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Dan Norcini continues:
“You had a big rush into the dollar in 2008, which drove the index almost to the 90 level. But when QE1 was announced, the dollar tanked back down into the low 70s. It then went almost back up to 90, and then QE2 was announced, so back into the mid 70s went the dollar once again.
Now what you have is the dollar moving back up in that very broad range of roughly 90 on the top and 73 on the bottom. If the dollar has a solid close to the week, it looks like it has a good chance to move to the 87 - 88 level.
“Technically, on the US dollar chart, there isn't much overhead resistance once the dollar clears 84....
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“The negative for the dollar bulls here is that this trade is relatively crowded from a speculative standpoint. You have a pretty large group of traders who are already on the long side of the dollar. Of course if the dollar closes above the 84 level on a weekly closing basis, that would portend continued weakness in the euro.”
When asked what to expect from gold if we see continued strength in the dollar, Norcini responded, "A lot of people are skeptical of gold's safe haven status, but the fact is it's still an alternative currency. There has also been more talk about bringing it into the monetary system.
Gold is functioning as a quasi-currency right now due to the fears of the health of other global currencies such as the British pound, euro, Japanese yen or the US dollar itself. None of these nations or trading blocs have very strong fundamentals for their currencies.
So you have entities such as central banks that are deeply concerned about the excessive money printing around the world, and they are coming in and buying gold. So there is a pretty decent bid in the gold market down at these levels.
What this pattern in gold is clearly displaying is a very strong and steady accumulation of gold by strong hands. These are value buyers, such as the Chinese, who are doing this heavy accumulation.”
Norcini also added: “If we continue to see dollar strength going forward, KWN readers could expect to see weakness in commodities because that's just a macro-trade, but just as the grains have defied the macro-trend, gold may very well do the same thing.
What the grains are showing us is that when the fundamentals in a market are strong enough, that particular market can withstand the algorithms being placed against it by the hedge funds. What I am saying is we may well see the same thing take place in the gold market. The fundamentals for gold, because it trades as an alternative currency, are so strong that gold seems to be continuing to attract strong buying on the dips in the low $1,500's.
In other words, Eric, what we have been witnessing in gold is massive accumulation on the price chart, or what some would refer to as ‘base-building.’ Before any market can experience a strong, trending move to the upside, it generally has to have a period of base-building.
That's what we saw in the grain markets. We had a period of base-building or consolidation, and then the fundamentals caused those markets to soar (see two consolidations and breakouts on the corn chart below).
In a sense, this is the same thing we are watching in gold. At some point gold will have a trigger, and when it does you are going to see gold move to the upside. KWN readers just need to keep in mind that when gold finally breaks out to the upside from this strong, steady base, it will experience a massive move to the upside."
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
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Eric King
Crucial Chart & What to Expect From US Dollar, Euro & Gold
On the heels of continued strength in the US dollar, many are wondering what to expect going forward in both the currency and gold markets. So today King World News interviewed highly acclaimed trader, Dan Norcini, to get his take on the situation. Norcini told KWN, “Technically, on the US dollar chart, there isn't much overhead resistance once the dollar clears 84.” Norcini also noted, “... just as the grains have defied the macro-trend, gold may very well do the same thing.”
Norcini let KWN readers know exactly what to expect from gold, but first, here is what Norcini said about the strength in the US dollar: “The price charts are definitely friendly to the dollar. The US dollar hit a two year high yesterday. When you look at the dollar, particularly on a monthly basis, it's been in a very broad range going all the way back to the eruption of the credit crisis in the summer of 2008.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
July 12, 2012
