Gold Correction Update, and the US Dollar

Although gold prices have penetrated the trendline shown in the weekly chart below, a brief penetration often occurs during a terminal move. If prices fall back below this trendline, that will be a strong signal that a significant correction in gold will take place.

The US Dollar (weekly chart) is near a multi-year low. Its devaluation has partially fueled gold prices; this fuel is running near empty. A lot of bad news on the dollar has been discounted already.

Gold-linked stocks are generally a leading indicator of gold, the commodity. The former has yet to surpass its December 2010 high although the latter has done so by over 7%. Moreover, the prices of gold the commodity, adjusted to be unaffected by changes in the value of the US dollar, have also yet to surpass their December 2010 highs. Show below is adjusted gold plotted against the gold miners ETF; the price of the commodity is below those two.

All of this evidence suggests that gold will correct.