USD, Gold, and the charts…

We’ve discussed a few times gold’s current defiance of the ‘normal’ inverse relationship with the US Dollar.  The USD has just set a new record.  It has just had the longest monthly streak of increases since it left the gold standard in 1971.  That would, and let’s face it has until this year, been bearish for gold prices.  Gold this year has been the best performing investment asset on the market.  So where are we right now?  Firstly, if we look (below) at the USD against various moving averages (10, 40 and 80 week MA’s) it is at its 3^rd most overbought level after 1985 and the GFC.  Secondly, and what we like to call the “Sheeple Index”, bullish public sentiment on the USD has hit extreme levels with a 15 year high 91%.  Invariably extreme optimism precedes a drop in the USD.  Meaning?  If the USD comes off, like the charts suggest it is about to do, and gold is performing like this despite a strong USD…. Just how far can it rally when the USD weakens!