April 13, 2023

Dollar Tanks, Time to Buy Gold?

Frank Cabibi

Today's inflation report on PPI came in lower than expected, indicating a decline in the rate of inflation overall. In the FOMC meeting minutes, the Fed expects to hike again in May. The market is taking in this news as well as mixed economic data. The dollar tumbled as a result, and gold is on the rise.

EdgeFinder Analysis

Gold remains bullish at a +3 buy rating, however, the latest inflation and unemployment rates came in lower and the score shows a weaker reading. On a technical reading, gold's trend is forecasted to go upward in the short term as April is a positive month for the metal. Retail is very short gold while institutions continue to pour money into the long side.

Now that the Fed is looking to hike once again in May, we'll have to keep an eye on COT data this Friday to capture some insight on where the metal could go. Although the dollar looks extremely weak as of late, smart money could be buying into the dip as inflation comes down and interest is expected to hit 5.25% next month.

USOil jolted higher as fears of recession build in the US economy. OPEC meetings last week mentioned a surprise cut in oil production leading the commodity's price higher. Oil broke above a significant level of resistance around the 81.90s. Yesterday's close above that level was a promising sign for the bulls.

At the same time, USOil's EdgeFinder score has flipped from a strong sell to a neutral reading. The main drivers for this score are mostly technicals as COT is heavily interested in the commodity and the trend reading is stronger to the upside.

Strong buy on CHFJPY at +7. Retail wants this pair to drop while COT has a slight bullish bias towards Swiss. The next three months are historically bullish on a 10 year average, and the trend reading displays a nice steady trend to the upside.

CHF beats the Yen in almost all categories of fundamentals, however. With a higher interest rate, lower unemployment, less inflation, and similar GDP growth, Swiss is comparatively stronger.

Retail Spotlight

Retail is strongly against gold while mixed with oil. The crowd has been mostly against these commodities for some time although price continues to push higher. Since April began, oil's price has gone up by over 4.50% and gold has risen nearly 4%.

Smart Money Spotlight

Smart money is not liking the indices right now, but they are interested in metals and oil. Silver, platinum, gold and oil are all 60-80% bought by the big players while SPX and NAS are 40% or less. Judging by this behavior, institutions are looking to be preparing for more economic uncertainty.

Fundamental Spotlight

Inflation data is reportedly lower for most currencies except the British pound who's inflation is not cooling down. The US reported PPI rate this week which came in lower than expected. Falling inflation rates are a good sign for the global economy, however, the dollar continues to tumble.

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