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« Kinross Gold Corporation Investors not impressed | Main | Agnico-Eagle Mines Limited: Record Quarterly Revenue »
Monday
Aug022010

Dollar Down, Gold Up, not Today!

USD Chart for 02 August 2010.jpg

The inverse relationship between the dollar and gold prices started to decouple recently with the dollar rising and gold rising concurrently. The dollar has since peaked and resumed its trek south with gold also down but holding steady at the moment. Today, however, we saw the dollar fall out bed as the chart shows, and gold almost followed it lower but was saved by the rapid fall of the dollar. The summer doldrums brings with it a certain amount of wishy washy market movements without any obvious direction. So we need to think of it as white noise and concentrate on the bigger picture.

Kitco Gold Price Change 03 August 2010.jpg


Today was one of those days, as evidenced by silver prices which jumped up to $18.35/oz with little effect on the price of silver stocks and the HUI managed to lose a couple of points.

In a way its a day to forget, however, from what we can glean there is more quantitative easing in the pipeline, which, when we consider just how many dollars are already in the system begs the question of where and when will all this printing of money end. History tells us that it does not end well as evidenced in Germany not so ago and Zimbabwe today.

The new finance bill does nothing to encourage us, as we understand it the SEC will be protected from the Freedom of Information Act, so in future it would not need to answer questions about the Madoff fiasco for instance. There is also a provision that every trade over $600.00 will need to be filed, a cost that the smaller stock brokers and you, could well do without.

As per usual we are hanging on to our physical metal and our core position in the producing stocks. However, we are looking to prune some of the laggards and re-deploy the cash into better performing stocks without being out of the market. Not to be in at this stage is the wrong thing to do in our very humble opinion, but a little refining and re-balancing can help to increase profits and thats what it is all about. We expect this month of August to be one of positioning ourselves for the coming rally in the precious metals sector which may begin gently over the next two to three weeks but start to gather some speed come the 6th September, Labour Day, when the heavyweights return from their holidays looking for some action.

We will also know more about the economy and its recovery and whether or not it needs some help of the stimulus type. The dollar, which has dropped from 88 to 81 on the US Dollar Index registering a lose of 8.64% since early June, once again appears to be friendless. On the 10th June 2010 we did suggest that it was overbought when we wrote “a gap that is opening up between the dollar at ‘88′ and the 200dma, which stands at ‘79′. The RSI, MACD and the STO are bouncing along at the top of their respective ranges and sooner or later they will return to somewhere more in the middle of their ranges” The fall has been faster than we anticipated and must now be giving the holders of dollars one or two sleepless nights. The Chinese for instance have seen their dollar reserves drop almost 9% in less than two months, thats one big hit to take and questions the strategy of holding dollars for the foreseeable future.

More money needed to prop up a jobless recovery, it just doesn't sound right or bode well for the future.




Over on the good news counter we spotted an article by John Embry on the Sprott Asset Management site entitled: Golds on the cusp of a parabolic move up which is well worth the read so try and find the time.



Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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Reader Comments (6)

I am not a lover of the dollar but if you look at the charts over a two year period it is in a huge "cup and handle" formation signaling an explosive move to the upside. What then for gold if this happens?

August 3, 2010 | Unregistered Commentergold bug

A wee bit of clarification:

The Disease Care Cost Shifting and Insurance Company Subsidy Act of 2010...otherwise knows as the "Healthcare Bill" is the particular catastrophic piece of legislation that included the requirement that all businesses and self-employed people report all transactions in excess of $600 to the Feds via a 1099 Form. So, if you buy a computer from Apple or a mattress from Fred's Mattress Emporium, you have to 1099 them. No kidding. It sounds like a hoax, but it isn't. Idiocy.

Anyone volunteer to warm up the tar and pluck the chicken feathers?

Scheduled to start in 2012. You'd think such a provision would have been part of a finance bill, but that's not how Washington works. They can and do throw any provision they want into any bill on any subject.

Can't imagine that part of the law isn't repealed, but ya never know. Parasitic meddlers are everywhere. Insanity reigns supreme. They may defend every part of it to the death to keep it all from being dismantled.

This kind of nonsense can't persist for long. A great cleansing is coming and it's overdue.

August 3, 2010 | Unregistered Commenterfallingman

I'm confused. I just read the Rosen Report on Kitco, , extremely accurate calling the last big down in Gold in 08. It points out on charts another Big leg down has started in gold and silver taking the HUI to 140-160. I suppose you mean to get ready for the next move up after the HUI bottoms at 150?

August 3, 2010 | Unregistered CommenterJohn

John,

This is something that only you can decide, are you are bull or a bear? We are with the bulls and expect to see to much higher prices by the year end, but it is up to you to read as widely as you can and then make your own investment decisions, after all its your money.

Best wishes,

Bob K

August 3, 2010 | Unregistered CommenterGold Prices

fallingman,

Thanks for the clarification - much appreciated.

August 3, 2010 | Unregistered CommenterGold Prices

A comment on Mr. Rosen's predictions:

Look at the Kitco archive from Aug 14 2009. His predicted gold price was $644 for April/May of 2010. He was off by about 90% from the actual price this Spring. That kind of forecasting ability qualifies him for government work and not much else. Maybe the Treasury has an opening.

But, the Elliot and Gann adherents are never "wrong," are they? They just determined the wave count incorrectly ... over and over and over again.

Look, anyone's opinion is as good as anyone else's, but not everyone's track record is as good. My experience is that following the advice of wavers loses you money. Mr. Prechter, a smart and good guy, had the Dow topping in 1996 in the 6,000s. The mega uber super 5th wave had completed! Yeah, tell that to the market.

That said, could Mr. Rosen be right that gold is about to tank? Absolutely. ANYTHING can happen. And I can come up with a very compelling scenario that would scare people away from gold right now.

Will he be right? That's probably no more likely than last year at this time. And if gold and silver blast off, which they could just as easily do, where are you then?

If the Fed sees the handwriting on the wall as clearly as I do and the Casey people do, and they go the QE route BEFORE the economy and markets tank completely...and the rumor floating around is that they've already decided to do so...you can forget about $644. If they wait for a collapse to justify flooding the system with new money, who knows what might happen to gold and other high quality liquid assets in the meltdown.

Personally, I'd rather take the counsel of the likes of Rickards, Russell, Embry, Sprott, Hathaway, Willie, Lassonde, Dines, Sinclair, Bonner, Casey, and the Kirtleys, to name just a few of the people I think have earned their stripes. But hey, THEY could turn out to be wrong. You pays your money and you takes your chances.

The key is to play smart and use basic money management techniques. When you make mistakes, keep the losses under control. Don't just put your chips down on red or black and pray that this or that chart guy has it right.

August 4, 2010 | Unregistered Commenterfallingman

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