Tuesday, April 16, 2013

Gold vs. US$

Gold is quoted in US Dollars.
The US Dollar is weak. See chart:
And the US Dollar looks to get weaker. If the past is ANY indication....

Gold is weak. To say the least! Many reasons are given for the selloff in gold. From paper gold getting sold, to the expectation of no inflation, to the desire to own dividend paying stocks. And there are purely technical factors; panic and a desire to avoid more losses.

But, to me, gold is all about a safe haven from inflation. Yes, inflation is tame. Unless you consider the stock market as an inflated asset. Is the recent action in gold prescient of a decline in equities?
Is this mostly technical selling? Is inflation really dead? Especially considering that the US equities market has been pricing in an economic recovery.
And what about the US Dollar index as an indicator of the relative strength of the USD. A move to the lows of the USD MUST be inflationary.

If the USD continues down it seems hard for this amateur to understand how gold can stay down for long.......


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