The Rising US Dollar continues to shift the investing landscape as a stronger US Dollar mutes the price acceleration in precious metals and continue to put pricing pressures on the global economy. The current levels of the US Dollar Index, above 99, clearly illustrates how the shifting landscape of the global economies has changed. Prior to 2014/2015, when a minor currency/market crisis hit China and capital controls were installed in China to help reduce capital outflows, the US Dollar Index average price range was between 73 and 90. Of course, the US Dollar Index weakened in 2008-09 and rotated within this range after 2010 – settling near 80 near the beginning of 2014. Before we get into the details, be sure to opt-in to my Free Market Forecast and Trade Ideas Newsletter
So, this impressive rally in the US Dollar throughout the 2015-2016 US Presidential election cycle, as well as the continued rally since the lows near December 2018, is not something that we can simply chalk up to normal price rotation. Something dramatic has shifted in the global markets since 2015/2016 and the new trend is US Dollar strength.
We believe the recent rallies in Gold and Silver related to this US Dollar strength are something every trader should consider relative to the real perspective of the global markets. Gold and Silver have become extremely expensive in certain foreign markets because of currency price levels and the stronger US Dollar typically mutes price rallies in precious metals. Therefore, the combination of a strong US Dollar and a rising metals price suggests “this time is different”.
We are starting to see news posts of how
unique this setup really is in relation to traditional market dynamics.
https://finance.yahoo.com/news/gold-breaks-aw...-103653513.html
https://www.msn.com/en-in/money/personalfi...qZKE?li=AAggbRN
target="_blank"
https://www.bloomberg.com/news/articles...s-play-catch-up< target="_blank"/p>
https://timesofindia.indiatimes.com/...ow/70892512.cms
The reality is that no matter what happens in the US Dollar or other foreign currencies, Gold and Silver are in very high demand as investors continue to pour assets into precious metals – which have quickly become one of the best-performing assets for 2019 and very likely for 2020 and beyond.
This Daily US Dollar Index chart highlights the strength of the US Dollar over the past 6+ months. The ability of the US Dollar to continue to trade above 96~97 and push higher towards the 99 ~ 100 level shows the very high demand for US Dollars throughout the globe and the strength of the US Dollar in comparison to much weaker foreign currencies. With the expectation of a weakening global economy, trade issues, negative interest rates, and bankrupt nations watching their futures spiral completely out of control, investors are naturally seeking out the strongest, safest assets – and are not seeking the highest potential returns. This is a shift to safety.
We believe that gold is about to launch into a new upside leg once it breaches our Fibonacci Price Amplitude Arc resistance level near 1550. The new upside target is $1625 or higher – where $1700+ could be the real upside objective for Gold. If the US dollar rotated a bit lower after setting the new highs near 99, Gold could explode to the upside on moderate US Dollar weakness.
