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« US Dollar Penetrates long term support of ‘80’ | Main | The Other Side of the Coin: Strong Dollar »

US Dollar Rally Falters: Good For Gold Prices

The large rally in the US dollar is now faltering, after we indicated that the greenback was running out of steam.

US Dollar Rally Falters: Good For Gold Prices chart
(click to enlarge)

As the chart above shows, the USD has broken down from its short term trading range and now looks likely to retreat towards its long term support level of 80.

We said this rally would end back at the begging of December since we noted that technically the US had shot straight up and was overbought. A negative crossover in the MACD indicator preceded the decline, as we pointed out in our article “US Dollar Rally Losing Momentum” on December 2nd.

In that article we also said, “If you haven’t bought a position in gold, do so NOW.” We would like to re-iterate this message as in our opinion the US dollar is set to fall to near 80 in the short term, whilst falling dramatically further in the longer term, which will send gold prices soaring.

There is nothing fundamentally good about the US dollar, no great economic fundamentals and no high interest rate to justify any kind of sustained rise. This recent rally was simply mirroring the devaluations of other currencies (which the USD Index is measured against) as other central banks around the world have slashed their interest rates. However soon these rates will be on par with the US interest rate, and then it will be a case of which economy and which nation’s balance sheet is in better shape. America is not looking good in that respect, so expect the greenback to reflect this.

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Reader Comments (4)

who is this degraaf gentleman? he is so opposite in what this site says.... how can the owners of this site let him post like he has? i follow wil's advice...he makes alot of sense....look at yesterdays email entitled the other side of the coin : the strong dollar.....wil mentions two etfs that track the strength of the dollar..i have found these funds invaluable in regards to the strength of the dollar and the charts he mentions are also very helpful..degraaf makes it sound so complicated and involved where as wil mentions the bailout infusion into the economy with tons of cash has weakened and will continue to devaluate the dollar ....wil has been very helpful...i recommend all who want simple to the point explanations to look at wil's posts...he is very helpful and contributes greatly to this site.....thank you wil!

December 14, 2008 | Unregistered Commentersusie

Hi Wil, ehh I mean Susieè (brother & sister) ;)

If you like, I'll be the contrarian for this moment in time. I must however say I fully understand the logic of technical analysis being used for short term trading but also recognize this economic situation is clearly not in favor for technical trading logics nowadays.

The markets are so volatile, that all technical barriers and supports have been disrupted without any remorse during the course of 2008, as the crew of goldprices would probably agree with me.

The fact that you can't take away the basics rules of technical trading a man has taught himself during his career, doesn't take away the fact that these are irrational times.
For someone to acknowledge that for himself, is another virtue you may (one day) possess as well as I'm able to admit to you that I was wrong in the future, if thats the case.

If you for instance have troubles with me, contributing in approval with the owners of, then you should know that we live in a free world, dear girl.
Freedom of speech. Freedom of choice. A broad perspective. And that is the reason why the owners choose to let other opinions trinkle down the world wide web.

Ahh... just write it off. ;) have a good one.

December 15, 2008 | Unregistered Commenterde Graaf

Would like to pass this bullish news onto Gold and Silver investors.
It was clipped from the morning (December 17, 2008)Financial Post in Toronto, Canada and is written by an excellent teacher of Technical Analysis and Seasonality, Mr. Don Vialoux.

"Gold and silver continued to move higher in overnight trading. Gold added $21 U.S. per ounce and silver gained another $0.43 per ounce. Silver broke above a base building pattern yesterday on a move above $10.70 U.S. per ounce. Next upside intermediate technical target is $13.60 where resistance exists"

It looks (and smells) like a short term gain is underway now that tax loss selling season is basically over and the "Obama effect" will now begin to become entrenched in the marketplace (remember to sell at highs - look at the charts carefully) - because we are heading lower afterwards.
Add in, that this is the strength season for Gold/Silver.

If I don't post anymore this year, I would like to pass on best wishes to the owners of this site for their great commentary and putting their funds to work in the marketplace and telling everyone what they are buying and at what price FOR FREE!. Now that is a good Christmas present - it lasts all year long....
And all the readers/commentors, I wish a safe and Happy Christmas and all good things in the new year!
All the best,
Toronto, ON

December 17, 2008 | Unregistered CommenterMark

Mark, A happy and safe Christmas for you too, and every other reader and crewmember of All the best.

I'm going to enjoy the fantastic rise in gold. And also my turbo's and speeders increase in price, every day.
The dollar shows absolute weakness at this moment. Lets profit.

Have good one.

December 17, 2008 | Unregistered Commenterde Graaf

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