Gold Is Telling Us Main Currencies Are Weaker - Not Just Dollar Stronger

Source:

Jeffrey Nichols of American Precious Metals Advisors : "The idea that the U.S. dollar is suddenly stronger in recent weeks is a foolish notion. Rather, gold is telling us that currencies, across the board, are weaker -- only the dollar a little less so than the euro, the UK pound, and other key currencies around the world.

Gold bullion is one of the few positive performers in the current meltdown, but the big question might be why is the gold price not doing even better? Liquidity is one side of the equation and investors' needs to maintain this paramount. The other is probably the dollar which has been showing strength - perhaps unjustified in some terms - where historically gold has moved in the opposite direction to the dollar index. What is significant particularly in the current market is that yesterday gold shot up, with the dollar rising sharply too - against the general historic precedent.

Conversely the oil price has been falling. In July, when light crude oil was around $140 and rising, Mineweb commented that oil and gold would inevitably decouple and that the likely trend was for oil and gold perhaps to settle at $90 and $900 respectively. Well the ratio of 10:1 (another historic average figure) has actually been gone through in the past couple of days with oil below $90 and gold over $900. So now gold appears to have decoupled from both oil and the dollar which is a very positive indicator for precious metals.

We are indebted to Jeffrey Nichols of American Precious Metals Advisors for the following comment : "The idea that the U.S. dollar is suddenly stronger in recent weeks is a foolish notion. Rather, gold is telling us that currencies, across the board, are weaker -- only the dollar a little less so than the euro, the UK pound, and other key currencies around the world. In fact, as finance ministers and monetary authorities in the euro-zone continue to fiddle, longer-term economic and political cohesion becomes increasingly questionable. In my view, the euro is just beginning a long and protracted fall -- but this should not be mistaken as an indicator of a strong and healthy U.S. dollar."...

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