate/ “on a dime”. An asset like gold ( with such a high value ) has been “on it’s own correction” based on the value / time / zigs / zags etc, while the US Dollar struggles within it’s own set of parameters.
There are points where “stars align”, but in general “intermarket analysis” is extremely difficult for a novice to effectively “time”.
If you ask me what I think. I think the U.S Dollar is going to zero and I think that gold is going to the moon. If you ask me “how long is that gonna take”?
I’ll tell you you’re trading to large, reduce your position size, don’t expect this to be easy and “don’t” pull your life savings with any expectations that you’ll “be even close” in timing it.
Near term – I’m looking for this last leg lower in the dollar – then an obvious bounce.
Hey Kong…. I have been of the opinion over the last week that Silver & perhaps digger will be leading the charge out of this bottoming process….. I was looking to Silver bigger brother Gold to lead the charge but after tracking Gold & Silver daily ( Squeeze ) & with gold firing off Neg on the 23rd….. weak Neg fire too boot….. ( others are now starting to approach this theory) Silver has held its course & continues to run it’s daily squeeze some 12 days currently…. I am looking for the daily to hopefully zig-zag continuing to build MM in the set-up ( Squeeze ) over the following week & then fire off positive the following week…. The longer the set-up runs the more MM is built-up leading to a longer & more explosive fire Neg/Pos – I am leaning to positive here with the DXY final move lower/ leg down – that daily squeeze has been currently running some 26-days now & am expecting some fire-works once this baby fires off – Negative being the least path of resistance currently…. this may even lead to the weekly set-up to fire off in the process leading to some very exceptional directional moves ( Lower ) but that’s still a little ways out still…. the daily fire will be the trigger then weekly & last but not least the monthly which is several quarters out to even be thinking about…… I think Gold will be chasing here with diggers a close second but Silver taking the spot-light coming out of the 2-year correction & bottoming process!!
I am locked & loaded with the largest % of my PF currently sitting in what’s also known as the ” Devils Metal ” LOL…. not much to do not except to sit back & enjoy the ride IMO…..
That’s my 2-cents – we will see how this plays out in the following couple weeks!!
All the best Schmed,
Ya the fundamental story for gold hasn’t changed. This most recent correction was slash is a reversion to the mean. The market went nuts upon the announcement of QE thinking that rampant inflation would immediately take over. That didn’t happen, the data improved a little….so people sold some gold. Inflation will come back and probably hard someday…Once the natural bid comes back and working with a massively increased m base. There are obviously some pretty major deflationary forces at work still in the short term but they will eventually wash and people holding gold will be proven smart once again…..I think haha
Great breakdown JSkogs ( much better than mine ) – makes absolutely perfect sense.
Hope you’re having a great holiday season, and maybe even catching a bit of this dollar weakness.
Thanks Kong! You as well bro! Had a nice time with my kids and family. Did a little snowboarding. I have 4 yr old twins so I took them skiing for a bit and one of them snowmobiling. Good times for sure.
Caught a little bit of dollar weakness but for whatever reason I haven’t traded the usd much for the last few weeks. Traded some yen shorts via the European currencies and some yen longs (current holdings).via the commods. Been pretty dormant over the last 2 weeks though. Looking to fire it up proper this week though bro!
Gracias, Senor Kong.
We can take today’s trade as an example. Though the dollar slipped, gold and its shares kept sliding, too!
Feliz Ano Nuevo, PT
The QE was a bit of a success http://www.federalreserve.gov/newsevents/speech/powell20131011a.htm
After Powell’s speech unemployment claims rose and now they are saying this http://www.reuters.com/article/2014/01/04/us-usa-fed-rosengren-idUSBREA0309420140104?feedType=RSS&feedName=businessNews and http://www.bloomberg.com/news/2014-01-04/dudley-sees-fed-needs-better-grasp-of-how-qe-works.html
maybe they were wrong on cutting QE and is hinting to increase QE to sustain growth and employment.