This is what it looks like when the dollar goes from bearish to bullish | The Gold Forecast

This is what it looks like when the dollar goes from bearish to bullish

March 26, 2021 - 7:09pm

 by Gary Wagner

The U.S. dollar has been on a virtual roller coaster ride when we look at the relative value of the dollar index from the end of 2016 until current pricing. In December of 2016, the dollar index rose to a high just above 103. Of course, the dollar index is literally a measurement of the United States dollar relative to six other currencies, which include the euro (57.6%), the Japanese yen (13.6%), the British pound (11.9%), the Canadian dollar (9.1%), the Swedish Krona (4.2%) and the Swiss franc (3.6%).

As you can see in chart 1, a line chart of the dollar index from December 2016 to current pricing, after reaching a high in December of 103, the dollar index fell to just above 88 in January, mid-February, and March 2018. The three lines represented in red magenta and green represent simple moving averages with the 50-day moving average, as the short-term green line, the 100-day moving average drawn in magenta, and the long-term 200-day moving average in red. From its fall from 103 to 88, you can see these three moving averages, for the most part, in full bearish alignment. This occurs when the order of the averages puts the 200-day as the highest value, followed by the 100-day in the middle and finally the 50-DMA as the lowest value.

After hitting the lows in March and April 2018, the dollar index began a slow and methodical climb to a higher value, and you can see the relative points between April and July 2018 when the moving average has moved into full bullish alignment. The exact opposite of bearish alignment, you have the 200-day moving average on the bottom, followed by the 100-day moving average in the middle, and finally the 50-day moving average on top. Although there are points in which the 50-day moving average crosses below and then back above the 100-day moving average, for the most part, they stayed in bullish alignment up until May 2020. By July of last year, the three moving averages moved back into full bearish alignment and maintained their respective positions up until this last week.

Chart 2 is an enlargement showing the most current data. At the beginning of this year, the dollar index had still been spiraling lower until reaching a low of 89.42 in January and then moving higher to its current pricing of 92.73. That means that the dollar index gained over 3% in value in the first quarter of this year. More so, for the first time since June 2020, it appears as though the shortest-term moving average (50-day) is about to cross above the 100-day moving average. On a technical basis, this would be the first strong signal that the prevalent bearish market sentiment that has existed since March 2020 has subsided and could be signaling a shift in market sentiment from bearish to bullish.

The obvious reason this is so important to market participants involved in gold is that the precious yellow metal is paired against the dollar, which means that there are two major factors changing the daily price of gold. The first, of course, is market sentiment, whether market participants are actively buying or selling. The second is dollar weakness or strength. Chart 3 is a line chart with gold (gold) overlaid against the U.S. dollar (green). It is clearly visible that since the beginning of 2021, we have seen dollar strength and concurrently weakness in gold pricing.

Whether or not this trend will remain will be dependent on the timeline for the United States to have an economic recovery taking it from the recession caused by the pandemic in March of last year to the strong economy that occurred prior to the pandemic.

The answer to the question posed above not as easy to answer as one might think. While it is clear that we have made incredible headway from the worst of the recession, many unknowns still exist as to how long it will take for the United States to make a full economic recovery.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer

This report is now free and publicly available to everyone

Gold Forecast: Proper Action

We are flat, with no active trades after taking profit on our long gold positions.

Futures: Gold (GC J21) in at 1722.80. Out at at $1728 for a profit of $520.00- per Comex contract.

Forex: XAUUSD in at 1724.40. Out at at $1729 for a profit of $4.60- per ounce.

ETF's: GLD in at 161.55. Out at at $161.90 for a profit of $0.35- per share


SLV in at $24.24. Stop hit at $23.50, for a loss of $1.05 per share
May 2021 (SI K21) in at $26.26. Stop hit at $25.3 for a loss of $0.96 ounce
Forex silver in at $26.17. Stop hit at $25,30 or a loss of $0.87 per ounce

On February 18 we entered a long April Platinum trade. In at $1282. Our stop was hit today (02/26/21) @ at $1217.00
SILVER FUTURES MARCH: Entry at $27.36, and then closed the trade later @ $27.45.
XAGUSD: Entry at $27.26,, our stop was hit at $27.39

We closed our positions in SLV:
First leg SLV: @ 22.95 .out at @ $24.99
Second leg SLV @ 24.60. out at @ $24.99

On Thursday February 4 stops were hit on our long GLD ETF. We entered at 172.14. Our stop was hit at $168.29 (the open on Thursday) for a $3.85 loss per share.

