Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
So, Where Is Gold's Corrective Upswing? - 7th Mar 21
US Treasury Yields Rally May Trigger Stock Market Crazy Ivan Event - 7th Mar 21
The Great Reset Is Coming for the Currency - 7th Mar 21
Gold Continues Declines on Bond Yield Jitters - 7th Mar 21
The Case for Inflation - 7th Mar 21
Dow Short-term Stock Market Trend Analysis - 6th Mar 21
Intel Rocket Lake EXPLODE on Launch - 11th Gen CPU's RUN VERY HOT Bad Cinebench R20 Scores - 6th Mar 21
US & UK Head for Post Coronavirus Pandemic Lockdown Inflationary Economic BOOM - 6th Mar 21
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Will the U.S. Dollar Rally End the Gold and Silver Bull Market?

Commodities / Gold & Silver 2009 Dec 23, 2009 - 12:30 PM GMT

By: Julian_DW_Phillips

Commodities

Best Financial Markets Analysis ArticleIt has become clear to us that the media and so many institutional analysts are going to keep talking the $ up despite the lack of fundamental reasons. We feel that you will benefit most from a look at what lies ahead for the $ and its fundamentals and what could take it higher, if it does rise.


A Rally is due?

The main reason a rally in the $ is being promoted is because it is due for a rally. The same is being touted for the Pound Sterling. It is certainly true that a price never moves in a straight line. It is also true that investors, buyers and sellers must see trade around all levels to ensure they are balanced and accept price levels as convincing. When the market sees a price 'spike' you can be sure that sellers will turn up to bring it down. The only time it stays there is when buyers and sellers feel that, that price is justified by them both.

However, please note that the price of the $ is the main fulcrum of the currency world, a currency, unlike a share that is traded by an exchange. So its price doesn't move by buyers dominating one day and sellers the next. It stays in balance most of the time. That is why its fall from $1.23 to $1.51: €1 has been gradual. If it rises it is because of a distinct reason similar to a change of tide. So the concept of "just a rally" will not end the bull market for gold.

Is the € is worth more than the $?

When the $ rises, gold traders on COMEX sell gold in such a related manner as to try to establish a direct link between the € and gold. Silver follows. Of late we have seen that relationship broken then followed again. As the gold price has risen if has also risen in the €, thus de-coupling from the $. But the actions of short-term traders keep returning to the day to day moves of the $ against the €, perpetuating the belief that when the $ rises against the €, the gold price falls.

When the € was first issued it was roughly a 1:1 relationship to the U.S. $. It is now $1.4254: €1 this is a rise in the € of 42.5%. In that time gold has gone from $275 to $1,215 and increase of 440%. Do we now expect the gold price to move in line with the €? Why should it?

The Eurozone and the U.S. are at similar levels of development, their economies are moving in a similar path. The $ and the € are paper currencies are of a similar structure and reliant on similarly driven central banks. They have the same economic and currency goals. They are relatively inter-dependent. What will ail the one will ail the other. Hence the rise of one against the other is similar to a race where one runner is slightly ahead of the other. They are in the same race and the performance of one is not detrimental to the other. But the gold price is in an entirely different race, going a different way, moved by different drivers. We believe that this $; € and $: Gold ratio will fall away over time, just as in the past the oil: gold price fell away

Surplus holders will keep it high?

Of far greater pertinence is the attitude of $ surplus holders to the $. These are caught in a cleft stick, knowing that if they sold their $ surpluses that they would inflict losses in these holdings on themselves in the process of undermining not just the U.S. but the global economy. But each of these surplus holders in a different position regarding the $. All of them are caught in the cleft stick, but in this they will react in different ways: -

  1. O.P.E.C. oil producers are dependent on the States for the security of their sovereignty. The House of Saud dare not reject the $ oil price or they will lose the physical protection of the U.S. as will all those Western and Northern countries of the Persian Gulf. So they can only influence the $ oil price through supply influence to ameliorate the state of the $. However, this may be changing as we now hear the news of a new Gulf currency that may be used to price oil in. If this does happen, then a major nail will have been driven into the coffin of the $ as the global reserve currency.

  2. Russia needs to maximize oil income to keep itself economically sound. So it will accept the Yuan from China but won't reject the $ payments from other countries. It is diversifying reserves as far as it can without damaging the $ exchange rate [such as into gold] and would love to jettison the $, but for the sake of the value of its reserves and the stability of the world's currency markets, including the Ruble market, it won't. As one Treasury Official said, the $ may be our currency, but it's your problem.

  3. China is stuck with around $3 trillion in its reserves, firmly snared in the $ trap. It is unhappy with this and is diversifying as far as it can [including into gold]. Its unshakeable answer is to peg the Yuan to the $ and reap the benefits of sucking the manufacturing out of the States and selling it cheap goods, which are the first to be bought in a recovery. There will be no loosening of the 'peg' until the problem of China's $ reserves are solved. It is therefore turning the disadvantage into an advantage that is bleeding the U.S. of its strength. By doing this, the advantage of a weakening $ to the States is neutralized. President Obama's visit to China simply demonstrated that the Chinese were not prepared to budge on this. However, the Chinese did concede that they would not dump their dollars on the market. This would cause such disarray globally that the $ would collapse, but so may the global economy.

  4. Other nations, will attempt to absorb the weakening $ and where this is hurting them too much, will attempt competitive devaluations to keep some stability in their exchange rate with the $, where their trade levels with the States require it. €-dependent countries will move with the €.

Overall the world will continue to accept the $ and to some extent diversify into gold to "counter the swings in the $".

Will a recovery spark $ strength?

When the U.S. was at its strongest economically it drew in imports from the rest of the world particularly China and the cheaper producing nations. Consumers in the States are more aware than ever of the buying power of the $ in their shops. As their disposable income rises they will spend it on the cheaper goods that provide the same needs as the more expensive, usually home produced equivalent. It will only be when the States imposes tariffs on Chinese goods that this will change. At the moment this is unlikely. If it does happen, expect similar barriers to be set up for U.S. goods entering China. With China moving to economic self-sufficiency, it is becoming less vulnerable to dropping exports or potential tariff barriers.

So we do believe that as the U.S. recovery accelerates, imports will grow rapidly and so will its Trade deficit, thus undermining the exchange rate of the $ on international foreign exchanges still further.

Will Gold De-Couple from the $?

We have seen it do so many times and so expect it to do so not just again but eventually to be weaned off this relationship as short-term traders are made to suffer because of holding to it.

With the global economy struggling to recover and with so many dangers laying ahead, each one of them threatening uncertainty, instability and with international tensions growing, it is clear to most that the gold price is rising against all of these worries. It is not rising because of a falling $. It will not fall, except short-term, against a rising $. It would therefore be wrong to isolate the $ as the reason why the gold price either rises or falls, but it will continue to be the reason why the media in general records such rises and falls, because it is easy and story-worthy to do so.

The impact on the Gold price of a $ Rally or Fall
Subscribers only

We sent out a review of the gold market to Subscribers only, which reveals why the gold price is being held well above $1,000, where it will go next and how the gold market has changed shape due to the changes in overall central bank policies, from selling gold to buying gold. Subscribers should ask for this report and it will be forwarded to them, so perhaps you should subscribe?

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2009 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

shiraz
25 Dec 09, 11:10
dollar

i need to know usa dollar future.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules