Falling Dollar Lifts Gold & Crude
By Colin Twiggs
August 4, 2009 2:30 a.m. ET (4:30 p.m. AET)
The US Dollar Index broke through primary support at 78.50, signaling a down-swing to test the lower channel border
Recovery above 79.50 is most unlikely, but would warn of a
A falling US dollar will boost gold and oil prices.
* Target calculation: 78.5 - ( 83 - 78.5 ) = 74
Spot gold is again testing resistance at $960. The falling dollar and rising gold miners index, silver and crude oil all point to a breakout — which would signal a test of $1000. Reversal below $950, however, would warn of another test of support at $925. In the long term, breakout above $1000 would signal a primary advance with a target of $1100*, while failure of support at $900 would test the April low of $865.
* Target calculation: 1000 + ( 1000 - 900 ) = 1100
The Gold Miners Index [GDX] broke through resistance at $40, indicating a test of its upper channel border — and a similar rise for gold. Twiggs Money Flow (21-day) recovery above 0.1 would confirm the signal. Reversal below the trend channel or TMF reversal below zero would warn of a bull trap.
Spot silver broke through resistance at $14.00, confirming the secondary correction is over and indicating an advance to the June high of $16.00 — a positive sign for gold. In the short term, expect retracement to test the new support level. Reversal below $13.80 is unlikely, but would warn of a bull trap. In the long term, failure of support at $12.50 is unlikely, but would test primary support at $11.80; while breakout above $16.00 would offer a target of $19.00*.
* Target calculation: 16 + ( 16 - 13 ) = 19.00
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Crude oil broke through resistance at $73 [green], in sync with a rising CRB Commodities Index, and signaling a primary advance with a target of $86*/barrel. Reversal below $67 [orange] is unlikely, but would signal a bull trap.
* Target calculation: 73 + ( 73 - 60 ) = 86
He that is of the opinion money will do everything may well be suspected of doing everything for money.
~ Benjamin Franklin (1706 - 1790)