Gold Breaking Above 6-Year Resistance!

Below looks at the ratio of Gold compared to the US Dollar over the past 20-years.

The ratio reflects that some long-term trends have taken place and the ratio is making an attempt to do something it hasn’t been able to accomplish in 6-years.

The ratio broke above 6-year falling channel back in 2001 at (1) and then it proceeded to rally for the next 10-years.

For the past 6-years, the ratio has continued to create a series of lower highs and lower lows inside of falling channel (2).

Currently, the ratio is attempting to do something that it has not done in 6-years, which is a breakout above falling channel (2) at (3).

[quote=“TradingPanda, post:1, topic:110035, full:true”]

For the past 6-years, the ratio has continued to create a series of lower highs and lower lows inside of falling channel (2).

Currently, the ratio is attempting to do something that it has not done in 6-years, which is a breakout above falling channel (2) at (3).[/quote]

Here is a chart of the New York Spot Gold price vs. the USD showing the 6-year downtrend from July 2011 until now.

It looks similar (but not identical) to your chart of the Comex gold futures price vs.the USDX.

Both charts (mine and yours) are Monthly charts. On my spot gold chart, only the wick of the June candle has penetrated the trendine, whereas your Comex chart shows the June candle wick and the body of the July candle penetrating the trendline.



Here is a Daily chart of the New York Spot Gold price (again, vs. the USD) showing the most recent part of the 6-year downtrend.

Notice that the penetration of the trendline – which appears on your chart to be current – appears on my chart to have happened 7 weeks ago. Since then, the gold price has returned to the down-trending channel highlighted on your chart, and has not yet ventured outside the channel.

To my eye, June 5-7 looks like an outlier. What do you think?

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lets take the usd gold correlation away for a minute and ignore it. lets aswell ignore the impending usd strength which is going to occure over the next months/year(s) (fed beeing the only of the big 3 increasing interest rates + bettering up economic datas released lately + worsening datas from japan and china).

looking only at channels id agree that the june top was within the range of a lasting down trend.

the down trendline created through the tops of september 2011 and september 2012 has been penetraded constantly over the matter of the last 1 year. (see picture)

but if we put it into the logarythmic scale -which is beeig used for long term analysis- we can see that the 2 highs of 2011 amd 2012 correlate perfectly with what has happened the last 12 months (see picture)

of we take into account the price action and formations of the last 12 months we aswell see a bearish bias (see picture)

the only point which is worring me is the last 2 years formed lows which indicate a upcomming up movement of gold (see picture)

in my opinion we are still in for a down move towards 1100-1000-900 in the long run.

fundamental datas (economies, bonds, global interest rates) aswell show no dark cloudes coming up the next years. bond prices and commodities prices corelate much more than usd-commodity prices (inverse correlation).

the next 4 weeks are deciding. if the 2011/2012 peaks forming the 6 years long trend line get broken then we are in for further buying and (after 1-2 retests) higher prices. the constant penetration of this resistanve zone is a indication that the probability for a break is increased. but in my strong believe, judging by fundamentals, correlations, economies, price actions and a personal bias (yes, not a usefull thing to have sometimes) the resistance will hold and we are in expectations of lower prices.

most analysts which i know (personally and not personally) are expecting a rally in gold for the second half of 2017, at least that “vision” is what they are trying to sell to the masses.

one more hint i can give you. this big red 5 minutes candle of the 26.06.2017 is not a mistake. 1 institution opened in short time big amounths of put contracts. at first the market could not soak up the amount of shorts, the next few days some recovery had happened but the market continued further down. these shorts are still open and in the market. despite the last 3 weeks rally i doubt that the geberal opinion or direction has shifted towards a bullish market.

The biggest influence on gold prices is monetary policy, which in the US, is controlled by the Federal Reserve.

Fed communication about rate hikes and election outcomes appear to have been the main drivers of the gold price fluctuations in 2017, as they were in late 2015 and 2016.

In September 2015 the Fed was pretty much focused on raising rates, and that proved to be a negative inflection point for the gold price, when it dropped to a six-year low in December of $1,051 per ounce.

When the Fed turned dovish in early January 2016 it proved to be another inflection point for the gold price, and it started rallying in early January 2016.

Then hawkish comments from the Fed created a sell-off in the gold price in the second half of 2016. And during 2016 we had two big spikes in the gold price from the Brexit vote and the U.S. elections.

Fed communications about rate hikes continue to be significant drivers of the gold price in 2017, exactly as they were in 2016.

The key driver of the gold price is NOT inflation, but real interest rates, which are the difference between nominal interest rates and inflation.

Gold does not provide any yield and real interest rates represent the opportunity cost of owning gold. If real interest rates move higher, the gold price moves lower and vice versa.

The single most important relationship that explains the gold price is the direction of real interest rates.

Interest rates have a big influence on gold prices because of a factor known as “opportunity cost.”

Opportunity cost is the idea of giving up a near-guaranteed gain in one investment for the potential of a greater gain in another. With interest rates holding near their historic lows, bonds and CDs are, in some cases, yielding nominal returns that are less than the inflation rate. In other cases, like in Europe, nominal interest rates are even negative!

Why own bonds (or other asset)s that essentially earn negative interest rates in real terms, when you can instead, park your money in gold.

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fed interests play little to no role on the gold price. its the bonds yields that influence the gold price the most. bond yields aremarginally influenced by the fed interest rates.

correlating charts:

bond yields/gold price




no correlation:

fed interest rates/gold price

little correlation:

fed interest rates/bond yields

If you are looking for symmetry I’d say this chart is more indicative of further declines. We seem to be making a similar fake out top as we did before the last final fall.

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Oh my. Are you sure about this? :slight_smile:

Monetary policy isn’t just about the Fed funds rate. That’s just one sliver of the interest rate curve.

You throw up several charts there of 10-year yields. But what do you think has the biggest effect on yields at this maturity? To the point of distortion? (Hint: It’s the Fed)

economic status. future perspectives of performance of country (employment, economy, security, credit defaults risks) performance compared to other assets. the general bond market conditions (if only gov. bonds are available or aswell other bonds-companies aswell can issue bonds if the conditions favour bonds over loans from banks: lioe in the last couple of years) the amount of bonds issued vs. the demand.

fed (central banks) interest rates influence is marginal.

here is anpther chart. some extent influencing each other but nothing that can be called truly correlated.

example out of real life: despite ECB giving 0% interest rates the bonds of germany yielding negative while the bonds of grece yielding 7-12% and both countries have the Euro as currency.

please control your arrogant attitude, i was not “talking down” to you or tried anything to offend you. im giving u free quality education. take it or leave it.

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Some quality insights here :slight_smile: Thank you all!

Gold exited from the trading range 1204 – 1296 and is approaching the 1337 critical level. A strong buying interest started from Monday 28th.