The US dollar took the opportunity of the Fed rate hike last week to advance further from the developing breakout we were observing over the past month. The dollar surged over 1% after the hike, eclipsing the 102 level on the Dollar Index and finally closing near 103 by Friday.
The breakout looks successful, and we now have an intermediate-term target for the dollar at 108 on the Index.
Gold and the precious metals are expected to be under pressure through the remainder of the dollar’s advance toward 108, although it is not true that the two must move opposite the entire time: there are distinct episodes in which the dollar and gold will move in the same direction. So while we will remain cautious on the precious metals until the dollar approaches its intermediate target, it is likely that gold will attempt to establish its intermediate low before the dollar reaches its expected peak.
We are now within five points of the dollar intermediate target… and as, for example, the previous five points from 98 to 103 were gained in just six weeks, the next low for gold could roughly be expected to form within a similar timeframe.