Gold And The U.S. Dollar
Anna Coulling | Nov 04, 2019 02:30PM ET
The daily gold chart is one I have commented on extensively over the last few years and one aspect in particular that has been interesting recently is the apparent breakdown in the traditional relationship with the U.S. dollar. To highlight this, I have attached my Quantum-trading currency strength indicator for NinjaTrader alongside the daily chart for the precious metal. The red line is the U.S. dollar and as we can see, this has been falling strongly on the currency strength indicator to the left of the chart on the daily timeframe and is once again approaching an oversold state.
h3 Not Your Normal Relationship/h3However, when we consider gold's daily chart, this sustained weakness in the USD is not reflected in similar strength for gold, which is the usual relationship we expect to see. While the precious metal has made attempts to rally, these have all run into weakness relatively quickly, building resistance in the $1520-per-ounce region as denoted by the accumulation and distribution indicator for NinjaTrader with the red dashed line. This is a level that has already been tested several times and the indicator displays this automatically in terms of the thickness of the line and is helping to keep gold rangebound and trading around the volume point of control, which sits at $1505 per ounce and is denoted by the yellow dashed line. The volume point of control – or vpoc – is where the heaviest concentration of transacted volume resides. Friday’s price action confirmed gold’s current malaise with the precious metal kissing both these levels during the trading session, before closing with a candle of indecision. Thursday’s candle and volume were also interesting with a solid move higher on the day closing the session with a wide-spread up candle, but note the volume which looks rather weak in contrast. Monday's gapped-up open also hints at another run to the ceiling of resistance.
It will be interesting to see over the next few weeks whether or not the U.S. dollar recovers some bullish momentum and moves from away from the oversold region, which in turn will reconnect the relationship with gold – or if the current disconnect continues.
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