GOLD FUTURES APRIL: Entry at 1845 - 1859 . Stop hit at 1813 - average loss $3900 per contract
XAUSUD: Entry at 1845 - 1857 . Stop hit at 1813 - average loss of $38 per oz
SILVER FUTURES MARCH: Entry at 25.42 - 25.46 . Stop hit at 24.11 - average loss $6650 per contract
XAGUSD: Entry at 25.33 - 25.40 - Stop hit at 24.11 - average loss $1.3 per oz
long February gold @ $1890.00 and stop hit @ $1902.20, for a profit of $1202.00 per contract
long Forex gold @ $1886.00 and stop hit @ $1898 for a profit of $12.00 per OZ
long March silver @ $26.31 and stop hit @ $26.41 for a profit of $500.00 per contract
long GLD @ $177.26 and stop hit @ $178.00 for a profit of $0.71 per share
long SLV @ $24.67 and stop hit @ 25.00 for a profit of $0.33 per share
long February Gold Futures at $1860-$1866 and stop hit at at $1869. Average profit $600 per contract
long XAUUSD at $1856-$1862 and stop hit at $1866. Average profit $6
long March Silver Futures at $25.16 - $25.25 and stop hit at $25.30. Average profit $450 per contract
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
long February Gold Futures at $1830 -$1843 and out at $1850 for a profit of $700 to $2000.00 per contract
long XAUUSD at $1841 and out at $1850 for a profit of $90.00 per mini 10 oz contract
long March Silver Futures at $24.29 and out @ $24.40 for a profit of $550.00 per comex contract
long GLD @ 1$71.50 and out @ $173.00 for a profit of $1.50 per share
long SLV @ $22.30 and out @ $22.50 for a profit of $0.20 per share
Long December gold at $1899. Stop hit at $1918, for a $1900 profit
Long forex gold at $1896.00. Stop hit at $1912, for a $1600 profit
Long December silver at $24.21. Stop hit at $25.07 for a $4300 profit
Long GLD at $180.46 and stop hit at $176.42 for a loss of $4.04 per share
Long SLV at $23.23 and stop at $22.78 for a loss of $0.40 per share
Long December Gold Futures at $1926 and stop hit at $1907.30 for a loss of $18.70 per ounce
Long Forex Gold at $1922 and stop hit at $1903 for a loss of $19.00 per ounce
Long December Silver Futures at $25.13 and stop hit at $24.73 for a loss of $0.40 per ounce
Long December gold at $1890, out at $1909.30 for a profit of $1,930.00
Long December silver at $23.95, out at $24.50 for a profit of $2,750.00
Long Forex gold at $1883.68, out $1907 for a profit of $23.32 per ounce
Long GLD ETF at $178.03, out at $179.80 for a profit of $1.77 per share
Long SLV ETF at $22.66, out at $22.03 for a loss of $0.63 per share

Gold Market Forecast

The focus of today’s weekend review is on recent US dollar strength and its effect on current gold pricing. We make a case for why the technical studies we present indicate that there is a high probability that we are witnessing a shift in market sentiment in regards to the US dollar, from bearish to bullish. However, there is a very large caveat to that assumption.

Recent dollar strength is predicated in a US economy that is emerging from a major recession and showing real signs of recovery. However, that recovery is largely due to the massive expenditures by the US government through fiscal stimulus and an extremely accommodative monetary policy by the Federal Reserve.

The government spent $4 trillion in aid last year, and so far this year has added another 1.9 trillion of debt due to the “Rescue Act”. President Biden is now proposing an additional $3 trillion the added to our national debt for a major infrastructure program that includes other elements such as transitioning to clean power and additional components.

As such if passed this would mean that over the last two years the government is spent $9 trillion to reignite the economy. This has to put enormous pressure on the US dollar the question is what is the timeline from the allocation and spending of these dollars and its effect on the US dollar.

Market Overview

Economic Calendar