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Turnaround Time for Gold? Dollar Overbought

The fact that our gold shares did very well this quarter may be trying to tell us the worst is near.

Ongoing trade war fears continue to move the markets as the first half of the year ends. The Fed’s core inflation hit 2% for the first time in six years, while gold stumbled below $1250, only to bounce up from this week’s low. Silver also skidded lower while gold shares jumped up, observes Omar Ayles, editor of Gold Stocks R Us.

The fact that our gold shares did very well this quarter may be trying to tell us the worst is near. The fall in the gold price this week is making it a full B decline, and it’s saying the lows are getting closer. Gold is still very much tied to the dollar.

The ‘B’ decline indicator has declined to the December 2015 lows, then the bottom of a strong ‘B’ decline. Could this suggest gold is ready for a renewed rise? The much awaited ‘C’ rise?

We’ll soon see. It’s interesting to note, this time last year, exactly on July 7, gold bottomed and proceeded to rise to its key multi-year resistance at the $1360 -$1380 level. It’s no coincidence we’re about to enter into a seasonal strong time for gold.

Also bullish for gold is what seems to be a petering U.S. dollar. The dollar failed to rally above its key “make or break” resistance near 95 once again and it’s forming a diamond top pattern, which typically signals a trend reversal.

The dollar is now testing short-term support at 94 while our indicators are telling us the dollar is overbought. A clean break below 94 could push the dollar to 90 or lower.

The 90 level on the dollar could coincide with gold’s resistance at $1360-$1380. We’re currently holding a full position in gold and a bear put spread on the dollar expiring in Dec 2018.

Gold shares continue to outperform gold. They’ve not only held up better, many of them are rallying.Most of our positions continue to do great.

Agnico Eagle Mines AEM broke clearly above its bullish ascending triangle as it regained the $47 handle. It’s now poised to rise further. Wheaton Precious Metals WPM and the VanEck Vectors Junior Miners ETF GDXJ are rising too and are now positioned for more upside.

Overall strength in gold shares is a very strong indication that the entire space is about to rally. We’ve been taking profits along the way, and we’re well positioned to take advantage of what could be a strong ‘C’ rise in gold. If it is, then the turnaround time will be very bullish indeed.

Subscribe to Omar Ayales’ Gold Charts R Us here.

Omar Ayles is presenting at MoneyShow San Francisco August 25.

This article was originally published by MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.