Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Correct into Bitcoin Happy Thanks Halving - Earnings Season Buying Opps - 4th July 24
24 Hours Until Clown Rishi Sunak is Booted Out of Number 10 - UIK General Election 2024 - 4th July 24
Clown Rishi Delivers Tory Election Bloodbath, Labour 400+ Seat Landslide - 1st July 24
Bitcoin Happy Thanks Halving - Crypto's Exist Strategy - 30th June 24
Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes - 30th June 24
Gold Mining Stocks Record Quarter - 30th June 24
Could Low PCE Inflation Take Gold to the Moon? - 30th June 24
UK General Election 2024 Result Forecast - 26th June 24
AI Stocks Portfolio Accumulate and Distribute - 26th June 24
Gold Stocks Reloading - 26th June 24
Gold Price Completely Unsurprising Reversal and Next Steps - 26th June 24
Inflation – How It Started And Where We Are Now - 26th June 24
Can Stock Market Bad Breadth Be Good? - 26th June 24
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Rally Threatens to Upset the Gold Price

Commodities / Gold and Silver 2010 Feb 08, 2010 - 03:39 AM GMT

By: Miles_Banner


Best Financial Markets Analysis ArticleLast week the gold price dropped 2.3 percent. The silver price dropped 7.2 percent and the FTSE 100 index closed down 2.5 percent. Just as everything went up together in 2010 [see our article ‘The Three Major Questions That Will Determine the Gold Price in 2010’] everything comes down together too.

The bull rally of 2010, which started in December ‘09 has so far been the US dollar. The dollar index (The USD Index measures the performance of the US Dollar against a basket of currencies) rose to 80.36 its’ highest since July 13th 2009.

The reason for the dollar bull rally is partly because of the vulnerability of the stock markets and the weakness in alternative currencies. A stock market crash in 2010, or a correction at least, looks likely given the persistent financial problems with eurozone countries and American States, and the need to withdraw the underlying fiscal stimulus’s that are supporting economies.

How will this affect the gold price?

Traditionally worries in the stock market have been good news for the gold price. These factors mentioned above should in effect forecast a stronger gold price but investors are, instead, heading for safety by turning to the dollar. In short, fear is driving this dollar rally.

Fear is being driven by Europe, and specifically the PIIGS ( Portugal, Italy, Ireland, Greece and Spain). Their economic woes are threatening the stability of the Euro and stock markets the world over…

Last week the Greek government agreed with the European Commission to reduce its’ deficit to 2 percent by 2013…

The Greek Prime Minister broadcasted a message on national television to Greek households that they should expect ‘difficult and painful times ahead’…

In Spain high unemployment (nearly 20 percent) is threatening the measures they will need to take to tighten their debt problems [Click here to see news story].

The problems in the PIIGS economies have escalated fear in countries with similarly large deficits, such as Britain. Britain has a lower level of debt than Greece but it has a similarly large budget deficit. Just as the euro members are facing their own crisis the pound looks to be under renewed stress.

Calls for the pound sterling’s demise have been getting louder… Philip Gibbs, the manager of £1.4bn Jupiter Financial Opportunities Fund, told the Sunday Times “it is difficult to be positive on sterling in the short term; it looks more sensible to be long the dollar”. If more influential people publicly echo Mr Gibbs’s words the pound could find itself very unpopular.

Rumours did the rounds at the back end of last week that Greece and Portugal might sell their gold reserves to support the economy (a move unlikely to happen in our opinion). Britain doesn’t have that option since Brown’s blunder back in 1999 where, as Chancellor of the Exchequer, he led a UK sale of gold reserves to the tune of 400 tons at an average of $275 a troy ounce (a 20 year low, and an estimated £5.3bn loss to the UK) .

The path ahead for Britain looks gloomy. Inflation is starting to creep back into investors’ mouths. It looks to be a question of when not if. And when it does happen the gold price will surely be used as a hedge by UK investors.

With major currencies experiencing problems and stock market corrections inevitable the dollar rally can continue. These are signs of support for the dollar. But many still believe the US has a long way to go before its own economy is back in full swing, and the problems of huge, accumulated dollars in foreign reserves still has to be addressed. This is why in our eyes gold continues to look strong in the long term.

This week promises to be an interesting one for gold and the dollar. Find out what happens and visit our archive to see what has been happening so far.

Gold Price Today

P.S Digger writes a weekly email analysing the gold price and the gold industry. Visit Digger at Gold Price Today (

© 2010 Copyright Gold Price Today - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

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