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Historical Overview of DJI DXY and GOLD as recession fears hit the top: Part 2

Historical Overview of DJI DXY and GOLD as recession fears hit the top: Part 2

DXY, EURUSD and GOLD-SILVER

DXY and XAUUSD both moving in the same direction. It may be interesting at first sight but we see a similar correlation when we check the historical charts. – See our headline DJI DXYGOLD Weekly Chart Part 1-.

What is history telling us?

  1. As seen on the chart, 2000 and 2008 crisis ended up with a DXY Rally.
  2. Before the crisis, DXY and Gold were moving in the same direction.
  3. The medium-term, crisis caused a 15%-20% decline in Gold Prices.

EURUSD & DXY

EURUSD is the heaviest component of the Dollar Index basket. That is why we focus on EURUSD to have a better and much more clear view.

U.S Data remain better than market expectations. The Retail Sales data was much better than better. But the significant positive changes and revisions in Unit Labor Cost and Non-Farm Productivity were remarkable. The data and its revised components showed that Powell was right about the US Economy.

On the other hand, we continue to receive disappointing data from Eurozone. Besides the disappointing data set, we can get clear and strong negative signals from other indicators.

As you see on the below chart Euro Stoxx Bank Index is melting. This is not the end but  just the beginning.

Euro Stoxx Bank Index

 

As seen on the headline Dollar Index chart, after FOMC meeting and FED’s rate cut decision, DXY tested 99 and retraced. The index completed the correction and headed North.

It is likely to re-test 98.40 resistance. Breakout of 98.40 could accelerate the bullish move. 99 and 100 will be the next target levels of the Index.

At this point, we need to see another sell-off in EURUSD to support the DXY rally. A daily closing below 1.08800 in EURUSD will trigger the Global Dollar Rally.

GOLD and SILVER

Manipulation!! Why?

I will post three charts:

Gold/Silver Ratio

Gold Silver Ratio

 

ETF’s Gold Positions vs Gold Price

Goldman announced a bullish Gold prices forecast considering Central Banks Physical Gold purchases and ETF’s Gold Positions. As seen on the chart ETF’s Gold Positions has reached a volume where the Gold was pricing in 1.800$. This chart is a sign of manipulation. We may see a sharp move of 100-150$ in Gold Prices near term.

We will publish our 2019 Q4 Gold forecast in this week. So, I will not go into the price details in this artcile.

However, history is showing that, during the Global Crisis, Gold prices fall after a consolidation. A decline of 300-400$ in Gold Prices is likely.

 

 

ETF’s Silver Positions vs Silver Price

As seen on the chart ETF’s Silver Positions has reached a volume where the Silver was pricing in 50$. Here another significant point is the JP Morgan’s Silver Stocks in Comex.

JP has 50% of the stocks. And the remarkable part is the ratio of eligible/registered silver stocks.

Simply speaking, once the long contracts ask for physical silver, there will be no physical Silver on Comex. But JP’s eligible silver stocks will be ready for the market.

That is why we like to stay in the Silver’s side while trading precious metals. When the Gold/Silver ratio breaks below 84, we may see a strong Silver Rally. I have published my long term silver forecast before. Said forecast is still valid.

Now we focus on EURUSD and DXY. A daily closing below 1.08800 will trigger the DXY and Global Dollar Rally. This would change the latest convergence in DYX/Gold relationship.

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