Gold Seeks Direction As US Dollar Index Slips

Based on the likelihood that the next big move is going to be to the downside, it would fit the overall picture more if the upcoming reversal was a top, not a bottom. A bottom would imply a rally in the following days or weeks, and the relative performance (as described above) along with other factors continues to favor a bigger decline.

This means that we might not see a meaningful decline for a few more days, and we might even see one final move higher before the top is formed. This could be something that takes place in silver only or something that we see in gold and miners as well. Still, I don’t expect it to be really significant in case of the latter. They are underperforming the metals, after all.

Before summarizing, let’s discuss the US Dollar Index’s main part – the EUR/USD currency pair in greater detail. After all, this pair often moves in tandem with gold.

EUR/USD Decouples from Fundamentals

John Maynard Keynes once said, “Markets can remain irrational longer than you can remain solvent.”

And right now, EUR/USD is putting his theory to the test.

Because the euro accounts for nearly 58% of the movement in the US Dollar Index, its rise (and likely fall) will determine if/when the war is won.

But brimming with confidence and unwilling to wave the white flag, the EUR/USD has been green for five straight days and has rallied during nine of the last 12 trading days. And while sentiment and momentum are warriors that don’t die easy, the euro is losing fundamental soldiers left and right.

Please see the chart below:

(Click on image to enlarge)

Gold US Dollar

Figure 5 - European Central Bank (ECB) Balance Sheet

Another weekly update shows the European Central Bank’s (ECB) money printer continues to work overtime. And as I mentioned on Monday (Dec. 28), the ECB’s total assets now equal 69% of Eurozone GDP – nearly double the U.S. Federal Reserve’s (FED) 35%.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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