There was a question if the strength in the dollar we saw in December was a year end squaring off or a counter trend move that could last a few months. Thus far as 2010 unwinds it appears it was more of a year end tactical retrace. That said, it is not a completely lost case for the dollar yet - after such a quick spike up, one should not expect the any instrument to crash right through a long term moving average, in this case the 200 day. The currency is still sitting nicely over both the 20 and 50 day moving averages and could be building a consolidation base for the next attempt to push through the 200 day moving average (green line below) - let's keep an eye on it.
But as the new year began, and a rush back into risk assets ensued - gold and silver look no different than the typical Las Vegas casino stock, Chinese small cap stock, or whatever dart you wish to throw to start off 2010. A nice sharp rebound in the first 2 sessions of the year and a solid start this morning as well.
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With the coast clear - both silver and gold bouncing back over some moving averages - I have added back to Ultra Silver (AGQ) and Powershares DB Gold Double Long (DGP), with about a 1.5% allocation into each. I think there are easier opportunities in the near term in some equities, so I am not going to focus that much on the precious metals for now. Also I want to see what the dollar does in the coming weeks because it could still be setting up for a 2nd attempt to push through resistance and if it does, seeing what gold and silver does in that scenario will be interesting.
If the moves in these 2 metals do continue upward; the next interesting spot to see how they react will be if they reach old highs. As always, before the gold bugs attack - I like these metals for the *very* long run as protection against what central bankers are doing to their currencies the world over....
*I am using the charts for the ETFs rather than the metals themselves for illustrative purposes, since stockcharts.com doesn't update the metals charts until after market close.
Long Ultra Silver, Powershares DB Gold Double Long in fund; no personal position