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Gold Trades Tick-For-Tick With The Dollar


  • An inverse relationship between the greenback and yellow metal.
  • The long-term trend suggests a rise above technical resistance for gold soon.
  • Higher lows will give way to a higher high.
  • Gold is set to shock on the upside.
  • An eventual rise to new all-time highs.

Gold reached its most recent high at $1364.40 per ounce on the active month COMEX futures contract on February 16. Gold put in a higher low for 2018 on that date, on January 25 the yellow metal had peaked at $1370.50, which was only seven dollars below its 2016 high.

Gold made a lower high and then dropped to a lower low of $1303.60 on March 1, as it briefly traded below $1309 per ounce, the February 8 bottom on the April COMEX futures contract. In both 2016 and 2017, the low from the first week of the year was the bottom price for those years. To keep that pattern intact on the weekly and monthly charts, gold needed to hold the $1304.60 level which was the nadir on the active month COMEX contract in early January. On the first day of March, gold moved to a level that was $1 below that nadir. Meanwhile, gold has been trading in a pattern that is almost a one-hundred percent negative correlation with the price path of the U.S. dollar index.

The inverse relationship between the greenback and yellow metal

At the very beginning of January 2017, during the week of January 3 the U.S. dollar index futures contract traded to a peak of 103.815 which was the highest level since 2002. The fifteen-year high in the dollar turned out to be the pinnacle of the bullish trend that began at the early 2008 low at 70.805; the index moved higher by 46.6% over the nine-year period.

In early January 2017, while the dollar was at its high, COMEX gold futures traded to a low of $1146.50 per ounce. On Friday, March 2, 2018, the March dollar index futures contract was at 89.93, 13.4% lower than the highs from early 2017. At the same time, April COMEX gold futures were trading $1324 per ounce, 15.5% higher

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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Comments (3)

fzr100098 profile picture
Been that way for quite some time but some authors here will continue deny its importance and rely on vodoo/"sentiment"
badford's IRA profile picture
Thanks Andrew for another excellent gold report. I couldn't agree with you more about the future prospects for the precious metal. I am a little worried about some of my silver stocks. They seem to be getting pummeled every day! Most of the major gold stocks in my portfolio seem to be fine unless they have a problem-like TAHO, ABX and PVG! But even those are improving. Keep up the good work. Cheers!
Disclosure: Long precious metals and their miners!
Agree with you about gold’s current inverse relationship with the dollar. I thought that I noticed it about 6 weeks ago and bought some CALLS in GLD, then when it looked like it was reversing, I sold them and bought some PUTS, and then did it again. So far, I have nailed 3 separate trades. The current trade has been a little dicier, the dollar looked like it was dropping only to shoot back up on Feb 27th - luckily, I wasn’t paying close attention that day or I might have bailed on it. It’s going sideways today but still looks like it wants to drop so I will stay in it. If this trade works, it will be the most consecutive options trades that I have ever profited from. Almost makes me giddy!
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