US Dollar Set To Rally: Will Gold Tank?
The theme from the Gold bug camp for so long has been; Gold is going to soar to the moon. What many forget is that these fools have been singing this same song for decades. Instead of soaring to the moon, Gold has been licking the dust for almost 7 years. It topped off in 2011 and since then the action has all down with a few false breakouts that the misguided Gold bugs mistook for the beginning of a new bull run.
We are not against Gold or the precious metals sectors; we actually favour the hard money doctrine, but the problem is that view is not shared by the majority. Mark Dice illustrated that most individuals would take a candy bar over a 10oz bar of Silver.
Now many would respond by saying these people are stupid, etc. That’s not the point, the point is that most people no longer view Gold as currency; instead, they view it as some ancient relic.
Is the Dollar getting ready to Rally?
The bigger issue is that the Dollar appears to be putting in a base. The dollar has mounted a very strong rally since it bottomed out in 2011, so the current consolidation is to be expected. The dollar is holding firmly at 90; a zone of strong support. As long as the dollar does not close below 90 on a monthly basis the outlook will remain bullish. With the passage of the Trump’s Tax package, the outlook for the dollar and the stock market has brightened significantly pushing Gold even deeper into the shadows. If the Dollar can close above 94.50 on a monthly basis, the groundwork will be laid for a test of the old highs.
Gold, on the other hand, looks like it’s going nowhere
The dollar topped in early 2017 and did the Gold market respond positively to this event. The reaction was muted at best. Instead of surging to new highs it could not even trade past its July 2016 highs. To make matters worse, gold put in a lower high than it did in July of 2016, even though the dollar traded below its 2016 lows.