Submitted by Morris Hubbartt:

The dollar’s failure is probably being masked by a gold market that feels a bit like it is “under attack”. The line in the sand that I have set for the dollar is 80.50It has closed under that key price numerous times, which indicates technical deterioration.
This “Cork In The Sea” weekly chart highlights a massive symmetrical triangle formation, with a horrific final price objective of about 50 for the USDX.   Where would gold trade if the dollar were to suffer such a catastrophic decline?  I believe it would trade above $4000 an ounce.

 

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US Dollar Cork In The Sea Chart

 

  • The dollar’s failure is probably being masked by a gold market that feels a bit like it is “under attack”. The line in the sand that I have set for the dollar is 80.50It has closed under that key price numerous times, which indicates technical deterioration.

 

  •  This “Cork In The Sea” weekly chart highlights a massive symmetrical triangle formation, with a horrific final price objective of about 50.

 

  •  Where would gold trade if the dollar were to suffer such a catastrophic decline?  I believe it would trade above $4000 an ounce.

 

  •  In the shorter term, a head & shoulders short term top within the black bearish wedge has appeared, rather ominously.  It projects a decline in the dollar to the 73 area.

 

  •  A decline to that level would test the lower red support line of the giant symmetrical triangle, and would probably coincide to a breakout above $2000 in the gold market.

 

Gold Comparison Chart

 

  •  When the dollar is weak against other fiat currencies, gold usually does well, but recent fiscal cliff discussions have put a bit of pressure on it.

 

  •  Technically, gold is on very solid footing. Key indicators on this chart are projecting higher prices. RSI is confirming price action, and has lots of room to move higher. MACD is channelling higher, and shows strong underlying momentum. My targets are $1850 and $2015.  I expect both to be acquired in January of 2013.

 

  •  The price patterns and commercial trader support for gold are similar to 2006-2007, when price underwent a consolidation, after a big move higher.  Also, quantitative easing didn’t exist then.  QE3 is a recent event, and its biggest effects on the gold price are probably coming in 2013.

 

  •  In 2006-2007, there were 3 consecutive rounds of aggressive commercial trader buying, followed by a 4th round a bit later.  Note the yellow bar that I’ve highlighted during the current time frame.  I believe the coming COT report will show aggressive buying again, and change that bar from yellow to green!

 

GDX Aroon Bull Signal Chart

 

  •  I use the Aroon as a confirming tool, and as an early indicator of market direction change.  As in 2009, the market just pulled back, after surging up from a major bottom.  The Aroon indicator is marching higher during this pullback, which is very positive.

 

  •  The next key bullish event by the Aroon oscillator would be a jump above the zero line.  That should ignite the “barnburner” rally that you’ve all been waiting for.

 

  •  Quite frankly, the US dollar is acting like a bloated whale, and the “Aroon Harpoon” is being launched from a GDX whaling ship. I hope you are all onboard!

 

GDXJ Money Flows Chart

 

  • The history of GDXJ does not include 2008-2009, so no direct comparison can be made with that time period. That said, there is strong technical evidence that the lows are in for GDXJ, and the next major move will be to the upside.

 

  • Specifically, last July, as the market was making a textbook double bottom chart formation, one of the tools that I used to predict the rally, was a series of key money flow indicators.

 

  • On the bounce from the 2nd low of that double bottom pattern, money flows into the sector turned strongly bullish. The result of such powerful money flows was a gain of 45% for GDXJ.

 

  • My money flow indicators are turning bullish again. This is happening as GDXJ arrives at powerful volume-based support.  Note the strong bullish divergence between my money flow indicators and the price of GDXJ.  I expect the situation to be resolved with a powerful rally.

 

Silver Fib Action Chart

 

  •  Silver is the most resilient sector of the precious metals complex. When silver moves, gold and gold stocks also tend to perform well.

 

  •  The outcome of fiscal cliff talk is likely more money printing, because politicians are not willing to talk about real solutions, and that is good news for silver.

 

  •  The action of the MACD indicator is extremely bullish.

 

  •  The $34 area is an important 38% Fibonacci retracement level.  A breakout above that price should quickly send silver to $44.

 

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  1. You don’t have to tell me about the Dollar losing value. Hell I went to the store and bought 12 Hallmark Christmas cards (Made of Paper) and it cost me close to $50 of those paper thingies. Keep Stacking The Physical.

  2. I’d be careful about reading too much into this chart.  Right now the Euro is $1.29.  The U.S. probably wants the Euro at $1.60 and the Euro wants the U.S. Dollar at probably $1.00.  Remember 10 or 12 years ago the Euro was around $0.80.  Basically its a long term currency war back and forth between all of the various countries.
     
    Trying to predict a breakdown in the dollar is the thing of tea leaves and crystal ball.  :-)
     
    However, you can be assured the various countries involved will continue to debase their currency in one form or another.
     

