Loading ...Updated NorthStar US Dollar Chart – Falling Wedge
The Falling Wedge is a bullish pattern that begins wide at the top and contracts as prices move lower. This price action forms a cone that slopes down as the reaction highs and reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope and no bias, falling wedges definitely slope down and have a bullish bias. However, this bullish bias cannot be realized until a resistance breakout occurs.
We have all seen Fully’s Boink chart. That and the one above all say the same. Dollar is going to rise, not fall. Cycles work, until they don’t.
I notice that Gold has had a very hard time going up. Solver is even worse, and you won’t have a gold bull market until silver you get a silver bull. As the earlier article stated, none of the outside fundamentals other than inflation and falling interest rates will have any real effect on gold, and like it or not, we had falling interest rates from 1980 to the present, with a 21 year bear market in PM’s from 1980 to 2001. Not sure there is any hard connection between falling rates and rising Gold.
Thanks for the opposing view. You say gold won’t go up until silver does, but you don’t explicitly say silver can’t go up because you see the dollar going up. I take that to mean that PM’s and the DXY are/may/will be increasingly disconnected in your view. Put plainly, does it matter what the dxy does in terms of PM values?
I expect a replay of the 21 year non market similar to 1980-2001. Up/down but in the end not much of anything. Gold/Silver went nowhere from 1985 to 2001 while the dollar was falling. There really is no real connection between the dollar and PM’s. Yes, if the dollar soars gold will fall, but there is no direct ratio between them.
To put it another way, we are facing a few years of deflation once the debt bomb explodes. Dollars will be in demand, gold will not. Can’t pay debts with gold. Most of the world’s debt is in dollars. We had rising gold in the 30’s, but only by government fiat. I doubt that will happen this time around.
I am wide open to the PMs catching a big move higher here as part of the reflation effort. And Northstar makes excellent arguments. From my own observations, I’ve noticed the same as Avocado which is just an observation at this point but worth keeping in the back of one’s mind: a high in gold in 1980 (after a 10 year bull market) then down hard for 2 years or so with a thrust higher in 1982 followed by another 2 years of declining prices creating a low in 1985. From there gold moved higher until 1987 where a cup was formed from 1982-87. Gold failed there and continued its bear market for another 13 years in the face of a declining USD while the equity markets soared. Compare that with our current gold market: a high in 2011 (which followed a 10 year bull market). A sharp move lower for 4 years and a thrust in 2016 (like 1982) which was followed by more declining prices until late 2018. We are now forming an unmistakable cup from 2014 to the present (like 1982-87) and the appearance of at least a cyclical bull. I don’t think one can deny these similar technicals notwithstanding obviously different fundamentals. The key as NS has pointed and the differentiating factor will be whether this move whether here or some time in the near future sees a break of the 1400 ceiling leading to higher prices. Even if the USD declines, should we follow the 1980 “model”, equities would receive the tailwind and not gold. (Note in contrast in 2000, a falling USD insured to the benefit of gold while equity prices feel hard spawning the gold bull) We are on the cusp of something really big here one way or another and the many contributions here have helped me make these observations.
>>>Deflation and Gold.
There is a common view that deflation is bad for gold. … However, gold is not just about inflation versus deflation. The yellow metal is a safe-haven asset which may shine (or languish) during both inflationary and deflationary periods.<<<
My expectation for the near future is that demand for dollars is going to soar, as debts MUST be repaid, either by the borrower or the lender. There is a record amount of dollar denominated debt owed by foreigners, about $12 trillion today. Should there be any kind of global slowdown, or even contraction, many countries are going to have a hard time paying off these debts, and for any that try, they can only pay them off in dollars. Gold or other currencies won’t work.
I’m not really expecting the debts to ever be repaid so the demand for dollars can be less than you’re suggesting. In any case, thanks for the good post and responses.
Not at first. But when the fit hits the shan dollars are going to be in high demand until debtors decide they don’t want to pay the loans back. That’s going to take some time. Gold will be a buy once the peak in this effort is reached.
>>>My expectation for the near future is that demand for dollars is going to soar, as debts MUST be repaid,<<>>There is a record amount of dollar denominated debt owed by foreigners, about $12 trillion today. Should there be any kind of global slowdown,<<>>many countries are going to have a hard time paying off these debts,<<>>and for any that try, they can only pay them off in dollars.<<>>Gold or other currencies won’t work.<<<
Again, why wouldn't this work? If someone owed you money, you wouldn't take gold?
