GoldMoney Alert - 18 March 2007

The Power of the Primary Trend

The US Dollar Index is falling away from 84, which has been an important level. This latest bout of dollar weakness suggests that we have reached an important turning point. It seems logical to conclude that the dollar is resuming its long-term downtrend. Take a close look at the following chart.

We can see in the above chart that the dollar is in a multi-year downtrend that began in 2001. But like all trends, the dollar's drop has not been a straight line.

The big initial slide in the dollar occurred over several years, and was not stopped until the end of 2004. A bear market rally then marked most of 2005, but the dollar started falling again in early 2006. After stabilizing for a time, the dollar has slowly, but surely, been slipping some more, trading relentlessly lower within the two red parallel lines marking on the above chart its multi-year downtrend channel.

The Dollar Index closed this past Friday at 83.23, a 10-week low. It is now being drawn toward 82.45, the low reached on December 5, 2006. This level becomes the new target. The Dollar Index should in time be drawn toward it, such is the power of the primary trend.

Bull market trends can also be powerful. Notwithstanding their recent setbacks, both gold and silver remain within their primary uptrends.

The above charts make clear that the US dollar should be avoided, and that the precious metals are the place to be.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk

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