GLD, USD update 02/14

GLD: Without having to go into too much detail, the monthly chart since 1980 tells the story actually really well. First we gave a picture perfect ABC rally with C=1.618X A into the high made late 2011. Then we have arguably either a 5-wave decline or a 3-wave decline into the late-2015 low. And more recently we have a (green) beautiful triangle consolidation which on a break targets $1700. I prefer for now the 5-wave decline and now blue Primary B up, as the 5-wave decline just simple counts better especially with the (blue) ending diagonal triangle. In addition, note that the 76.40% retrace is at $1719, which fits perfectly with the symmetrical triangle breakout target. That’s 21+% of upside from current levels and plenty enough for a long. Once $1700 is reached it’s advisable to scale out and re-assess. There’s always a next bus to catch with more money in your suitcase.

GOLD monthly

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USD: Due to the nature of the underlying sentiments I’ve found that currencies and commodities preferably move in the more confusing abc’s pattern. Therefore I find it easier to track them through assessing the big picture, as the short term quickly becomes muddled. Right now, I see the dollar in a decline towards the 76.40% retrace at around $80+/-2 dollars. This fits with the above shown rally in gold as falling dollar:

  • increases the value of other countries’ currencies. This increases the demand for commodities including gold. It also increases the prices.
  • When the U.S. dollar starts to lose its value, investors look for alternative investment sources to store value. Gold is an alternative.

All of this was explained last month: see here.

USD

Thus the anticpated drop in the USD fits with the anticipated rally in Gold and also with the preferred view that Gold will only put in a “temporary” B-wave top, because once the USD bottoms out and starts rallying for Cycle wave C, it’s plunge time for gold.