Gabriel Neama
The US dollar's 50 day moving average (dma) has crossed above its 200 dma, a technical maneuver known as a Golden Cross. A Golden Cross usually leads to a sustained rally. You can also see from the chart, courtesy of stockcharts.com, that the dollar has also broken above its overhead resistance line and popped higher as it finally broke out.
If the dollar is rising, then conventional wisdom suggests you should sell your precious metals as a stronger dollar tends to portend a decline in metals prices, right? Well, no. Gold has been in a bull market for 11 years and has a few more left to go. You don't want to sell you metals and then be left watching it go vertical. A good strategy is a slow and steady accumulation with an eye on trying to pick a final top (easier said than done of course).
It's also important to remember that the US Dollar Index is weighted against primarily the Euro and other paper backed-by-nothing fiat currencies. Gold can rise against the Euro or Dollar regardless of the direction of either one and often has.
As a general rule, we are not a huge fan of trading in and out of markets because the big gains are in capturing the bulk of the big move and the big move is the long-term gains accumulated over years. Some traders are successful trading in and out but they are rare.
In our last Gold Update, we showed a perfectly healthy bullish gold chart and our views have not changed since then. It is important to always go with the trend as the old adage "the trend is your friend," rings true once again. And the trend is clearly higher as long as gold stays above its 200 dma.
In the scenario that gold does weaken on a rally in the US Dollar, then obviously it will present the prudent gold investor with yet another buying opportunity. For this very reason it pays to keep some dry powder handy to take advantage of a sale on precious metals if and when they present themselves.
That's all for now and remember to consult a financial professional before making any investment decisions.
Happy Investing!