{"id":5979,"date":"2017-10-19T07:30:00","date_gmt":"2017-10-19T07:30:00","guid":{"rendered":"https:\/market-minute\/can-the-dollar-and-gold-stocks-rally-together\/"},"modified":"2017-10-19T07:30:00","modified_gmt":"2017-10-19T07:30:00","slug":"can-the-dollar-and-gold-stocks-rally-together","status":"publish","type":"post","link":"https:\/\/stage.jeffclarktrader.com\/market-minute\/can-the-dollar-and-gold-stocks-rally-together\/","title":{"rendered":"Can the Dollar and Gold Stocks Rally Together?"},"content":{"rendered":"

\tOver the past few weeks, I’ve written articles that were bullish on both the US dollar<\/a> and on gold stocks<\/a>.<\/p>\n

\tMost people think those two assets tend to move in opposite directions. And I’ve received a few comments from readers suggesting I’m trying to have it both ways – that I’m presenting both cases so I’m sure to be correct on one. Then I can brag about being right on one while I quietly ignore the other.<\/p>\n

\tSo, please let me clear up the situation…<\/p>\n

\tGold and the US dollar do tend to have an inverse relationship. Put the charts side by side and you can see clearly that, over the long term, when the dollar rallies, gold falls. And vice versa.<\/p>\n

\tThere’s no surprise there. Any economic textbook will tell you that’s what’s supposed to happen.<\/p>\n

\tBut the textbooks don’t say anything about what happens to gold stocks as the dollar moves up and down. There is no strong inverse correlation between the two. In fact, gold stocks and the dollar often move up and down together.<\/p>\n

\tTake a look at the long-term, monthly charts of the VanEck Vectors Gold Miners Fund (GDX) and the US Dollar Index ($USD)…<\/p>\n

\t\"\"<\/p>\n

\t\"\"<\/p>\n

\tThe dollar enjoyed a very strong rally from November 2014 to January 2015. GDX rallied almost 30% during that period.<\/p>\n

\tThe dollar then spent most of 2015 chopping back and forth, while gold stocks got crushed.<\/p>\n

\tIn early 2016, gold stocks and the dollar did indeed move in opposite directions. But they moved up together again in the summer before decoupling in the later part of the year.<\/p>\n

\tAnd, in perhaps the best illustration that there’s no inverse correlation between gold stocks and the dollar, just look at the decline in the dollar index so far this year. Meanwhile, GDX has simply been chopping back and forth.<\/p>\n

\tIn a year in which the US dollar dropped almost 10% – which is a HUGE move for a currency – GDX is only up 3%, which is a ridiculously small amount for the volatile gold sector.<\/p>\n

\tThere’s no correlation here, inverse or otherwise. That suggests gold stocks will fall just because the dollar looks poised to rally. The action in one does not seem to influence the action in the other to any regular degree.<\/p>\n

\tRemember, stocks typically move based on expectations. They move “ahead of the game.” So, it’s entirely possible the recent weakness in the gold sector is happening in anticipation of a rally in the dollar. By the time the rally occurs, gold stocks will have already discounted the event. Then they’ll be looking “ahead” to the next dollar decline.<\/p>\n

\tThat’s why it’s entirely possible for both the dollar and the gold stocks to rally together.<\/p>\n

\tThat’s also why I humbly expect to be right on both calls.<\/p>\n

\tBest regards and good trading,<\/p>\n

\t<\/div>\n

\tJeff Clark<\/p>\n

\tP.S.<\/strong> What action do you see ahead for the dollar and gold? Which of the two do you see higher a year from now? Or will it be both?<\/p>\n

\tAs always, feel free to send in your thoughts – along with any questions or concerns – right here<\/a>…<\/p>\n

\tReader Mailbag<\/h2>\n

\tIn today’s mailbag… readers write in with a different take on Treasury bonds, their excitement about a recent earnings trade, and questions about trading from a land Down Under…<\/p>\n

