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Dollar Breaking Down, Good Sign for Commodities

By    |   Friday, 07 Aug 2009 08:57 AM

A few days ago we were looking for the dollar to bounce before breaking down.

However, even though the U.S. Dollar Index has not had a significant bounce since May, it kept trading lower and broke through its important support level at 78.

I cannot tell you how bearish this is. The dollar index had held support at 78 during both the December 2008 and May 2009 declines in the Dollar. In addition, the dollar broke this support despite huge amounts of bearishness towards the currency. That is a true bear market.

All of this is very positive for commodities and gold. Gold shot up to $965 an ounce and the CRB Index (Commodities Research Bureau Index) is now breaking above its high of June.

See David Skarica's Top Gold Stock Picks for 2009 — Click Here

Remember, commodities trade higher when the dollar trades lower.

The next support level for the dollar is 75, then the lows of last year in the 72-73 level. It should have a bounce sooner rather than later.

But, we must remember that the dollar is in the midst of a long-term bear market. A definition of a bear market is the inability to rally despite a oversold situation. I also feel that the dollar will trade much lower than the 72 level in the coming years.

All and all, this is excellent for us commodities investors as gold, silver, and other commodities should continue to rise in price.

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DavidSkarica
A few days ago we were looking for the dollar to bounce before breaking down. However, even though the U.S. Dollar Index has not had a significant bounce since May, it kept trading lower and broke through its important support level at 78. I cannot tell you how bearish this...
david,skarica,dollar
244
2009-57-07
Friday, 07 Aug 2009 08:57 AM
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