Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Yikes! Major Reversal in Fortunes for the US Dollar and Gold

Currencies / US Dollar Aug 15, 2008 - 05:52 PM GMT

By: Black_Swan

Currencies Diamond Rated - Best Financial Markets Analysis ArticleTell us again about the safe haven qualities of gold? It has been going straight down ever since Russia decided to spread its wings again. Maybe it’s just a correction. But maybe it is, as it has always seemed to us, that gold is only a reflection of global purchasing power that simply ebbs and flows with the world’s money and its safe have reputation is just that, reputation. And in case anyone was confused as to the world’s money; it is the financial gurus’ favorite whipping boy—the good old US dollar.

And aghast they are lamenting over the possibility that their favorite asset—gold—may have topped and, dare we say it again, the US dollar may have bottomed. We’ve laid out our reasons why the dollar may have bottomed many times over the last few months in these pages. If we are right about a dollar bottomed, we have high confidence gold has topped! Global conflict ain’t going to save the gold bugs if the dollar trend has changed, unless of course it is “different this time.”

In almost every major time frame (though exception do apply and 2005 was one of them) in which you compare gold to the dollar, you will see a simple correlation—dollar up gold down or dollar down gold up. Again, in our book gold is the reflection of global purchasing power against real stuff and as it is priced in the world’s money--$’s—it must go up when the value of the world’s money is going down, and vice versa.

We have attached our long-term chart comparing gold to the US dollar index for your review; readers that have been with us for a while will recognize it.

Gold is the blue line, the US$ index is the black line. Notice too we added the note “credit crunch” at the bottom right of the chart as the possible key global macro event ushering a change in the long-term trend in the dollar. Why the credit crunch? Isn’t that supposed to hurt the US more than anyone else?

Here’s our simple logic why we think, though we won’t know without our elusive hindsight, the credit crunch may have done the trick for the dollar:

Global deleveraging is forcing money flow from the periphery to the center. And the center is where the deepest and most efficient capital markets lie. And that is in the US.

US$ Index vs. Gold Monthly:

Now, all this being said, the dollar bears still have a solid argument when they say this move in the dollar is simply a small bounce in long-term bear market that is far from over. This argument is still in play. But it becomes less and less in play. Already the US dollar has broken above its long-term down trend going back to 2001 as you can see in the chart below:

Using simple trend line analysis, the key weekly resistance comes in at around 8209. You will notice that the last time we had a big dollar correction in a bear market was back in the beginning of 2005. The dollar rallied for 11 months. And using the same simple trend line analysis, it closely defined key resistance for the dollar index then (red trend lines in the chart on the next page)…

So, although we have high confidence in our story, we have to respect the idea of a bounce in a bear market until the market says otherwise. And that otherwise is above 8200 on the US$ index.

What adds a bit more weight to our view the bottom is in this time, as opposed to the 2005 time frame is gold. During 2005, when the dollar was correcting for eleven months, it was not correlated with gold i.e. gold was rising along with the dollar then, unlike now.

Whether we are right about this, or dead wrong, we have to admit to strong case of Schadenfreude (satisfaction or pleasure felt at someone else's misfortune) at the moment. Satisfaction that all those cocky mindless dollar bears that believe(d) the world’s money could only go one way for ever—down are finally feeling some pain.

Keep in mind this is our long-term view. Traders have to consider at some point here, and maybe it is today, this dollar run will need to be congested. The buck is extremely overbought on the near-term price oscillators. But, that said, when a major trend change is in play based on a conversion flow of expectations about the alignment of global fundamentals, the technical stuff takes a back seat. In short, if you are trading against this trend be quick and keep stops tight.

Have a great weekend!

Jack Crooks

Black Swan Capital LLC

Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at

Currency Currents is available for only $49 per year. Just visit the sign-up page on our website to subscribe:

Black Swan Archive

© 2005-2019 - 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