Gold Approaching Breakout

Currency trouble is brewing again and gold is on the rise, but one of the last currencies that will see a new high in gold is USD. First up is non-USD currencies: emerging markets (gold on the cusp of a new high in Brazilian real, already at a new high in Indonesia rupiah) and the Australian dollar.

Gold Bottoming In Most Currencies

Here is a chart of GLD versus PowerShares DB U.S. Dollar Index Bearish Fund (UDN). This shows the price of gold relative to the foreign currency basket that is the U.S. Dollar Index (Euro 57.6%; Japanese Yen 13.6%; British Pound 11.9%; Canadian$ 9.1%; Swedish Krona 4.2%; Swiss Franc 3.6%). Notice that the 50-day moving average is still above the 150-day.

Here is GLD alone. The 50-day moving average has cross the 150-day moving average, but the bounce is more pronounced due to recent USD weakness relative to the euro and yen.

Here is GLD against CEW, an emerging market currency basket.

Finally, GLD versus the Australian dollar (FXA), which has been very weak since May. Notice that gold has actually flat-lined since May in the Australian dollar. Good news for Aussie miners?

Gold also appears to be topping versus the miners. Here is GDXJ, which formed a head-and-shoulders pattern in the 14-day RSI. This isn't necessarily bullish for miners, only that they will outperform the next move in gold, up or down.

Since I expect a U.S. dollar rally, the gold price may be under pressure moving forward, but I expect it will not breakdown again in currencies such as the Australian dollar.

Gold hits new high, dollar up

When gold moves higher along with the U.S. dollar, that means its moving higher in just about every currency in the world. Gold peaked at 780 euros per ounce earlier this year, as the strong rally in the U.S. dollar lifted the price of gold in euros. Gold is above the 730 euro level today, placing it about 6% away from a new all time high. Note that can come via a combination of a dollar rally plus a move in the gold price. At this moment, gold is up 2.4% in terms of USD. In terms of euros, gold is up 3%. Below is GLD divided by FXE, to show this move.

Below are gold in the yen and Australian dollar, as measured by their respective ETFs. The AUD chart looks particularly good.

Another view of the rally

Here's the SPDR S&P 500 Index (SPY) divided by PowerShares DB U.S. Dollar Bearish (UDN)

Here's the SPY divided by CurrencyShares Australian Dollar (FXA)

Here's the SPY divided WisdomTree Emerging Market Currency (CEW). Much shorter time-frame because CEW issued in the spring.

Here's the SPY divided by SPDR Gold Shares (GLD). Notice the weak trendline.