The Smart Money Charts


US Dollar Vs Gold COT Chart


Looking at the past three years of history, I believe the most recent COT reports were some of the most bullish issued for gold, and bearish for the dollar. Throughout this update I will focus on what this report likely means for gold over the next several months. We are in a correction, and phase two of this powerful bull market is underway.

The economic slowdown predicted here by “Dr. Copper” two weeks ago is being felt around the world. Federal Reserve Chairman Ben Bernanke said Tuesday that the economic recovery is close to faltering, and prepared to take further steps to support it. These steps will probably end the dollar rally.

This week’s key COT report data essentially predicts that a dollar decline will begin in the coming days or weeks. Smart commercial money short to long ratios are extremely bullish for gold, which is an action that historically pressures the dollar lower.

The above dollar chart shows extremely favorable periods for gold that were predicted by COT report data, going back to 2006. My shorter timeline work continues to point to a peak in the dollar over the next several weeks, followed by a substantial decline, with 65 as the next big target on the $USD chart.

US Dollar Sell Signals Chart

On the above chart the black arrows indicate stock market panic using data from Rydex fund flows. As money pours out of equities, it flows to the dollar. Historically this type of panic is a dollar sell signal.

You’ve heard a lot about the big rally in the dollar. Look at this long term chart. This is the “big rally”? Compare the dollar chart to the gold chart. Gold is now in a modest correction, after a huge move higher. Bullish public opinion towards the US dollar almost hit a 3-year high as of Wednesday’s close. I believe that’s another major sell signal for the dollar.

Gold COT Report Chart


Gold is the crown jewel of all assets. As we have entered a healthy corrective period in gold, this is the time to fully understand the fundamentals of what you own, and why you own it.

When the commercial buyers come in, it’s not a pinpoint place to drop huge amounts of investment money, but instead offers an area to employ capital. The force of the move once these buyers step in tends to be very powerful. Following these reports, the gold price often moves well over 100% to the upside.

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