Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Last Tango of the Currencies will end in Golds Favour

Commodities / Gold and Silver 2011 May 24, 2011 - 02:12 AM GMT

By: Bob_Kirtley

Commodities

Best Financial Markets Analysis ArticleThe debt problems now weighing on the Euro have inflicted a devaluation of around 6% this month with no recovery in sight for the PIIGS, Portugal, Ireland, Italy, Greece and Spain. The harder the ECB tries to badger and cajole the PIIGS into accepting a serious dose of austerity, the more the people, who will have to carry this burden, revolt.




We have seen riots in the streets in Athens, demonstrations in Madrid, marches in London, all expressing their dissatisfaction with the status quo. Heavy defeats in regional elections have been inflicted on the ruling party in Germany, which must be of grave concern to Angela Merkel, the Chancellor of Germany, assuming that she wants to stay in office. The same goes for Spain where regional elections have gone against the current incumbents.

In the mean time European Union officials are running hither and dither with arm fulls of newly printed euros in an attempt to support the latest basket case. However, Standard & Poors cut its outlook for Italy to “negative” from “stable” on Saturday, following a downgrade by Fitch on Friday for Greek debt. So we have a situation where there could be very well be political changes at the top, however, the debt, just like a rotten smell, remains.

This slippage, experienced by the Euro has had the effect of boosting the dollar as these two currencies are the main constituents of this basket of currencies. As the chart above shows a fall in the value of the euro, the chart below shows a rise in the value of the US Dollar. This race to the bottom between the currencies will continue as each sovereign state believes that a weaker currency will boost exports and ultimately will get them out of this mess. The fact that each currency devaluation negates the previous one would appear to have gone unnoticed, by those involved.

The chart above shows the dollar rallying this month as its inverse relationship with the Euro continues. The demise of the euro hides the fact that the dollar is not well, so this rally may be short lived.

So what does this tango of the currencies mean for gold? Well, sooner or later the investment community will realize that a flight to safety will be a flight from anything paper, no matter who’s portrait is printed on it.

So now you are thinking; will the summer doldrums cap the progress of the gold prices as interest wanes and trading becomes lackluster, could be. However, there are a few factors to be considered here, a civil war in Libya, general unrest in the desert, Al Qaeda, a leaderless International Monetary Fund, the US debt ceiling, a wobbling coalition government in the UK, supply side difficulties in the mining sector and the specter of inflation. All in all we expect the summer to be choppy with the real fireworks for gold and silver beginning mid August and continuing through to January 2012.

Having acquired a certain amount of gold and silver our strategy will be to look for bargains amongst the quality producers as they have production and cash flow. The junior/exploration sector still appears to us, to be an outside punt and so we will allocate only a small amount of our capital to them. To add a little spice to the mix we will look to the options sector with the view to turbo charging our trading account.

Go gently, but do prepare and get into position as this gold bull has a long way to run.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.
Bob Kirtley Archive

© 2005-2022 http://www.MarketOracle.co.uk - 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