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The US Elections, US Dollar, Stocks, and Gold


The decline in gold is likely not over but relatively close to being over.

To see what we can expect on the precious metals market in the short term, let's move on to today's technical part. This time, we will focus on markets that can impact the precious metals market in the following days and then we will move to the strength and direction of this impact. We'll begin with the analysis of the US Dollar Index (charts courtesy of

In the medium-term USD Index chart, we see a small possibility of another retest of the declining support line. While lower index values are still possible here, it already seems that the consolidation period has ended and the USD Index is ready to move higher. Moves to the upside appear to be more likely than not. These implications are based on this chart alone, however.

Turning now to the short-term USD Index chart, this is where we find the key details concerning the USD Index this week. We have seen a breakout here and it has been verified by three consecutive daily closes above the declining resistance line. The index now appears likely to move higher. Please keep in mind, however, that the cyclical turning point will soon be reached.

Since the USD Index has been moving higher of late, the cyclical turning point will likely coincide with a local top. It seems this will be fairly soon, likely at the end of October or early in November. There appears to be a good chance that the Index could move to the lowest Fibonacci retracement level (80.74), which is slightly above Thursday's close. While a move a bit higher to the 50% retracement level (81.38) would not surprise us, a move above this next level is unlikely. This is because it would invalidate the very long-term declining resistance line, something which is highly unlikely.

Consequently, the very short-term picture remains bullish here -- but beyond that, the situation is rather unclear. A local top will likely form within the next two weeks (more likely next week), but it is too early to discuss the next moves for the dollar. How soon the top is formed as well as how high the index goes before reversing are both critical pieces of information that are missing at this time. What we have now, however, seems enough to form a strategy for precious metals, because their charts provide other important pieces for this puzzle.
No positions in stocks mentioned.
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