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US Dollar remains the price driver

Commentaries & Views

Regular readers will be very well familiar with the below weekly DXY chart we have been presenting for months, paying particular attention to the negative divergence between price and momentum in anticipation of a resolution; that resolution may finally be upon us.

The below chart below shows the DXY on a weekly timeframe yet again. Note RSI has broken the momentum uptrend line as the price has corrected aggressively, a sign that the price may soon follow lower as well. The yellow rectangle shows a downside target for the DXY, which coincides with a former breakout level and the 50-week moving average.

The implication for the stock market is already being felt, as the bear market rally we suggested was beginning last week has found some little (for now) legs. Below is a 4-hour chart of the SPY; note the higher high in price coming off the bottom consolidation. Although we see US indices pull back into the end of the week as the run in the last few days is digested, the yellow rectangle highlights a support area where that dip might be quickly bought. The open gap denoted by the arrow continues to represent a target for swing traders on the long side.

As for Gold? Bulls are successfully defending $1650, and although $1685 may not be in the cards, a defense of $1650 on a weekly closing basis is still constructive. We had suggested that metals and stocks may be ready to decouple, but thus far, the falling DXY seems to be persistent in driving price action in both assets.

The chart below is the 2x leveraged Canadian gold mining ETF (ticker HGU) we have been showing since late September. The bottom we suggested then continues to hold. We also updated that miner ETF chart, highlighting the breakout from its consolidation, and even suggesting that a retest of that breakout point was an attractive spot for traders to enter; the below is an update of that chart on the 4-hour timeframe.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.