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« Portfolio Update 14 September 2008 | Main | Randgold Resources Limited: Back to the Buy Zone! »

Gold: Hanging by a Point!

Gold: Hanging by a Point!

The flight to cash has pushed the US Dollar up by around 10% since mid July 2008 and to within one point of its major resistance level on the US Dollar Index (EOD) INDX.

From the chart above we can see that the '80' level was previously the support level for the dollar, once penetrated it becomes the resistance level. Should the dollar break through this resistance level it could go a lot higher. Taking a look at the technical indicators we can see that the RSI, MACD and STO are at the top of their respective overbought ranges. This normally suggests that this mini rally has ran its course and the dollar should at least pause for breath.

However these are not normal times as evidenced by numerous factors including the credit crunch, which is not over yet, the spot light just moves from one troubled financial institution to another. We are also heading into the last furlong of the race for the presidency and as we all know the picture must look rosy in order to give the incumbent party another shot at holding power. So a strong dollar and a steady stock market are the order of the day from their perspective.

What puzzled us today is that the dollar was not pushed straight through this hurdle in order to keep the momentum going and deal a hammer blow to gold bugs around the globe. Maybe we speak too soon but the dollars rise was suspended as it took a look at the hurdle in front of it. We know that this is only one point on a chart and cannot be extrapolated to produce some meaning full conclusion. However, some of the faster moving traders must be considering taking profits from the dollar at this point, which could be the pivotal point for a reversal in the dollars progress. After all the fundamentals for the dollar are still deteriorating and the outlook remains gloomy, in our humble opinion.

Should this be the case and the dollar re-commences its trek south the effect on gold and gold stocks could be electric! It’s said that the time to buy is when there is blood in the streets. The question is have we got the guts to take advantage of this opportunity if that is what it is?

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Reader Comments (8)

"The question is have we got the guts to take advantage of this opportunity if that is what it is?"

No yet: there´s more blood to spill. Wait after january.

truly yours,
The Devil.

September 10, 2008 | Unregistered CommenterRandolph

Is there any significance to the 50 and 200 day lines crossing on the dollar chart, or does it just mean that they are crossing?

Some folks read the charts like tea leaves. I would like to know more about this stuff.


September 10, 2008 | Unregistered CommenterJohn Ell

The Devil,

Why is January significant? Gut feel? or have you based it on something more technical

September 10, 2008 | Unregistered CommenterGold Prices


Have a look at this link regarding moving averages you might find it interesting.

September 10, 2008 | Unregistered CommenterGold Prices

I think that 'The Devil' may be referring to possible strife in the world. Specifically, from one of my other newsletters that I receive, the author and his/her group believe that Isreal may attack Iran right after the election, as a response to their nuclear program. This way, no one would have to answer to western world if an all out war broke between the two countries, since the govt in the States would be in transition. The belief is that the attack would be swift and done before we knew it - well before the next president takes power.

Do I beleive it? I don't know - the theory does seem plausible - but I know that it would make gold move in a significant manner.

Do I want this? Resounding NO ... regardless of the potential profit I could make as a gold bug.

Another possibility is that 'The Devil' may be referring to the ongoing fallout of the credit crunch - I mean, look:Fannie Mae/Freddie Mac bailout?!?!? Lehman Bros also on the rocks???

I have to say that even though both McCain and Obama talk the talk about becoming the next president, I beleive they are also wondering what kind of quagmire they are getting themselves into. Let's face it - the next four years are not enough time to fix the financial/economic/social issues in the US. Whoever is going to become the next president may be secretly wishing they didn't once in oval office.

Good luck to all gold bugs ... (not that we need it)

September 10, 2008 | Unregistered Commentercome_on_gold

Sorry, I was attending a couple of know, the hell is plenty of attorneys.

Why January? New man in the white house. No more need to buy time. No more bail-outs.

PS: Sovereign funds are starting to be reluctant about buying more treasury note.

The Devil

September 11, 2008 | Unregistered CommenterRandolph

gold prices------nice moves up today !!! hurricane ike or is dollar rally almost over??????

September 12, 2008 | Unregistered Commenterlou

We think the dollar rally is dead in the water as it failed to break 80.
Gold prices are preparing to embark on a major rally in the coming months.

September 18, 2008 | Unregistered CommenterGold Prices

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