    • BadAngel: Yes, “tea leaves”. LMAO.  Anyone can play Monday Morning Quarterback and look up last months performances or short interest plays.  Last time I received advice like this was everyone doubling down on China and they lost big, Big, BIG time.

      GTIM went up 40% last week, TELK up 33%, KONE up 23% in one day!!  O.K. there’s my Monday Monday Quarterback reading last weeks charts.   :-)
       
       
       

  3. There must be more to the author’s suggestion that a dollar index of .50 will drive gold above $4,000 an oz.  If we look at a ratio of the projected loss in the dollar index, we get 0.80 / 0.50 = 1.6.  If we multiply that times the current gold price of $1705, we get about $2730 and not $4,000.  Is he suggesting that the additional 50% rise in the price of gold will be because of less or no manipulation of gold or some other factor?  If so,  that could allow a true gold price discovery.  If not, then what would be causing that extra rise in gold prices?

    • Your numbers are very incorrect….$2700 wtf are you on.? 
      If you look at the usd peak lets just round numbers here, in 2001 the usd $ was at 120 and gold was below $300. Now the usd is at 80 and gold is at $1700. ahhhh now you see! A 600% rise in gold and a 50% drop in usd. Any way you do the math now. Another 40% drop in the usd would send gold at least 4-5 times higher ! Add to this fear and a mania and you now understand what Jim Sinclair and many others are saying $8000+

    • When the US dollar becomes 50 on the USDX, I wonder how the situation of the USA will be. I think the economy won’t recovering, it will be heading for a collapse and people will work a lot longer and will suffer from inflation. I can’t see the future brightly if the inflation rate is not fixed.

  4. With the cartel controlling gold and silver prices(probably at the request of the governments) I would not rely on any chart or any claim of a rise in silver or gold prices. Until something catastrophic happens to the euro or dollar we will continue to see market manipulation.

  5. The spotlight on currency degradation inexorably leading into utter collapse, is somewhat disarming when presented as US-centric. The exact same underlying structural faults exist in every other banknote currency around the world. It may be especially lucrative to examine American currency for parochial illustration to garner domestic Press, but integrity demands that effort ought to be made at superimposing the analysis on the bakknote scheme generally. That the entire facade is doomed to fall in a grand heap, is not truly attributable to any one currency, but the very structural design. Moreover, that ANY variation on the theme, can only be assembled with those exact same flaws; since without their inclusion, collapse by depreciation naturally occurs almost immediately, as had been the experience with ‘Greenbacks’ and ‘Continentals’ before.

    • At least back then, “Greenbacks” and “Continentals” were previous American fiat currencies that were redeemable for US dollar coins that have intrinsic values. Now, there aren’t any other American alternative currencies to redeem the US dollar for them.

    • @Sumkid

      Neither ‘Continentals’ nor ‘Greenbacks’ were convertable in a true sense and because of that, traded at progressively lower discounts to their face value. The Continental’s inflation caused their depreciation to 1% of value from face (helped along by BoE counterfeiting), in the end only ‘convertable’ to Treasury Bonds.  The Greenbacks ended up trading at a 50% discount to face. They started our as convertible, but that was ‘suspended’ and by the time they were ‘discontinued’, they didn’t convert in gold, bur deeply depreciated silver only (which is another story altogethe, also involving BoE).

    • @PatFields I did some research on “Greenbacks” and it is true that this fiat currency was nonredeemable afterward according to Wikipedia. At least before if the “Greenbacks” and the “Continentals” collapsed, there was still the US dollar left but now, there is only the fiat US dollar left as our only option.

  6. I’ve never really understood how the fiat currency index works and how it values paper. To be sociable I’ll take his word for it. I can however look at the amount of fiat printed globally and compare that to the amount of metal mined and extrapolate that the fiat price should be higher for all metals, across the board. In fact there has been so much currency circulating and backed by nothing but a governments promise to tax their citizens. The citizens they intend to tax are mostly already financialy stressed to the breaking point and in debt themselves, everywhere. What is the old saying, you can’t bleed a turnip. Something will have to give. That something will be fiat currencies. It’s the fraud, the illussion.

    • To be honest, I also don’t understand how the USDX works. How does the USDX values the US dollar and based on what? All I know is that if the USDX goes down, then the US dollar’s value is also going down and if the USDX is going up, then the US dollar’s value is also going up.

  7. Why 50 for the USDX? With the Federal Reserve admitting itself that QE infinity is a reality which means that the US dollar will continue to go down and more investors are dumping all their US dollar holdings for other alternatives.

  8. UDSX is a measure of the dollar vs a basket of 6 foreign currencies, the Euro, Yen, Swiss Franc, Swedish Krona, Pound Sterling, and the Canadian Dollar.  It’s a measure of comparative strength.  All currencies are falling against gold and silver.  The USDX was started in the early 1970′s when the U.S. went off the gold standard.

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