Gold and Silver Trading Alert: Dollar Soars to New Highs

By: Przemyslaw Radomski | Wed, Aug 20, 2014
Print Email

Gold & Silver Trading Alert originally published on August 20th, 2014 11:19 AM


 

Briefly: In our opinion no speculative positions in gold, silver and mining stocks are now justified from the risk/reward perspective.

The back-and-forth trading in the USD Index ended as it pierced through the short-term resistance and also above this year's high. As we have emphasized many times previously, the U.S. currency is after long-, medium- and short-term breakouts so the surprises should be to the upside. Consequently, yesterday's rally was not unexpected. What was surprising was the lack of real decline in the precious metals sector. Does this mean that the USD rally won't hurt gold and silver investors? Let's take a closer look (charts courtesy of http://stockcharts.com).

$SUD US Dollar Index - Cash Settle (EOD) ICE

The above chart clearly shows that there was indeed a breakout. At the moment of writing these words, the USD Index is slightly above the 82 level. Is this the time to get excited about the strength of the U.S. dollar? Not really. The breakout will need to be confirmed first. We would like to see 2 additional closes above the broken resistance before we think that the continuation of the rally is very probable. It's already probable, but the odds will increase once we see a confirmation.

Please note that the U.S. currency was strong enough not to really decline at the most recent cyclical turning point. Instead, we saw only a small local top that was followed by a consolidation. This type of flat correction is something that characterizes strong uptrends, so it seems quite likely to us that the rally will be continued. The odds will further increase if yesterday's breakout becomes confirmed.

Consequently, the USD Index will likely put bearish pressure on the precious metals sector and once the breakout is confirmed, this will become very likely. Gold and silver are currently at a critical juncture and this pressure might be the thing that "helps metals to decide in which way to go".


Larger Image

The critical juncture is created by 2 lines that we see in gold and silver. In gold, we have the declining medium-term resistance line. It was broken a few times, but only temporarily - gold moved back below it shortly. Gold would need to verify a breakout (and actually break out first) above this line before a move higher would become probable.


Larger Image

Silver, on the other hand, provides the support line. The white metal is not (yet) at its previous lows, but it's already at the support line that is created by connecting these lows. Once this support is broken, the decline is likely to accelerate. If silver breaks below the previous lows, we could see a very sharp move into our target area. Will this happen soon? There are no certainties, but it's becoming more and more likely that we will see this type of action in the following weeks or months.

What's the most likely outcome for the following days? In our opinion we could see a verification of the breakout in the USD Index in the form of a pullback, which would cause a temporary upswing in gold and - especially - silver. Then the rally in the USD would continue and so would the decline in the precious metals sector. Of course, there are no guarantees, but the above is our best guesstimate at the moment.

The above-mentioned corrective upswing in metals could provide a confirmation that the big decline is about to start - for instance if we see silver's outperformance and/or miners move higher on tiny volume.

Summing up, the situation in the precious metals market still remains too unclear to open any positions in our view, but it seems that we won't have to wait too long before things clarify and the risk/reward ratio becomes favorable enough to open a trading position.

To summarize:

Trading capital (our opinion): No positions
Long-term capital (our opinion): No positions
Insurance capital (our opinion): Full position

Thank you.

 


You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As always, we'll keep our subscribers updated should our views on the market change. We will continue to send them our Gold & Silver Trading Alerts on each trading day and we will send additional ones whenever appropriate. If you'd like to receive them, please subscribe today.

 


 

Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Copyright © 2009-2014 Przemyslaw Radomski, CFA

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/