Dollar Breaks Down, Gold Jumps

If you could forget about Apple Inc. for a moment...

GOLD has been streaking higher, writes Greg Guenther in Addison Wiggin's Daily Reckoning.

While the financial media frets over Apple's slide and Amazon earnings, the yellow metal is pushing toward new 2016 highs. And our precious metals trades are set to go through the roof.

It's a perfect storm for gold traders and investors right now. It all comes back to a breakdown in the US Dollar we've been tracking over the past several weeks.

"The Dollar spot index is at its lowest level since August 2015, with low economic growth in the US backing the Federal Reserve's dovish stance," Bloomberg reports. "The weakness is also being felt in Asia where the Yen dipped below 107 to the Dollar this morning while China's central bank reacted by strengthening its currency fixing the most since a peg was dismantled in July 2005."

The Greenback has taken a dive this year. Not only has that fueled the gold rally – it's also slammed the US Dollar Index back toward early 2015 levels. I told you weeks ago that if the Dollar slips below its 2015 lows, it runs the risk of a much bigger drawdown. And that's exactly what's happening as I type.

The US Dollar Index is down another 0.5% this morning and quickly approaching one-year lows. A weekly close at these levels will leave the Dollar Index with one foot in the grave...

As you can see from the chart, the Dollar is in the danger zone. It's time to seriously consider what will happen when the Dollar begins hemorrhaging the gains it stockpiled during its 2014 bull run...

Naturally, this is bullish for the price of gold.

I told you earlier this month that gold was primed for another rally. The Midas metal just recorded its best quarter since 1986. Gold jumped double-digits during the first three months of the year for a 16% gain. And now that the Dollar is breaking down, we could see more gains in the months ahead.

Of course, no one was paying attention when gold started ticking higher in January. Even those closest to the metal were shocked at how quickly it emerged from the dead.

"Absolutely no one saw this coming," a bullion dealer CEO told Bloomberg. "Forecasts made at the start of the year were out of date within weeks."

Remember the chart I showed you of the false breakdown at the very end of 2015? That move primed the pump for the rally we're enjoying this year...

Even now, many investors probably think the gold rally we've witnessed so far this year will burn out rather than streak higher. But the move lower we're seeing the Dollar tells us that this rally could become much more than your standard dead cat bounce.

You've had numerous chances to profit from gold's rise so far this year. More are on the way. We've witnessed some wild swings and plenty of shakeouts as gold has risen from the dead this year. Comeback moves are never clean or easy. But they are powerful – which is why we've focused so many of our trades in this space over the past couple of months.