During the past 6 years, Gold bugs have seen opportunities come and go in a struggle to recoup the gold bull market magic of a decade ago.
Many investors are aware of the US Dollar’s impact on the price of gold. In particular, it has been the US Dollar’s strength that has kept the yellow metal at bay for the past several years. Could this be changing?
The chart below displays the relationship between the US Dollar and Gold. When the dollar is weaker than gold, the ratio heads lower… and is bullish for gold (see green line). When the US Dollar is stronger than Gold, the ratio heads higher… and is bearish for gold (see red line).
For the past 6 years, this ratio has been rising (leading to a bear market for gold and the precious metals sector).
But the Dollar-Gold rally stalled at a convergence of trend line resistance (point 1). The ratio then gave way to a pullback and is currently testing its 6-year rising trend line (point 2).
If the Dollar-Gold ratio breaks support, it will send out its first bullish message in 6-years!
Portfolio managers (and traders) will want to stay tuned to what happens next, as a shift in this market would open the door to new opportunities for the metals sector. Stay tuned!
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.