It’s all about the Dollar
For the past few years the movement of the US dollar has dictated the movement of the markets. When the dollar rises stocks, commodities and precious metals tend to selloff, however when the dollar falls risk assets have rallied.
Since the start of May the dollar has been trying to rally – for a while it looked to be forming a decent basing pattern – and while this could still play out, its recent breakdown shouldn’t be ignored. Last week the buck broke its short-term uptrend line (circled) and is now signaling more weakness ahead.
Bullish for Risk Assets
With all the talk of the debt ceiling, downgrades and the possibility of more QE it’s hardly surprising that investors are dumping the dollar and further falls should bode well for risk assets especially gold.