{"id":148182,"date":"2019-05-22T11:02:59","date_gmt":"2019-05-22T15:02:59","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=148182"},"modified":"2019-05-22T10:29:46","modified_gmt":"2019-05-22T14:29:46","slug":"eye-opening-currency-charts-why-metals-are-falling","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/05\/eye-opening-currency-charts-why-metals-are-falling\/","title":{"rendered":"Eye Opening Currency Charts – Why Metals Are Falling"},"content":{"rendered":"
May 22, 2019<\/div>
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By TheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n

The incredible strength of the US Dollar over the past 12+ months has put downward pricing pressure on Gold and Silver.\u00a0 I believe this downward pricing pressure could be muting any upside price advanced in Gold and Silver by as much as 20% to 30% or more.<\/p>\n

The US Dollar has turned into the global \u201csafe-haven\u201d for international investors and foreign governments.\u00a0 Over the past 6 to 12 months, or more, the US Dollar has been the only fiat currency to see any strength and upward trend.\u00a0 All the other major global currency levels have fallen \u2013 some dramatically lower.<\/p>\n

The EUR, GBP, AUD, CAD, and CHF have all fallen sharply over the past 6 to 12 months as the strength of the US Dollar and US Economy continued to surprise many.\u00a0 We\u2019ve been calling this a \u201ccapital shift\u201d that started back in 2015~2016 \u2013 when the 2016 US Election cycle began and China began to implement capital controls.\u00a0 At the same time, foreign nations such as Brazil and Venezuela began to shift into an economic abyss while the UK dealt with BREXIT negotiations.\u00a0 All of these external factors created an environment where the US Dollar became a global safe-haven for global investors \u2013 all of which were seeking US equities and US Dollars to hedge weakening foreign currencies and weak foreign stock market performance.<\/p>\n

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I think that the US Dollar strength, in combination with the continued foreign Gold acquisitions has amounted to a resolved \u201creversion\u201d in Gold prices that could reflect a 10% to 20% price anomaly.\u00a0 In other words, the strength of the US Dollar has muted the advancing price of Gold by our estimates of 2x to 2.5x the strength of the US Dollar.\u00a0 Over the past 12 months, the US Dollar rallied from 89.42 (April 2018) to 97.92 (May 2019: current price).\u00a0 This reflects a 9.60% increase in the value of the US Dollar.<\/p>\n

If my research is correct, the price of Gold should have rallied by about 18% to 26% from the April 2018 levels IF the US Dollar had not appreciated in value as it has.\u00a0 Therefore, the true price of Gold should be somewhere near $1600 (18% above April 2018 levels) to $1700 (26% above April 2018 levels) if we attempted to eliminate the \u201creversion effect\u201d of the US Dollar strength.<\/p>

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We come to this conclusion by statistically analyzing the US Dollar strength after April 2018 and how Gold reacted to this strength \u2013 by falling over 12.5% from near $1350 to a level near $1170.\u00a0 That range of time reflected an 8% price advance in the US Dollar.\u00a0 Thus, a ratio of 1.5 to 1 has clearly been established within that move.\u00a0 More recently, from August 2018 till now, the US Dollar has rallied 1.47% while the price of Gold has rallied 8.87%.\u00a0 The current price of Gold is -5.60% below the April 2018 price level.<\/p>\n

If we were to assume that the rally in the US Dollar deflated the price appreciation of Gold by nearly equal ratios, then we take the April 2018 price of Gold ($1350) and add the related price variances of Gold over this span (essentially reverting the price of Gold to April 2018 US Dollar levels : $1350 * 1.27) and we end up with $1714.50.\u00a0 This reflects a greater than 30% price anomaly from the current price of Gold.<\/p>\n

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Gold Futures \u2013 Goldchart by TradingView<\/a><\/p>\n

We need to ask ourselves one simple question, what would it take for Precious Metals and the global stock markets to revert back to these expected price levels?\u00a0 Would it be a move away from the US Dollar?\u00a0 Would it be some shift in foreign currency valuations?\u00a0 Would it be a combination of factors that drive greater fear into the markets and reflect a US Dollar valuation decline?\u00a0 In the second part of this article, I will explore some possibilities and explain why I believe we are just days or weeks away from finding out exactly what will cause this price anomaly to revert along with my proprietary gold price cycle forecast.<\/p>\n

I just highlighted the strength of the US Dollar in comparison to other foreign currencies and suggested this US Dollar strength may have created a \u201cprice anomaly\u201d setup in Precious Metals \u2013 specifically Gold.\u00a0 I believe a very unique setup is happening in the global markets right now and that the price of Gold is substantially undervalued compared to risks that are present throughout the global economies.\u00a0 I believe the strength of the US Dollar has muted the upside potential of Gold by at least 20% to 30% over the past 12+ months and I believe a shift is taking place where Gold is starting to break these pricing constraints.<\/p>\n

If the analysis is correct, I believe traders only have about 3~6+ weeks before we\u2019ll find out why and what will cause this price anomaly to revert back to what I believe is \u201cprice normalcy\u201d.\u00a0 The strength of the US Dollar, as well as the continued global \u201ccapital shift\u201d where foreign investors are piling into the US stock market and US Dollar related investments, have continued to put incredible pricing pressures on Precious Metals.\u00a0 We believe this \u201cshift\u201d may be about to revert back to some levels of normalcy in term of Precious Metals pricing.<\/p>\n

I believe a major Pennant\/Flag formation is setting up in Gold where this price anomaly event will be resolved.\u00a0 This type of price anomaly reset, or reversion will prompt a massive upside price advance in Gold and Silver that will attempt to restore proper pricing levels to the Precious Metals commodities.\u00a0 I believe we are just weeks away from the completion of this Pennant\/Flag apex\/breakout event and believe the upside price targets identified align with a series of key events that are likely to unfold over the Summer months of 2019.\u00a0 Take a few minutes to read the recent three-part research post regarding these events and how they relate to the global stock\/commodity markets here<\/a><\/strong>.<\/p>\n

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Our predictive modeling systems have been warning that a price advance in Gold and Silver will take place between April\/May of 2019 and Aug\/Sept or 2019.\u00a0 We are calling this the \u201cinitial upside price leg\u201d because we believe this upside price move will be just the beginning of a much larger move higher for Precious Metals.\u00a0 We\u2019ve highlighted some of the biggest concerns we currently have related to the global stock market price appreciation levels and the concerns related to the US Presidential Election cycle in precious articles \u2013 Please read them here :<\/p>\n