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« Golden Cross on Agnico Eagle | Main | Inflation: Is it worth the gamble? »
Monday
Jul302007

The USD Bounces As Gold and Silver Tumble: That’s what we want!

It was close. It was very close. The US Dollar Index went as low as 80.02, so very close to breaking down through though critical support at 80.

However, we didn’t want the USD to break 80, not yet and we were pleased to see the USD begin to bounce and believe it or not, we were happy to see gold and silver take a tumble.

Why?

The USD Bounces

Basically we were pleased to see this for two main reasons.

Firstly, the USD has been falling from 83.27 almost non-stop for a month. Technical indicators such the STO, MACD and RSI were all on the floor, in fact its possible that the RSI was actually down as far as the basement. Therefore any breakdown through the 80 level would have been short lived and the dollar would have risen back up, perhaps leading to speculation that 80 was not in fact a major support level. Now that the USD has bounced, it can be a dead cat for a few weeks before really breaking down through 80 and falling much further than it would have done if it had broken 80 a few days ago.

Secondly, we are pleased that gold and silver fell because that’s exactly why we are invested in them; we want them to move in the opposite direction to the dollar. Therefore when the inevitable terminal decline of the USD comes, it will catch gold and silver and our gold and silver stocks will soar to all time highs and beyond.

Gold and Silver Tumble: That’s what we want!

We see the USD enjoying a bit of a rally over the next few weeks, but this will be short lived as we think that the next time the USD tests 80, it will break it. Then we will see a large decline in the USD index and a big upswing in gold and silver starting at the end of the summer.

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Reader Comments (9)

Bob, I have been involved in securities since 1960, both as an amateur investor and as a professional. I have run major fixed income trading desks for several member firms of the NYSE and been president of a highly respected fixed income firm. My fascination has always been with the equity side of the business, however, and since my retirement I have made the investment of my own funds a full time job. I just want you to know that I think the advice and direction I receive from you is of far greater value and far more acurate than any research I can purchase. I would like to thank you for your well thought out and inciteful guidance. Like you, I also have become convinced that the best way to protect what I have accumulated for my family is with a well chosen and well timed commitment to the precious metals, particularly silver, and a somewhat smaller position in the base metals.

Please accept my sincere thanks,appreciation and admiration for your efforts. You have certainly meant a lot to me.

Sincerely, Don McGahan

July 31, 2007 | Unregistered CommenterDon McGahan

You should be honest with your readers and tell them that
the $US will go only as low as the central banks allow. All
the world's fat cats want to continue getting rich on the yen
carry trade, and if the dollar goes too low it hurts the carry
trade.

Gold likewise is at the mercy of the central banks. The price
of gold will go only as high as the central bankers allow.

It will take a major war or world-wide economic collapse to
thwart the manipulative efforts of the central banks and
allow the price of gold to rise to its correct level.

July 31, 2007 | Unregistered CommenterP

US$ Closed @ 79.93 on 7/24/07

July 31, 2007 | Unregistered CommenterGreg

Exactly. Couldn't read the rest of your story, (My computer showed "Sorry, no posts matched your criteria.") but I think I know where you're going and I agree completely. Hope others don't jump on your for your apostasy.

Give me the disappointment discount and let me climb on board when this latest pathetic dollar rally fails. The next knock on the door at 80 might just be the charm, especially if it becomes apparent that the rally is just a garden variety oversold bounce or a brief intervention-induced countertrend move.

One serious whiff of a rate cut in the air and we're...uh...golden. That's the trigger I'm looking for.

Thanks for your insights.

July 31, 2007 | Unregistered CommenterTW

Yes indeed, the USD did in fact break 80 on the dollar index. It briefly broke through and remained under 80, until the Fed's PPT, the gold cartel, the BOJ and other co-conspirators bought massive amounts of dollars, after covering their shorts. I've been following the USD by the second, as I am a gold/silver futures trader and can be wiped out in a nanosec by those idiots buying the USD. I was on Kitco.com when I nothiced the USD breaking the "magic" 80 on the DX and that was later confirmed by the site I've used for years, Prophet.net. (link: http://www.prophet.net/analyze/sc.jsp?symbol=DX0709 ) So, I am staying with my gold/silver trades as we approach the fall wedding season in India. I think the gold cartel may make another attempt at pushing gold back to near $650. With oil passing $77 bbl, inflation off the charts and the USD sinking fast, I'm betting that in the next 90 days we see $700 gold, before we see $650.

July 31, 2007 | Unregistered CommenterEric

I agree : the price of gold will continue to rise as the value of the US dollar continues to fall. But that means that the value of the gold in US dollars will also fall.
A strange contradiction !
bobi

July 31, 2007 | Unregistered CommenterBobi

Hi Bob, last Monday morning the USD index on Kitco did briefly show a decline of the dollar below 80.00, to 79.92. I was astounded and a little unnerved and immediately invested in physical silver.

August 1, 2007 | Unregistered CommenterAllen

Agreed to Bob,

point 1: Gold has never dropped in average price since the introduction of it to humanity.So it won't now either.
point 2: It can't yet be fabricated.
point 3: Since the decision to disconnect currency to gold,a timebomb has been triggered.Governments and banks are draining the economy ever since ,and the price has yet to be paid.
Don't know if anybody noticed ,but here in Europe I can see only new Euro bills coming from the ATM machines. (don't know about the US).
Some gold sell-offs were already noted in order to cover-up their crimes ... (remember Spain ?)

The signs are there since a while ,and I'm pissed off I hadn't jumped earlier then last year on the gold train.

A good indicator would be the number of small brokers/broker agencies closing their books. (read : taking the money and run). I know already a few who done so.

In reaction to : ... But that means that the value of the gold in US dollars will also fall A strange contradiction !...

=> Indeed ! The contradiction comes from the a short time phenomena in which gold sell-offs occur in order to pay creditors (who can't request immediately gold as currency).

Hard times to come for the brokers ...

August 1, 2007 | Unregistered CommenterKTheKing

Watch this clip : your best well spent 40 minutes ...
Money, Banking and the Federal Reserve.
If you haven't ,get to it ASAP !

http://www.youtube.com/watch?v=m2pxW7D1Vao
http://video.google.com/videoplay?docid=-466210540567002553

August 9, 2007 | Unregistered CommenterKTheKing

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