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Is Gold's Price a New Floor?


Closing above the $1,000 barrier is a significant development.

This week gold finally touched $1,000. So without further ado, let's get right to the charts -- beginning with the one (courtesy of that features gold in other currencies than the US dollar.


Here's a quick reminder of the ratio featured in this chart (price of gold divided by the value of the UDN ETF).

UDN is the symbol for PowerShares DB US Dollar Index Bearish Fund, which moves in the exact opposite direction to the USD Index. Since the USD Index is a weighted average of the dollar's currency exchange rates with the world's most important currencies, we may use the gold: UDN ratio to estimate the value of gold priced in "other currencies."

Looking at the price of gold from the non-US perspective, you realize that there's no need to worry about the health of the gold bull market. The price of the yellow metal in the other currencies isn't near its previous highs. But those folks who are concerned that there's no bull market in gold because it doesn't rise equally in all currencies should relax. For now, the fundamental situation of the precious-metals market is stable, which means the bull market is charging ahead. Besides, bull markets usually end when everyone jumps in, causing a parabolic spike in the price. We're still far from seeing anything like that.

The gold/UDN ratio is quite bullish. It seems to have finally managed to move (and verify) above the support level at the 34-35 area.

Additionally, the three declining trend lines have been broken -- a bullish signal indicating higher values of the ratio in the future.

As you can see in the short-term chart, the breakout above the highest of the resistance lines was verified this week, as the value of the ratio touched its 200-day moving average and bounced. The recent rally is much more visible in the gold (USD) chart than here, but the overall implications are bullish as well.
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Positions in gold and silver.
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