Dollar Rally Won't Last Forever; Don't Give Up on Gold
Source: Seeking Alpha (8/14/08)
For the first time this year gold prices are breaking important technical support levels. In fact, gold might drop below US$800 an ounce before this painful correction is over. Eric Roseman
Worse, gold stocks have collapsed since July. These stocks now sit at the same levels they were at two years ago.
Gold prices are now in negative territory this year for the first time since mid-2005. That year also coincided with a U.S. dollar bear market rally that drove the dollar 12.8% higher against the euro. Still, gold finished 2005 with an 18% gain.
Major Correction Likely
The correction now underway in gold prices will probably be far more severe than the declines posted in mid-2005.
We're seeing a wicked U.S. dollar reversal this month and commodities are coming undone.
Since peaking on July 11, the CRB Index has tanked a cumulative 19%. Meanwhile gold prices have declined 16% and the XAU Gold & Silver Index has plummeted 34%.
If commodities were heavily overbought heading into July, then now the opposite is true. We've seen brutal declines in just four weeks of trading...
Dollar Rally Won't Last Forever
Fundamentally, there is nothing to support a long-term U.S. dollar rally...