Sorry, but this all seems very speculative at best. I'm not making any case for gold, in fact gold may or may not stay valuable.
Personally, dried food goods may become the most valuable commodity some day?
Try again…..
“My expectation for the near future is that demand for dollars is going to soar, as debts MUST be repaid”
I’m no expert AP, but must it? Bankruptcies happen all the time (Our president four times.) and if the borrowers never have the money, maybe it never does?
My guess is the way debt is endemic all over the world, no one pays anyone back.
“There is a record amount of dollar denominated debt owed by foreigners, about $12 trillion today. Should there be any kind of global slowdown,”
There is a global slowdown happening right now! The dollar has been in a down trend.
“many countries are going to have a hard time paying off these debts,”
Or maybe not at all?
“and for any that try, they can only pay them off in dollars.”
Why is this a prerequisite?
“Gold or other currencies won’t work.”
Again, why wouldn’t this work? If someone owed you money, you wouldn’t take gold?
Sorry, but this all seems very speculative at best. I’m not making any case for gold, in fact gold may or may not stay valuable.
Personally, dried food goods may become the most valuable commodity some day?
We went bankrupt in 1997. $100K in CC debt on an income below $20K. For a long time we tried to repay the debt but business conditions were such that we could not generate enough revenue to fund our income. Bankruptcy followed. The world does the same. First they try and pay, then they realize they cannot, so they don’t.
Gold is NOT currency, and has not been for almost 100 years. Try transmitting a gold payment via the Internet from your stash in your safe. Good luck! Or go down to your mortgage company with a stack of silver half dollars. Guess what their value is? Yup. 50 cents each. (I know, because I recently got change in silver quarters from a store. Didn’t notice until I got home, by then it was too late.)
Like it or not we live in an electronic world, and there is no going back. Not unless the we reduce population by 80% or more, and technology stops working. In which case it won’t matter for most of us.
“Gold is NOT currency, and has not been for almost 100 years. Try transmitting a gold payment via the Internet from your stash in your safe.”
AP, this just does not make any sense at all! I can and have converted gold into cash, there are several avenues.
“Good luck! Or go down to your mortgage company with a stack of silver half dollars. Guess what their value is? Yup. 50 cents each. (I know, because I recently got change in silver quarters from a store. Didn’t notice until I got home, by then it was too late.)”
I’ve bought and sold silver dollars many times. Again, convertible.
What do you think you are doing with your charge card or writing a check? Converting your plastic to cash or a piece of printed paper with your bank name on it to cash.
We’re constantly converting
“Like it or not we live in an electronic world, and there is no going back. Not unless the we reduce population by 80% or more, and technology stops working. In which case it won’t matter for most of us.”
Yes, now we are converting digital to cash everyday.
Cash is slowly on it’s way out.
Cash is slowly on it’s way out.
Not in my lifetime. Don’t have a phone, so either I have to use a card or cash. The world is not yet ready for 100% digital currency. When we do yard sales everyone wants cash.
With respect to gold as currency, your argument, if taken to the extreme, means that used shoes are currency as well, as they also have value, and can be traded or exchanged for cash just like gold.
LOL! Yes!
The funny thing AP is I consider myself a so called “57 Chevy” guy myself….Keep it simple. But I’ve been forced to adapt to this new world in some ways.
No phone, okay, I love it! You win!
The wedge you’ve drawn in there is looking bearish to me. It suggests an apex hit almost exactly where I said – just below 70. Then it turns bullish when the apex holds.
That’s if the trading was confined to the pattern. But notice the <- in red. Points to the breakout to the upside in late 2015.
I see what you’re saying, and appreciate the counter-argument, but an apex at a major cyclical low looks more than a coincidence to me.
Great discussion Knights.
At most other Gold discussion boards if you challenge the Bulls you get verbally abused .
Here we appreciate both sides and discourse remains civil.
That’s all I ever wanted .
Even if Sir Avocado Pit is wrong
🙂
Yes, thanks AP for the lively discussion….You may be all right and me all wrong! 🙂
I’ve always like the Native American philosophy that nothing is certain….Every idea ends with a “maybe”.
I think the Native Americans were spot on. If you ever close your mind to the fact that you could be completely wrong, it displays extreme arrogance/naivety.
Uncertainty is an uncomfortable experience but Certainty is Absurd
Voltaire