The fear trade that started in early September caused a huge run into the US dollar. Assets fled the risk trade. Investors feared that a re-run of 2008 was coming again. On Tuesday this week, we all felt a bit of that fear, again.
In 2008, the dollar formed a sharp double top technical pattern. From there a major top was put in.
My technical indicators indicate the recent US dollar rally has already ended. If there is a second rally, I fully expect a double top, and it should be as short lived as it was in 2008.
My sentiment and technical readings target the 65-66 area in the intermediate term. Fundamental dollar analysis suggests a substantially lower dollar over the next two years.
Gold has excellent support. The worldwide fiat currency system is clearly broken. There is a round of QE by one nation, and then another, like children on a merry go-round.
The greater problem is that there is no end game. Now that the application of QE is the normal response of governments and central banks, its very unlikely that it will change, until the system breaks.
Its this set of circumstances that supports the gold market on all corrections. Gold is knocking on the door of the upper channel line at his price point of $1764. That is the solid purple trendline on the above chart. Is it time to sit back and enjoy your trip, on the gold super highway?
In the above chart the smart money commercial buyers are highlighted. By a number of measurements, their recent buying support has been unprecedented, and that surely spells much higher gold prices.
General pessimism about gold and gold stocks is substantial. I expect gold to climb this wall of worry, right to my trading target of $2,000. It should happen by late December, 2011, or early January, 2012.
Some technicians have called for deep corrections in gold at this time. They believe gold will decline to around $1300-$1400. I dont see anything technical that indicates such an event is likely.
Today the fundamentals are profoundly different from the fundamentals at past blow off tops. The fundamentals of the gold market are enormously supportive for an ongoing bull market.
My technical analysis of both the super highway chart and the turn call chart suggests gold has started an immense move higher!