USD Meltdown Is Your Gold Advantage


US Dollar Versus Gold Chart

The dollar is only in the middle stages of what appears to be a very long term bear market, and this bear market is stealing the purchasing power of American citizens.

The Federal Reserve is out of control. Investors need to protect themselves from increasingly negative interest rates. Your savings and income are being severely diluted, by both the printing press and stealth inflation.

The best thing to do in preparation for any financial crisis is to own physical gold. It should be your largest holding. Asian physical buyers are accumulating gold at these highly attractive prices. In the gold market, a good motto is, “Do as the Asians do!”

The dollar could barely rally while Greece almost imploded, when it should have skyrocketed. There is a large technical divergence in play on the US dollar chart. Both the CCI and Ultimate Oscillator lost momentum while the dollar price went higher. Dips on the dollar should not be bought, and rallies should be sold.

The rising wedge delivered a price breakdown at resistance. On meaningful strength, the dollar is met with stout selling and shorting from large commercial traders.

The dollar’s great long term vulnerability is gold’s advantage.

UUP (US Dollar Proxy) Chart

The dollar, as shown on this UUP dollar proxy chart, has moved up in the last week, but the volume is absolutely terrible. There is little fundamentally-based buying behind this move. If the dollar has limited upside potential, that likely means the gold correction is almost completed.

The MACD indicator shows a significant non-confirmation with the UUP price. In January, UUP surged above the October highs, but MACD came nowhere close to making a new high.

Technically, the US dollar is terribly weak. Sell some dollars and buy some physical gold.

Gold 2012 Roadmap Chart

Gold touched my projected $1667 target, although price still could go slightly lower. What won’t be known until after Friday’s market close is the actions of the commercial traders. Those actions will be shown clearly in today’s COT Report.

My projected model suggests that commercial buyers have stepped up by covering shorts and have been buying heavily since the correction began last week.

Gold Right Shoulder Chart

The biggest news for the gold community in the last couple of weeks was probably Ben Bernanke’s speech, which caused investors to sell gold in a panic. The price plunged nearly $100 an ounce and started a correction.

I have been an advocate and will continue to be an advocate for owning physical metal. My work suggests gold $2100 in the next few months and $2400-2500 late in 2012.

Please note how close to the upper trendline of the wedge pattern the price of gold came as it built what appears to be the right shoulder low of a head & shoulders pattern.

For the gold price, I think the bottom is either in place, or very close to being there.

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