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GOLD BENEFITS FROM WEAK DOLLAR

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After surging from the low 70s to the upper 80s, the U.S. Dollar Index ($USD) experienced its sharpest decline in years. In fact, this week's decline was the sharpest in over 10 years. The bottom indicator window shows the 1-week Rate-of-Change dipping to -3.89% this week. While this may seem like a trend changing event, keep in mind that the Dollar was quite overbought after the prior advance. Some sort of correction is normal and the index could very well retrace 50% of the prior advance.

Weakness in the greenback sparked a rally in gold this week as the streetTRACKS Gold ETF (GLD) gained over 8%. The surge off support looks impressive, but GLD remains in a falling price channel for the year. This pattern, however, could be bullish because it looks like a massive flag. Flags are corrective patterns that form after a big advance. A break above the 40-week moving average and upper trendline would signal a continuation of the prior advance (55-100).

There is also a video version of the this analysis available at TDTrader.com - Click Here.

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Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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