Gold continues to benefit from weak US dollar

Dollar Index looks weak…
July 26, 2020
WTI Crude Oil finally ready to move?
August 25, 2020

The gold markets continue to rally significantly as I awake on Monday, with the US dollar getting hammered. The spot price has hit all-time highs, and I think there is much further to go, for multiple reasons. However, the most obvious one is the falling US dollar.

I wrote yesterday that the US Dollar Index was ready to continue lower, perhaps with a slight pullback into resistance. However, we didn’t get that pullback – at least not yet – so it appears the selling will simply continue. The gold contract rallying in this environment isn’t much of a surprise, as the contract is priced in those dollars. It simply takes more of them to buy an ounce. (That being said, you can see both rise at times. Same with falling, it just comes down to the reasons.)

US dollar index vs. gold
Top: USD Weekly.
Bottom: Gold Weekly.

With this being said, please don’t be one of those traders that suggests, “It has gotten too bullish/bearish.” The reality is that you could have said that about gold several times in the past, and while it is true that the trend will change someday, that day doesn’t look like today. Remember, you need other traders to agree with your opinion to push the markets in your direction. There is no need to try to ‘outsmart’ everyone else. Twitter is full of people yelling about how things ‘are about to fall apart.’

Your job is to be profitable, not ‘correct.’

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