A Big Week for Precious Metals

Gold prices just closed the week at a new all-time high for the first time since 2011.

From 2001 to 2011, Gold rallied an incredible 650%, posting only 1 calendar year of negative returns, and annualizing at more than 20% for the decade. But, alas, no party lasts forever. The next several years were filled with nothing but frustration and disappointment for yellow metal investors, as prices stumbled along, digesting the run-up.

But having gained 60% in less than 2 years, including 5% last week, to reach new highs, Gold is having its day in the sun once more.

The strength last week wasn’t limited to Gold. Other precious metals are joining in the fun. Palladium, the strongest of the group over the last 5 years, jumped 10%. It’s spent most of the year digesting the blowoff top of late 2019 and early 2020, when prices doubled in 7 months, but another week like last would put Palladium above resistance at $2300, and closer to setting another new high.

Confirming the strength, Silver rose a staggering 17% last week, its best 7-day stretch since 1982. Prices started the year by dropping nearly 40% in a month and breaking to 11-year lows. But they quickly reversed, and last week’s performance took Silver to its highest level since 2013.

Like Gold, Silver’s rally from 2001 to 2011 was nothing short of spectacular – it rose more than 1000%. But it has underperformed Gold in the years since. To reach a new high of its own, Silver still needs to double.

Platinum has been even weaker: it hasn’t even managed to break the downtrend line since its 2008 peak. But just as the false breakdown in Silver prices spurred a rally to multi-year highs, the false breakdown in Platinum earlier this year may be the catalyst needed to turn things around. It climbed 9% last week, bringing prices back above the 200-week moving average and only 10% from its year-to-date high.

Broad strength in precious metals comes amid the backdrop of a weakening US Dollar, with a benchmark index falling to its lowest level since mid-2018 last week. The DXY has been trapped in a channel between 90 and 100 for the better part of the last 6 years, but early this year looked poised to head higher. A rally to 103, as global investors rushed to the safety of the world’s reserve currency during the onset of the COVID-19 crisis, was quickly reversed, and the Dollar has steadily trended lower since.

As long as the DXY falls in value, hard assets priced in USD can count on at least one tailwind to push them higher.

Nothing in this post or on this site is intended as a recommendation or an offer to buy or sell securities. Posts on Means to a Trend are meant for informational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in posts. Please see my Disclosure page for more information.

King Dollar

The U.S. Dollar is the largest reserve currency in the world. The U.S. economy represents about a quarter of the globe’s GDP, yet the Dollar’s share of official foreign reserves is more than double that amount. Strength and weakness in the USD has both obvious and more obscure impacts on economic activity, no matter where you reside.

The DXY, a basket of currencies measured relative to the USD, has largely gone nowhere since a marked rally in 2014. The 38.2% and 61.8% retracements from the 2001 – 2008 decline have acted as support and resistance, and now prices are approaching the upper end of the channel once again. With a flat 200-week moving average, there’s not much of a long-term trend here, but another break above $100 could be enough Dollar strength to start looking at the 2001 highs near $121.


The Euro cross comprises nearly half of the DXY, so it’s no big surprise that the two look so similar over the shorter term (with one of the two charts inverted, of course). The EUR has been rangebound vs. the USD for 5 years. The 38.2% retracement from the 2008-2016 decline has been a key rotational area for a decade, and held as resistance again last year. Though the EUR is approaching multi-year lows and the short-term trend is down, the trend hasn’t been all that strong – daily momentum hasn’t even gotten oversold in the last 12 months. This exchange rate is stuck in the range until it isn’t.EUR.PNG

Amid the political turmoil surrounding Brexit, the British Pound has been relatively weaker. The mid-2016 vote to leave the European Union pushed the cross below the 2010 swing low, a level that held as resistance in early 2018. Now, the exchange rate is threatening to set fresh lows.


The Japanese Yen, on the other hand, is trying to set fresh highs against the USD. The Asian currency rallied from 2007-2011, before weakening back to 124 Yen per Dollar in 2015. The 61.8% retracement at from those major moves (near 105) has acted as chart support for the last 3 years, but any further weakness from the Dollar would push the cross through that level and towards rotational support near 100.JPY.PNG

Once we get past the major crosses, though, things get a little more interesting. The Trade Weighted Dollar Index, with its reduced Euro exposure, is setting 20-year highs. The strength is most apparent against emerging markets

Trade Weighted Dollar

The Chinese Remninbi has broken through the former resistance area at 7.0, and is now at the weakest level since 2008. The 138.2% extension from the 2017-2018 move is a logical stopping point over the near-term, but anything is possible in a currency controlled by the state.


The Brazilian Real is near its weakest level of the twenty-first century. The cross has consolidated for almost 5 years after the 2011-2015 rally, and with weekly momentum in a bullish range, could easily weaken further. The 138.2% extension from the entire 20-year range lies just under 5.0. That area could act as resistance if the chart weakens past the 2018 highs.


In countries like Argentina and Turkey, the relative strength of the Dollar is more pronounced and troublesome. Debt in these countries is often denominated in USD, and it becomes more difficult to pay back when revenues in the local currency are worth less and less over time.

Strength in the U.S. Dollar has made it more difficult for U.S. investors to make money overseas, too. European indexes have, on balance, performed similarly to domestic equities over the past 12-months. As you can see below, however, the currency translation has negatively impacted performance by more than 5%. The problem is obviously worse in some of the emerging market currencies mentioned above, whose relative performance has been substantially worse than that of the rangebound Euro.

Equity Derby.PNG

As the globe’s primary reserve currency approaches key levels in several key crosses, it will pay to keep in mind the potential effects on both emerging market credit and equity performance.

Nothing in this post or on this site is intended as a recommendation or an offer to buy or sell securities. Posts are meant for informational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in posts. Please see my Disclosure page for more information.


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