Dollar Strength is Good for Gold
Strength in the Dollar is good for gold.
Yes, you read that correctly. But one major clarification is needed. Only look at this relationship between gold and the dollar since 2000 when gold entered into a bull market. The best time to buy gold is when the Dollar Index is in an uptrend.
Figure 1 shows a weekly chart of gold (cash data). The indicator in the lower panel is analogue representation of a simple Dollar Index model that has been bullish since September 30, 2011. To see more about this model for trading the Dollar, go to this article: “Dollar Index: Bullish”. The Dollar has been in an uptrend, and based upon the past 11 years, this is the best time to buy gold.
Figure 1. Gold v. Dollar trend/ weekly (2006 to present)
Figure 2 shows the same relationship for the 2001 to 2007 time period.
Figure 2. Gold v. Dollar trend/ weekly (2001 to 2007)
For the record and as stated above the Dollar model turned bullish on September 30. On that day, the SPDR Gold Trust (symbol: GLD) closed at 158.06. As of Friday’s closed, GLD was trading at 155.23.
Category: Gold
