US Dollar Index and Spot Gold Outlook

0 Comments Published November 4th, 2009 in 4xGenie

US Dough Index and Spot Gold Outlook.

Gold Rallies As Dough Declines.

US Dough Index

The US Dough Index broke owing to resistance at 76 before consolidating in a narrow band. Consolidation above the new support level is a continuation signal, indicating a test of 77.50, but the index is once again testing support at 76 after a fake breakout. Respect of support would signal that the primary down-trend is weakening, while failure would again test support at 75. In the longer term, breakout above 77.50 would indicate that the down-trend has finished. Reversal below 75, on the other hand, would offer a target of 74.

Spot Gold

Spot gold rallied sharply on news that the Reserve Bank of India, normally an astute buyer, bought 200 tons from the IMF (WSJ). The small-term target is $1100, but we could see further retracement to gauge support at $1000 before the long-term target of $1300 is veteran.

Gold miners are lagging rather than leading spot gold as they normally do. The Market Vectors Gold Miners Index [GDX] is headed for a test of the upper trend channel at $50. The broadening wedge over the last 2 months is a bullish continuation pattern. Reversal below $41 is most unlikely, but would warn of a secondary correction. Divergences between gold miners and physical gold often forewarn of changes in the spot price.

There’s a huge bubble, because we have zero rates in the US, zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dough is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re making a larger bubble than before.

~ Dr. Nouriel Roubini, October 23, 2009

4xGenie Suport Team

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