The McClellan Market Report (snippet)
Gold

McClellan Financial Publications, Inc
Posted Aug 28, 2008

Gold prices saw another slight gain in the futures market, and an unchanged day for the cash market. Eventually, the really overbought condition in the dollar is going to start to matter, and the dollar giving way will allow gold to rebound strongly. Gold has already been acting stronger on its own than just being a response to the dollar's movements, something I mentioned on Tuesday.

Here is a more thorough way to look at this relationship. Our Goldollar Index is calculated by multiplying the cash price of gold by the closing value of the US Dollar Index. What this does is to factor out the fluctuations in the value of the dollar so that we can see what the true value of gold is doing in a unitless index.

One big point to notice is the top gold made in March. You probably remember gold prices eclipsing the $1000 mark at that top, but the Goldollar Index made a lower high, showing that in real terms gold had already topped and was heading downward.

Now we are seeing the Goldollar Index coming up through its 10% Trend, something that gold priced in dollars has not done. The Goldollar Index has also moved up above the level it saw at the May 1-5 low, something that gold priced in dollars has not been able to do. What that means is that gold is actually acting stronger than its dollar price would indicate. And so as soon as the dollar backs off a bit, that greater real strength in gold prices will have the chance to spread its wings.

Written Aug 27, 2008
McClellan Financial Publications, Inc
email: tom@mcoscillator.com
website: www.mcoscillator.com

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