The Daily Market Report: Gold Extends to the Upside, Poised for 3rd Consecutive Higher Close


20-Mar (USAGOLD) — Gold heads into the weekend on a solid note, buoyed by renewed weakness in the dollar. The yellow metal appears poised for a third consecutive day of gains, nothing new 2-week highs.

The weekly chart looks particularly good from a technical perspective, showing a failed test of the November low at 1131.15 and a likely key reversal (lower low, higher high, close above the previous week’s high). That’s a pretty bullish setup, but further upside follow-through is needed to lend confidence.

Silver is actually leading the charge on this week’s rally, up more than 2.5% today, to gold’s 1.1% gain thus far. The gold/silver ratio had been hovering around 74 recently, but started to retreat on Wednesday. Today support at 70.23 gave way, putting the ratio at 5-month lows.

The major currencies, with the exception of the yen, are all up significantly against the dollar: EUR +175. CHF +160, GBP +210, AUD +120, NZD +140, CAD +80. Clearly the surprisingly dovish tenor of this week’s Fed policy statement has ignited considerable volatility in the FX market.

While the FOMC removed the word “patient” from the statement, the significant downward revisions to central tendencies suggests the central bank is now far less optimistic about growth and inflation prospects. Significant shifts in the “dots” show that when (if?) the Fed starts raising rates, FOMC members think they will climb at a far slower pace than previous expectations.

HSBC’s David Bloom warns us that “The U.S. economy is surprising to the downside aggressively. Don’t ignore it.” The Fed’s own outlook is suddenly reflecting that reality, and the recent dollar strength has likely been a contributing factor.

While the stock market is up significantly today, equity bulls should take heed of that reality as well. Former Dalls Fed President Richard Fisher chimed in with his own warning today on CNBC:

“Are we vulnerable in my personal opinion to a significant equity market correction? I do believe we are, and the reason for that is people have gotten lazy. They’ve depended totally on the Fed.” — Richard Fisher

“Depended totally on the Fed” to the exclusion of the fundamentals and the reality of the slowing economy. Now may the time to lock in some of your profits in shares and move those funds into the safety of gold and/or silver.

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