\n

\t\tGiven your experience and expertise, you are probably right about your analysis of the Treasury bond market<\/a>. But, I’m reading the December Treasury bond chart differently.<\/p>\n

\t\tI see the correction of the last three days ending by this Friday, October 20th, in the $152.00 area and then beginning a significant rally to near $157.00. I will, of course, wait for the reversal up to confirm itself before jumping onboard.<\/p>\n

\t\tThank you for your daily newsletter… it’s outstanding, and I look forward to reading your commentary every morning!<\/p>\n

\t\t–<\/strong> Melvin R.<\/strong><\/span><\/p>\n<\/blockquote>\n

\n

\t\tNot bad for my first earnings trade Jeff! Just knowing your system has the direction correct over 90% of the time makes this so easy.<\/p>\n

\t\tI saw them drive down the stock early on… put in an order for $1 and sold for $1.70 within 10min. I tried to get in at $1.60 yesterday but after your rec it shot up. Just patiently waited to see what they would do on the open…<\/p>\n

\t\tJust getting my feet wet in your new system… NEXT!<\/p>\n

\t\t–<\/strong> Blair S.<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/span><\/p>\n<\/blockquote>\n

\n

\t\tHi, I've been following Jeff’s Market Minute<\/em> on email for a while now, seems pretty good. As a result, I'm considering signing up to the Delta Report<\/em>.<\/p>\n

\t\tBut before I do that, I have a couple of questions:<\/p>\n

    \n
  1. \t\t\tI live in Sydney (Australia), do you anticipate the time delay between Sydney and the US will impact trading performance much given that options can move pretty fast? The daytime overlap between US Eastern and Sydney is low, so I would likely need to enter trades when the US market is closed (or get up really early!).<\/li>\n
  2. \t\t\tDo you have a list of online options brokers that you recommend?<\/li>\n<\/ol>\n

    \tThanks. \t<\/p>\n

    \t\t <\/p>\n

    \t\t–<\/strong> Jason C.<\/strong><\/span><\/p>\n<\/blockquote>\n

    \tHi Jason, thanks for writing in.<\/p>\n

    \tThe good news is that the time delay between Sydney and the US will not impact your trading performance. You will receive the weekly Delta Report<\/em> and all my daily updates at the same time as all other subscribers. The bad news is that you’ll have to wake up early if you want to enter the trades right away.<\/p>\n

    \tMost of the time, for the weekly Delta Report<\/em> trades you should have plenty of time to get into the position as long as you enter your order on the day of the recommendation. We’ve completed (bought and sold) 28 trades so far this year in Delta Report<\/em>. I don’t think the time difference would have mattered on any of them.<\/p>\n

    \tBut for the faster trades I recommend in my Delta Direct<\/em> blog, you might have a disadvantage. Those trades are designed to be quick. And they do tend to move right away. So, it’s important to be able to get into and out of positions quickly.<\/p>\n

    \tWe’ve completed 31 trades in the Delta Direct<\/em> blog this year. Thirteen of those trades were opened and closed within just one day. So, for those 13 trades you might not have been able to participate. For the other 18, though, the time difference probably wouldn’t have been a problem.<\/p>\n

    \tAs far as which option brokers I might recommend… Both Interactive Brokers and TD Ameritrade have good trading platforms. I’ve heard good things from subscribers who use both of these firms.<\/p>\n

    \tI’m sure there are others as well. But those are the two names that seem to pop up the most.<\/p>\n

    \t–<\/strong> Jeff Clark<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    No matter what the textbooks tell you, history shows a different story\u2026 <\/p>\n","protected":false},"author":28,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-5979","post","type-post","status-publish","format-standard","hentry","category-uncategorized","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/5979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/28"}],"replies":[{"embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=5979"}],"version-history":[{"count":0,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/5979\/revisions"}],"wp:attachment":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=5979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=5979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=5979"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=5979"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=5979"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=5979"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=5979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}