Mighty Strides for GOLD, OIL,and USD
Should I say, "The USD has gone down"? Or are "GOLD prices finally in a Bull Run"? Maybe "OIL has found a price bottom and is set to go higher"? Cause and effect are particularly obscured in this case.
OIL prices seem to drift lower for ever, at least since June 18, 2014, when oil traded at $115 a barrel. Meanwhile, the talking heads blamed a successful fracking industry for the lack of foreign oil imports into the US, resulting in an oil glut, and rapidly falling prices. Then they blamed the lack of action by the OPEC nations to limit supplies as a measure to regain price control. Why would someone (...in control) let prices slip 70%, if he could help it? No-one seriously dared to put the blame on the US dollar. Among the many oil producing nations, Russia suffered a serious economic setback, as a result of low oil prices, - and the European sanctions imposed in response to their involvement in the Ukraine crisis. In January, Russian sources published suggestions that it wants to cooperate with the OPEC members, on the day when crude oil prices had fallen to below $28 a barrel. Since then, prices rebounded. That's funny. Does it mean that investors consider Mr. Putin's finger on the oil price trigger to be positive for the industry, the stock market and the global economy? Might he have persuaded the Saudis to bide their time in knocking the US fracking companies out of contention with low prices, arguing for a more "promising set up" later? Stuff for another 007 movie. What would America do without 007! Did you say "TRUMP"? Ah yes, of course you would.
Another aspect is the ominous statement of central bankers that they would "do whatever it takes" to safeguard the economies (AND STOCK MARKETS) of Europe and Japan, buy ANY asset with their newly printed QE money, including resources like gold and oil. Is that what is happening now?
Maybe the Federal Reserve realised that continuing with a strong dollar is not helping the US economy to withstand the headwinds of China's economic slowdown, on top of the unlimited quantitative easing in Europe and Japan?
On February 3rd, the USD dropped 2.76% against the Euro, just as soon as US markets opened. Who sold USD? Who could make it drop such a huge percentage, one of the biggest 1-day drops in history? And how? According to financial media sources, investors have now "discounted any further interest rate hike for this year". How did they find that out? By the way, INVESTORS DID NOT DISCOUNT IT ON DECEMBER 3RD, WHEN THERE WAS A SIMILAR DROP OF 2.4%. Back then, we were still waiting for the announcement of first rate hike! Which begs the question, what was the cause for the December drop in the USD? Is it enough for the FED to instruct Mr Goldman and Mr Morgan? "Selling USD", the media argued, "means, USD investors bought foreign assets." All in the one day, February 3rd? And another round of buying on February 4th, exactly 2 months after the first rout! Brilliant, how all these millions of minion investors work together for the one goal at the same time.
Bryan Rich of Logic Fund Management argues a kind of 7-year cycle, marking the fortunes of the USD. According to his theory, the last rise in the USD is now 7 years and 9 months old, i.e. very old, and in all likelihood will be starting its descent anytime, - like now. Cycles, once again, take precedence as cause over economic data and conventional wisdom. Of course, an immediate and unchallenged 40-50% slump is fiercely debatable, given the FED plans for higher rates as the economy improves. This coming cycle will last 7 years, too.
The rest of the world is still fighting over whose currency is the lowest, using various tactics and tools. Quantitative Easing (QE) has been great for higher prices in stocks. So far, it has helped the US stocks the most. But a USD over 100 (SEE CHART) is suffocating the advance, as we saw in January. Those with sufficient knowledge in Ichimoku Cloud and similar technical tools should recognise the significance of the USD drop, on the day that the lower cloud recedes its support.
Which one came first?
OIL
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| Brent Crude Oil, 3-month, January 2016 low at $27.63 Source: www.investing.com |
Another aspect is the ominous statement of central bankers that they would "do whatever it takes" to safeguard the economies (AND STOCK MARKETS) of Europe and Japan, buy ANY asset with their newly printed QE money, including resources like gold and oil. Is that what is happening now?
US Dollar
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| USD - 2 months chart. 2 drastic down days, 2 major changes in direction. I have long argued that a weaker dollar is in the offing, despite FED policies. Source: Chartnexus |
On February 3rd, the USD dropped 2.76% against the Euro, just as soon as US markets opened. Who sold USD? Who could make it drop such a huge percentage, one of the biggest 1-day drops in history? And how? According to financial media sources, investors have now "discounted any further interest rate hike for this year". How did they find that out? By the way, INVESTORS DID NOT DISCOUNT IT ON DECEMBER 3RD, WHEN THERE WAS A SIMILAR DROP OF 2.4%. Back then, we were still waiting for the announcement of first rate hike! Which begs the question, what was the cause for the December drop in the USD? Is it enough for the FED to instruct Mr Goldman and Mr Morgan? "Selling USD", the media argued, "means, USD investors bought foreign assets." All in the one day, February 3rd? And another round of buying on February 4th, exactly 2 months after the first rout! Brilliant, how all these millions of minion investors work together for the one goal at the same time.
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| USD Cycle Theory by Bryan Rich, Billionaires Portfolio |
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| 1-year USD, with double top at 100.3, Note the drop when the support of purple cloud ends. Source: Chartnexus |
GOLD
I have been rather quiet on gold for a long while. In my portfolios, we started buying in December, and early January, at quite a bargain price. Now we are "happy", because prices have jumped to $1159 briefly, and we count some 6-8% profit. However at this level, prices will encounter considerable resistance in the short term.
UPDATE 6-2-2016: Gold prices actually reached $1174.34 toward the end of the day, breaching the perceived resistance at $1160 after a short sharp reversal. It is also a direct response (FEAR!) to the 3% slump in US equities today. Is this the peak in gold?
We are one trading day away from the new moon on Monday. New moons traditionally mark a turning point when reaching a peak - or a trough. This immediate set up correlates with the exhausted looking selling move in the USD as of today, which suggests an interim period of settling in trading range somewhat higher than today. My preliminary target is 97-98.
UPDATE 6-2-2016: Gold prices actually reached $1174.34 toward the end of the day, breaching the perceived resistance at $1160 after a short sharp reversal. It is also a direct response (FEAR!) to the 3% slump in US equities today. Is this the peak in gold?
We are one trading day away from the new moon on Monday. New moons traditionally mark a turning point when reaching a peak - or a trough. This immediate set up correlates with the exhausted looking selling move in the USD as of today, which suggests an interim period of settling in trading range somewhat higher than today. My preliminary target is 97-98.
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| (almost) 5 year chart for gold prices. At the end of a long correction? SOURCE: Bullion Vault |
So, whereto for gold prices? Since the low on December 1st, at $1054 per ounce, prices rose 100 points or near enough 10%. Could this mark the end phase of the 5-year correction? Well it could, if the dollar does indeed trade lower in the months ahead. The target range to confirm my expectations are between 93-96, medium term. And that exactly fits the big picture.
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