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Chart 1: US$ Index Bull Analogs
The chart below plots the bull markets on the current scale.
We adjusted the start point for the 1995-2001 bull and 2011-2017 bull. The price lows were in 1992 and 2008 but the bulls did not begin in earnest until 1995 and 2011.
The chart suggests the US$ index could go parabolic and see its bull market end in the next year.
We had hoped to profit from a rebound in the sector while de-risking our portfolio but that backfired last week as the sector brokedown. We held onto a few positions for too long.
A medium term rally in the sector is increasingly likely but from when and where? Gold could test $1085-$1095/oz before rebounding. It could also snapback to $1150-$1160/oz and then fall to $1085 or even $1050. GDX lost critical support at $20. Could it retest the breakdown before falling to $17? In any case, I think the odds of the rebound starting from lower levels are high.
Gold is getting hit because of a tighter Fed and rising real rates but a surging US$ could actually be a catalyst for the sector. We aren't saying it's an immediate catalyst, mind you, but a 10%-15% surge within a few months could put the rate hikes on hold. Raoul Pal in 2015 said that Gold would begin its bull when policy makers do everything they can to get the US$ down. Good chance we reach that point in 2017.
I expect a historic buying opportunity in the first half of 2016. I'm making my buy lists and will share with subscribers in the weeks ahead.
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