As the US dollar pops to the anticipated test of the down trending SMA 200 (91.92, with USD currently at 92.09) we finally have this out of the way. That includes gold’s test of the SMA 200 going the other way. USD is testing resistance and gold is testing support. All is normal.
Ah, but these are the financial markets and they are under no directive to remain normal. And so, this update to show what needs to remain in place.
Here is gold at yesterday’s close. This morning it is at around 1308 and testing lateral support and the SMA 200. A breakdown from there probably targets 1260. A hold and it’s situation normal.
Last week we correlated the US dollar and the gold miners’ ratio to gold, which have been generally going on the same downtrend since the US presidential election. The ratio is sitting right at the EMA 20 and any further weakness and a test of the SMA 50 would be in order. Ironically, a failure of the HUI/Gold ratio could actually predict a coming failure of the US dollar as counter intuitive as that may sound to many gold bugs. But again, recall the HUI/Gold ratio’s correlation to USD post-election.
In nominal terms, HUI is probing well into the support zone looking for a test of the SMA 50.
This always was classified as just a bounce, but there may be some important signals in the making as stocks appear weak and the buck tests its downtrend. We’ll get that stuff sorted out in other updates and in the weekend report.
But for now, gold stock bounce players (next target 190) should watch the SMA 50. Gold stock future bull market players should be on alert to the macro, especially where stocks are concerned. If they stabilize and re-bull it’s likely to get painful in the precious metals. But if they continue to weaken we’d be looking at a gold sector buying opportunity on any downside that results.
