News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
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Gold Market Wire

News, analysis and commentary for gold traders and investors

FX Watch

US Dollar Bears Sweat Bullets

January 28, 2020 - (Gold Market Wire) - Much as we anticipated, the US Dollar took another leg up yesterday. We wrote:

                                   "The Dollar looks set to move higher. Although only a few cents above, that high at 1.235 now looks like a long way away.

                                                 Horizontal support is coming in at 1.2071 and we would expect that to be challenged soon."

And, sure enough, we got it with a low at 1.2059. To add fuel to the fire, the 50-day moving average fell to the Dollar Bulls (are there any, outside of this blog?) and so, the chart set up paints a rough picture for the "US Dollar is finished" crowd.

...no country for Dollar bears.

So fire up the you tube videos of some pop star, "I write two books a year" - Dollar perma-bear, or spend your time watching the little guy with a funny bow-tie tell you how "flawed" the Dollar is, as you leverage up and get stopped out. The Dollar hasn't been destroyed. In fact, its making a bull run – and if the Dollar bears turn out to be right in a year's time – what good does that do you, today, this week, this month and quarter? None.

The 1.235 level is looking more and more like some kind of significant top.

Of course, the Gold price has been affected by this move, but, to be fair - a lot less than most would have expected. We are cautious because we don't like the chart set-up here. The trend line, moving averages and Dollar strength are all keeping us on the sidelines of the Gold game. But that isn't to say that Gold hasn't hung in there - because it has.

not great -but given the strength of the US Dollar, admirable.

That in itself is impressive, and could indicate a rallying Gold price in the future, that increases alongside a US Dollar rising against all other currencies. That's heresey to the Gold crowd, we know, because they live for the correlation trade. But correlations, like all rules, are made to be broken. (Just ask anyone who has spent years trading oil!) The danger for the US Dollar-perma bear.s is that Dollar rises strongly against all currencies, and only moderately against Gold... denying them of their "victory", while technically being right. So, if cable goes to .90 and the Euro goes to .90 and Gold in US Dollar terms goes to $ 2,500, you haven't made the killing you wanted, unless you got long the Dollar (in fx-cross) and Gold together...i.e. took on the fx/Gold spread (Now that is a radical thought!)

So ask yourself: Do you want to make money...or do you want to prove to the world that you're 'right' ... and that Gold is going to $5,000 this year? Because if it's the latter - you are either going to wind up in the poor house, or you are going to be one of those people who watched the Gold paint drying session from 2012-2016. Gold has good place in a portfolio - but don't interpolate that fact of an insurance like 'core' position, into a trading posture. Trading is different, because it demands you admit when you've got it wrong - quickly. That means you have to shelve your ego. And that is a tall task for most. The current Dollar rally is proving just that, all too well.

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