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USD Falling, Gold & Silver Rising: Gold and Silver Stocks Hesitate…For Now

After testing the 80 level in late July, the US Dollar again tested its single most important support level yesterday.

USD Falling

We are of the opinion that a significant breakdown through 80 is just around the corner and when the USD breaks 80, it won't just break it, it will smash down through the support propelling gold and silver prices through the roof. The only thing that will impress more than rocketing gold and silver prices are the stocks of the industry. The quality gold stocks will outperform yellow metal and the quality silver stocks will outperform silver bullion. For ideas of what stocks to invest in subscribe to our gold letter and silver letter free of charge. Although the USD did dip below 80 yesterday, it takes a significant drop to confirm the breakthrough. This drop is coming, very soon. We believe it will take place towards the end of the summer and this will coincide with the next great run of the gold bull market.

As for gold, it has been held down in the $640.00 to $700 range for a long time, too long, the upside breakout will be phenomenal, surging way past the 25 year high made last year.

Gold & Silver Rising

Looking towards the shorter term, gold is looking to make a higher high than it made in July. Gold moving above $690.00 would be a higher high and a good sign and if gold can test $700 again in the next few trading sessions, then that would be great to see. However, do not be deterred if gold fails to break $700 in this run. A failed breakthrough followed by a fall to somewhere like $670 would be fine and would mean that when the breakthrough past $700 comes, it will be more powerful.

Even though gold prices are up approximately $30.00 recently, the Gold Bugs Index (HUI) has not responded with a positive move.

Gold and Silver Stocks Hesitate

Falling 30 points from 370, the HUI appears to have found some support on the 50 day moving average and perhaps now the 200 day moving average can help support the HUI at these levels. If this fails we are looking at a sharp decline to the support at 320. We consider any drop further than that unlikely as this index is showing a lot of strength. The 50dma looked as if it was going to breakdown through the 200dma but this did not materialise, a good sign of strength in the index and in gold stocks.

The Gold & Silver Index – Philadelphia (XAU) has also refused to rise with rising gold prices and the tick up in silver prices.

Gold and Silver Stocks Hesitate…For Now

On the XAU we see that both moving averages are moving up, closely together, which we consider to be a bullish signal, particularly as the XAU is now trading right on its moving averages. We hope that the XAU can find some support on its moving averages, otherwise support should come in the low 130's or at the very least at 130.

Any further drop in gold and silver stocks is, in our opinion, a great opportunity to buy before the next rally begins. Baring in mind that gold stocks usually move before the metal, by the time the metal begins to move, those gold stocks may be considerably higher. The hesitation in stocks to follow the metal is by no means a negative sign. Stocks will do better than follow the metal over the next few months, they will outperform it many times over.

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Reader Comments (5)

I Have been invested in golds and gold stocks since 2001,and made about 6 times from my original investment princinple.Today,I wonder why the folks in CNBC still cheering for Downjone 13000+.How many % gold has downjone gone up since 2001 and hpw many % the gold stocks gone up.6 time more than the Down.because of these people,I believe gold still has a long way to go unless the US finished the historical coreection downward and thse folks in CNBC start cheering for Gold and the party will end.

August 7, 2007 | Unregistered CommenterMark Lamb


I keep reading about the US Dollar Index and its being close to breaking the "80 level".

What exactly is this index and what is it calculated against ... what does the daily Index price mean .... what is dollar being compared to?

It's very interesting but I have no idea what the significance of it implies ... is it a ratio or relationship to price of gold ( or a basket of currencies, or ?) ... and if so using what parameters?

Appreciate your help ... thanks!


August 9, 2007 | Unregistered CommenterPatrick

We can measure a currency against almost anything we choose, for instance when the US Dollar is measured against gold, an ounce of gold costs $668.30 as we write today.

However that is only one of many indicators, which offer clues as to how the US Dollar is performing. The Dollar index is to my knowledge a basket of currencies put together to form one component by which the US Dollar can be compared. Instead of wading through all the other currencies and calculating how the Dollar has performed against each individual currency this provides us with a snap shot of how the US Dollar is doing.

The magical ‘80’ number is important because a number of analysts see it as being the support level that must not be broken. There is a school of thought that believes that if the ‘80’ is broken then a number of holders of the US Dollar will bail out putting even more pressure on it and probably forcing it to go a lot lower.

If you follow the link below to stock charts you can see how the US Dollar has performed over various time scales, it is worth having a ‘play’ with it as different parameters can show you different stories!

Good luck with it.

August 9, 2007 | Unregistered CommenterGold Prices

That makes sense to me ... though if one were to truly scrutinize it .... would be interesting to know what exact currencies are in that basket and how they are proportionally weighted.

For example is a basket of "stabler" currencies or does it include Argentina, Brazil, African, Asian, ... and even (heaven forbid) Zimbabwe!

It seems you folks didn't design the Index. Would be informative to know who did/does.

Just some more comments worth thinking about when attempting to validate this as a good tool and indicator.

It could have tremendous value, as it balances off the gold/dollar realationship which can be and is highly manipulated by all sorts of influences ... not to forget the clandestine operations of the US Fed!



August 9, 2007 | Unregistered CommenterPatrick Esmonde

VHGI is next gold stock

December 19, 2009 | Unregistered CommenterJC2811

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