Gold Appears To Be Staging New Momentum Base In Preparation For A Big Upside Move

In the first portion of this research article, I highlighted the correlation between gold and the US dollar as well as the correlation between the US dollar and the EUR/USD and JPY/USD pairs. The purpose of this example was to highlight the different phases of US dollar appreciation versus depreciation compared to these pairs.

EUR/USD and JPY/USD are often compared to the US dollar as major global currencies. Therefore, when the US dollar moves into a depreciation phase, we expect to see EUR/USD and JPY/USD move into an appreciation phase.

How this correlated to the price of gold and the phases of advancing versus declining precious metals is simple to understand. Gold will stall or move broadly downward while the US dollar is within an advancing/appreciation phase. Gold will move higher or begin an upward trend bias when the US dollar begins to generally weaken or moves into a declining/depreciation phase.

Understanding Cycle Phases and Correlative Gold Price Trend Bias

In the first portion of this research article, I highlighted this relationship by detailing the 2007-2008 US dollar depreciation phase that lasted until a major bottom setup in 2014 (almost exactly seven years). The next US dollar appreciation phase lasted until a recent major peak in March 2020 (almost exactly seven years).

If the US dollar continues to decline in value after the COVID-19 virus event and the change in cycle phases, we can expect another five to seven or more years of advancing precious metals prices as a result.

The recent bottoming in gold, just above the $1700 price level, set up a very unique scenario related to potential future advances in price. The current gold rally from the 2015 lows, near $1045.40, to recent highs near $2089.20 represents almost a 100% price advance. In my opinion, this rally in gold is similar to the rally that took place between 2000 and 2005 – starting near the end of a US stock market appreciation phase and lasting about three and a half years into a US stock market depreciation phase.

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