One interesting occurrence that has not been written about in the precious metals alternative media or blog space yet is that gold has been quietly moving in tandem with the dollar over the past several trading sessions. It has been quite pronounced during the past four trading days, today inclusive. In the previous 15 years, gold’s best periods of return have occurred when gold and the dollar move in tandem higher for a brief period of time, followed by a period of time when the dollar heads south and gold continues higher.
If you look at graphs of both gold and the dollar side by side, you’ll see that this occurred in late 2005 into early 2006, when gold moved higher until May while the dollar fell and again in late 2008. It’s too early tell if that will happen now, but suffice it to say that both are moving in tandem right now and it’s worth watching to see if it continues. My theory is that there’s flight to safety into gold and the dollar ahead of an adverse economic event. As the event unfolds, the dollar begins to sell off but capital continues to flow into gold as the ultimate wealth preservation asset.
The above analysis is an excerpt from the latest issue of IRD’s Mining Stock Journal which was released last night. Earlier today, Bill “Midas” Murphy poked his head out of the New Orleans Investment Conference and asked me why the metals were acting “so goofy” this morning, to which I replied:
Interestingly, gold and the dollar have been moving in tandem the past several days. Not perfect correlation but I bet its 80-85%. I discussed this in the latest issue of my Mining Stock Journal. Over the last 15 years, gold has had some of its best performance periods when it moved in tandem with the dollar for a bit then took off higher while the dollar sold off. It’s been moving in tandem with the dollar today as well.
The manipulated correction is over. India and China are buying a LOT of gold right now. Two days ago nearly 100 tonnes were delivered onto the SGE. I don’t think the cartel can take gold lower and I think right now they are merely trying to keep the “beachball” from popping above the surface of the water. Every time gold pops up, they hit it, but gold bounces back like one of those punching clowns.
At some point they are going to have to go back into “managed retreat.” Maybe once the election is over.
You’ll note that there’s now been a complete reversal in the precious metals sector, with gold, silver and the HUI running higher and the SPX/Dow headed south. MSJ subscribers have been getting analysis like this since early March. In addition, my picks have been substantially outperforming the sector. MSJ is $20/month, with no minimum commitment period. You can access this content by clicking here: Mining Stock Journal.
You’ve got a great journal for an amazing price – James, happy subscriber
Actually the last 4 weeks currency traders in London have been monkey hammering the EUR/USD and GBP/USD crosses and when London closes the New York and now Asia have been driving the crosses back up causing dollar weakness which is what the Fed has been trying to do. When there is short term dollar weakness the HFT algos have been driving the gold price back up on the Comex and LBME, waiting for the long term dollar strength to return and of course London hammering the crosses again, adding shorts then riding price weakness back down in commodities. The FED not only wants to help US exporters but also banks who have lent trillions in dollar denominated debt to foreign entities and a strong dollar makes these difficult to service. The FED recently ask central banks to sell dollars to create dollar weakness hence the recent selling of treasuries for dollars and the selling of dollars. As long as London keeps hammering the crosses the dollar will still have strength. As this involves 3 of the 5 world’s reserve currencies the amount traded daily is simply in the trillions. This is what you call a currency war with London’s volume over twice of that of the US.