Gold Market Wire
News, analysis and commentary for gold traders and investors
US Dollar Breakout Halted
February 19, 2021 - (Gold Market Wire) - Yesterday's breakout move in the US Dollar is on hold this morning as the Euro tries to muster a defense to counter its beginning of year weakness.
Colour us non-plussed, but we don't see a major reversal happening at this time. Yes, the Euro has fought its way off the ropes, but the US Dollar has fended off several challenges like this, since the start of the year. For all the reasons we laid out this week, we still see the Dollar as a currency that will strengthen. We will never marry the Gold/Dollar correlation argument as a trade, but we still glean some knowledge from Gold's activity, and right now, both Silver and Gold look frightened by a resurgent US Dollar. Frankly, Gold's action this week has been abysmal.
Which is why, we have headed to the 'action'. And that action is the Gold/Silver ratio....from the short side... which is where we have been positioned, and continue to be.
Obviously the 64.80-65.00 area is a significant line of support, but we will probably challenge it soon. Trading is about going where the action is, and this ratio is where it has been and is at. Our continuing short has been successful, while the outright comes under pressure.
The collapsing ratio is not yet working to buoy the Gold price, as it should. But it should eventually - after Gold has had a shake out to frighten the weak length away from the market. That could take a few weeks to achieve. Right now, as is typical, we've had the 'death by a thousand cuts' Act I. Next up will probably be the big gaping fall that scares the daylights out of everyone and causes them to throw in the towel. After that, we will start to rebuild the chart damage. The Precious Metal Bull market isn't over. But we are going to need/want a big shake out to galvanize for the rally that down the road...probably after the Bitcoin buyers get roasted in a couple weeks/months time.
Until then, we stay short the g/s ratio, avoid the outright flat-price action, and hang on to the US Dollar length... while we wait for the market to clear.