INVERSE

 Observations

  • Gold Prices are a function of the inverse of the strength or weakness of the dollar.
  • From mid-2016 when the dollar was in a strong rally, gold tended to have trouble moving higher and ended in a correction for the rest of the year. (Fig. 1 & 2).
  • From early 2017 when the dollar turned weak and began a correction, gold began to rally.
  • In 2017, the Fed is tightening into weakness and the weaker dollar is the result.
  • The Fed is trying to raise rates this year and to cut them before the next recession, a tactic that is historically seen.
  • The dollar weakness has just begun due to the Fed, and if a recession were to materialize, then the Gold rally should have a chance to continue for a period of time.

 

2017-07-27 Gold Price

Fig. 1 – Gold price movement inverse to US Dollar (Source: TradingView.com)

 

2017-07-27 US Dollar Index

Fig. 2 – U.S Dollar price movement inverse to Gold price (Source: TradingView.com)

 

Best,
Michael

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