The Dollar and the BRICS Summit
Contributed Opinion

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The purpose of this brief update is to highlight firstly that this has been a remarkable month for gold and silver, with both ascending to (at least) 1-year highs despite a strong snapback rally in the dollar, as we can see on the 1-month chart for the dollar index below. The other purpose of this article is to point out that with the key BRICS Summit starting in just two days in Kazan, Russia, the dollar may well be at an inflection point here, with developments at the summit triggering a reversal to the downside, which as we will proceed to see looks probable if only for technical reasons.

The dollar's strong recovery this month to date appears to be largely technical — there was a lot of negative sentiment towards it by the end of last month and something sparked a self-feeding short-covering rally. That something may have been the prevailing belief that Israel was / is going to attack Iran in response to its missile strike on the first of the month and "teach it a lesson" and so put it in its place and show the BRICS before their summit which runs the show which would serve to bolster the dollar.

However, the prospect of that appears to be diminishing, with Israel starting to comprehend that if it does so, it could disappear from the map. So, the BRICS summit could serve as a trigger for a dollar reversal to the downside, especially if the BRICS announces a gold-backed currency, which would, of course, be a big step on the road to eliminating dollar hegemony.

On the 1-year chart we can see why the dollar index might soon reverse to the downside. The sharp rally of recent weeks has brought it up to a zone of quite strong resistance in the vicinity of its 200-day moving average and resulted in a short-term overbought condition with it way above its 50-day moving average.

So, on purely technical grounds, this is a good point for it to reverse to the downside.

If the dollar does reverse to the downside shortly it will probably "light a fire" under precious metals stocks which are already strong with the big gold stocks highlighted in the Big Golds Review posted in August already doing well and the big silver stocks highlighted in the Big Silvers Review also doing well and no action is required with respect to any of these you may have bought, apart from perhaps adding to positions.