Gold Market Correction Over?

Posted by Richard Russell & Morris Hubbartt

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Richard Russell 06/03: Gold — How much damage? Note that all the recent action in gold has taken place above its 50-day moving average, and the 50-day MA, in turn, is still bullishly above the 200-day MA. I don’t see that any technical damage has been done. Gold, as I write, is still within 2 percentage points of its record high of 1575.10.

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Is the Gold Market Correction Nearly Over?:

by Morris Hubbartt

UUP (US Dollar Proxy) Chart
Dollar Commentary

  • The debt crisis rolls on. Is this decline in the US economy just another down turn, with happy times just around the corner? I don’t think so. I believe some of the social safety nets that America has gotten addicted to will begin to shrink and even disappear in the next few years.
  • In the shorter term, the dollar began a sizable sell-off last Friday, as I suggested it could. This decline had light volume, indicating that the short term dollar rally will continue for a few more weeks. That’s not a long period of time.
  • Please note that in the bigger picture the up volume (green bars on the chart) has been fading since my initial Fuel Cell Indicator buy signal for the dollar. The fading volume in this bigger picture tells me the dollar rally is now in its final move upbefore the structural decline intensifies.
  • The countertrend rally in the dollar, technically, is a natural process in a “slow bleed” decline in the dollar over the last year. Negative sentiment reached a breaking point in April, and that created this countertrend move. Stay focused on the big picture rather than this countertrend. The debt crisis in the next few years could greatly reduce the value of the dollar.
  • There is part of the debt crisis that is totally unpredictable. There are large periods of time where markets are not predictable, and that is why those who get too involved with countertrend moves eventually take some sizable losses and pain.
  • Look closely at my dollar chart and think about the risk to reward ratio of playing this countertrend rally. The reward is small and the risk is enormous. I strongly recommend accumulating metals, (not dollars!) during any further rally in the dollar. In its current form, the dollar is probably headed for the dustbin of history.

Go HERE to read the rest of the commentary on the following topics:

  • SGOL (Gold Bullion Proxy) Overshoot Chart
  • SGOL (Gold Bullion Proxy) 6 Month Chart
  • GDXJ (Gold Juniors ETF) Chart
  • GDX 14 month Chart
  • Silver via SIVR- 6 months