USD priced in gold slips firmly below 2016 downtrend line again

Technical analysis for U.S. dollar priced in gold.

In last week’s analysis, I stated that “I think the most likely outcome (for the U.S. dollar priced in gold) is a break downward through the lower trendline, keeping the 10% rate of depreciation on track to continue.” That’s exactly what happened this week: the downtrendline reasserted itself after the December false breakout.

USD gold 12-30-17

We can now expect the dollar to depreciate by AT LEAST 10% per year in its gold value for the foreseeable future, as long as this trendline continues to hold. The real question is…where is the bottom? And in order to make an educated guess about that, we need to look at a longer-term chart and try to find areas of support for the dollar.

There’s a very strong line of support at 0.727 mAU/$ (0.000727 oz./$ or $1374.93/oz.). But the price is caught in a bearish triangle. So there’s a strong possibility this line will be broken at some point. Nevertheless, this is a good line to buy dollars (sell gold) at in order to gain advantage from short-term bounces. We still have a long ways to go before we get there though.

Technical analysis for U.S. stocks priced in gold.

U.S. stocks, as represented by the S & P 500, have now fallen to the 50 SMA. I have been expecting them to rally once they get to this point. So next week, we’ll find out if I was right.

spx-gold-12-30-17

As I stated two weeks ago, I expect stocks to continue to rise over the medium term until they hit 2.25 oz./share. The one caveat to this is that it is the end of the year and a tax cut just passed, so it’s possible that people are waiting until the new year to sell in order to get favorable tax treatment. However, I don’t see any evidence of that in the charts. So I think it’s best to assume that stocks are going higher until we see some evidence to the contrary. After all, the S & P 500 just broke through a very strong line of resistance that had held for over two years, so it would be pretty surprising if it then sold off right away.

Having said that, the stock market could fall to retest the 2 oz./share line before moving higher.

In summary, if I was thinking about trading stocks, I would either go long right now or wait till 2 oz. per share is hit. I would not go short unless the 2 oz. per share line is broken to the downside or the price rises all the way up to 2.25 oz. per share.

Technical analysis for U.S. bonds priced in gold.

In the past, I’ve looked at the TLT bond fund as being in a bearish triangle housed within a sideways range. Since the triangle was invalidated last week, I’ve now erased it from my chart. Looking at it this way, it appears that bonds are just bouncing around in a range between 0.094 oz./share of TLT and 0.102 oz./share of TLT.

tlt-gold-12-30-17

The most likely scenario is for the price to fall to 0.094 from here, but it seems like too small of a return to even bother with.

Technical analysis for Palladium priced in gold.

I’ve been waiting for palladium to drop to the 50 SMA, which I would consider a great buying opportunity. Unfortunately though, palladium bulls seem to be completely controlling the price…with no sign of it ever slowing down.

palladium-gold-12-30-17

So I decided to take a closer look using faster moving averages.

palladium-gold-12-30-17 chart 2

On Friday, sellers tried to push the price down but failed, creating a “hammer” candle. Momentum indicators have also slowed quite a bit since two weeks ago, so it looks like maybe the market has cooled enough to allow for another rally. I expect a higher price by the end of the week. If I was going to go long here though, I’d put a stop at 0.802, as it’s important for that 21-day EMA to hold.

Technical analysis for bitcoin priced in gold.

Bitcoin is still trying to fall to the 50 SMA, and buyers still won’t allow it to.

bitcoin-gold-12-30-17

In the past, I’ve been concerned that it might not return to the 50 SMA for a very long time. So even though I could see that it should fall here, I’ve been reluctant to stay out of bitcoin. Nevertheless, I’ve now looked at it using faster moving averages and am more convinced than ever that it’s headed down to at least 8.24 oz., maybe lower. I’ve now stopped buying bitcoin and am simply holding what I have. When it falls to 8.24 oz., I’ll start buying again.

bitcoin-gold-12-30-17 chart 2

The EMAs are pointed downward and the price is below them. That’s not a good sign. In addition, there’s this hourly chart of the dollar price from Bitstamp.

bitcoin-bitstamp-price-12-30-17

The 50-hour SMA has crossed the 200-hour SMA, creating a “death cross.” The price is also below the 50-hour SMA. These are all indicators showing short-term bearishness. So I’m not accumulating anymore bitcoin right now.

Full disclosure and risk statement: I own gold and BTC. Nothing said here should be construed as offering investment advice. Trading is risky and can lead to total loss of principal.

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