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Dollar-gold relationship back to normal?
Thursday, April 02, 2009
After a brief period in February and March when the trade weighted dollar and the price of gold marched in near-lockstep, the two seem to be reverting to either their typical inverse correlation or, hopefully, the natural relationship between the two, no relationship at all.
Bank of America shares are up 10 percent! It looks like happy days are here again!
3 comments:
You have 3 elements:
(A) USD
(B) Gold
(C) basket of foreign currencies, though mostly Euro and Yen
It's not clear to me why there should be a relationship between C/A and B/A, or why should a movement in either lead to corresponding movements in the other. In a flight to quality, you would expect (A) to outperform (C) and (B) to outperform (A). Excluding the commodity-related charge to $1000 USD/oz gold, this is what has been happening since the credit bubble finally blew up. In the present set up, I regard the USD as a gold derivative (since that it how it originally derived its value) and other currencies as USD derivatives.
The USD is known as the Buck, because it was the standard unit of trade for one deer buck skin.
If you read the two following very recent articles
http://news.goldseek.com/GoldSeek/1238360122.php
http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default
you will see there likely is no trend, no relationship, and no relationship to reality, just an artifact of the current highly manipulated and suppressed pricing of gold. This trend is a big nothing based on a smoke and mirrors market. Because this is counter intuitive it may even add credence to the following belief ....
Until the few blind short selling banks stop polluting the gold market with their high volumes of "imaginary gold" the total "supply" can only be considered artificial or "undetermined." Please buy your gold on the COMEX exchange and demand delivery.
Once these Darth Vaders of the banking world run out of real gold the holders of real gold will then finally get to know the real price. When this happens your market will be Craigslist or the black market (like buying pot)
because the bankers are not "good losers" and gold confiscation will be back in force.
(Some time ago) Ron Paul put in a bill to remove the law that allows the gov't to confiscate gold and only a couple other congressmen voted with him for the repeal. Our Gov't is still counting...or Banking :^) ...on their ability to take your gold and keep monopoly money the only real money!!!
Ignore this trend and realize gold
is worth much more than the COMEX market tells you. Coin and Physical
dealers know this very well already.
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