Saturday, April 18, 2009

Dollar Sentiment update

one of my preferred indicators is looking pretty bullish at the moment. the US Dollar index relative to the price of Gold is what I call 'Dollar Sentiment'.

nothing confirmed just yet, but the chart formation pleases the eye. here's the ratio from a longer term perspective:

still too much knee-jerk Dollar Bearishness pervading the Commentariat these days. and even as Gold continues to drip, I see too much wishful thinking that the correction will prove shallow, too many people viewing each down day as a buying opportunity, too many charties claiming the pattern in Gold over the last 13 months is some 'inverse head and shoulders'.

too many amateurs, in other words.

but at the same time, Gold's decline must accelerate significantly in the next week or two for my preferred scenario to retain a modicum of validity.

Update 10:06PM: looking at the long-term chart of the ratio's inverse I'm getting a similar, if slightly less severe, target than the dashed line offered above. Gold-USD ratio to between 7.50 and 7.25 is my best guess for now.