Sunday, 22 March 2015

Gold: Is US Dollar Parabolic Move Over?



  This is what is called the parabolic move in US Dollar. It has "coincided" with the collapse in Oil and other commodities. You can appreciate the magnitude of this move and the total devastation is has caused in the commodity markets. Is it over now? Everybody is still bullish on dollar, but FED has already scaled back expectations on the rate hike. Immediately we had the dollar flash crash, which is better seen on the daily chart below. Strong dollar is not very good for the recovering US economy, actually FED is in the corner of 18 Trillion debt, All-Time-High markets and the brave idea to hike the rates. Half of the traders maybe have never even seen rising rates in their lives before. What will happen with the market on fire once the oxygen will be going out? I would say that this "removal of patient does not mean that we are impatient" will lead to the very gradual couple of hikes the most. Once the market realise it, this parabolic move will end in the crash. The higher it goes the harder it will go down. When will it happen? I guess that nobody knows, but at least we have the hesitation now, which could be enough for the margin calls on this the most crowded trade after another 5% move down.




  Despite of the totally bearish outlook for Gold, it was holding relatively well, considering the magnitude of the dollar's rise. Now we are at the very important crossroads: will gold be allowed to paint the Double Bottom reversal and move higher? Record amount of gold bought by China and other Central Banks buying will support this outcome. As well as the industry cash cost of production, which needs to be above $1,200 at least. I am not even talking about the exploration and Peak Gold in 2015.




  On this daily chart for the dollar we can see the flash crash and how it is rolling over now. When it  crossed 100.00 the upside was discussed at 120.00 level. Now when it is facing the "dovish" FED the re-test of MA50 can happen very quickly.



  
  So far Gold was cooperating with the sliding dollar and has shown the strong reversal with 3 days up forming potentially the second Low, which we have discussed above. This maniacally depressive state of the gold market can turn on a dime like we have seen in January. Move above $1,200 will bring the attention back, but solid breakout of the formation above $1,320 is needed to put this bull back on track now. News from China will be driving this market further. 
  Gold above $1,320 will take the survived juniors out of the misery and the best projects will find their audience again. We are protecting our assets and building the strategic partnerships to develop them further.

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