0 votes

Gold Breaks the Rules & Rises with Dollar

Gold Breaks the Rules
by Myra P. Saefong
Friday, February 26, 2010

Gold's been quite the rebel lately -- and investors are giving it much more than a passing glance.

The precious metal recently broke from its usual inverse relationship with the U.S. dollar to move more in sync with the climb in the greenback, showing off its prowess as a resilient world favorite.

"Gold moving up with the dollar is a sign of tremendous strength in gold," said Sam Kirtley, chief executive officer of SK Options Trading.

Gold futures prices are up nearly 5% from this month's low of $1,050 an ounce in New York. The U.S. dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, has also climbed, gaining more than 2% from its low in February.

"Both gold and the dollar have been trending upward since early this month," said Brien Lundin, editor of Gold Newsletter. "If gold and the dollar can decouple, [that would] hold important implications for the metal going forward."

And those implications are likely to be good for gold. A decoupling in the relationship would mean that "investors are not only buying gold as a U.S. dollar hedge but as a safe-haven asset too, and buying for this reason is so heavy it is outweighing the selling from U.S. dollar strength," said Kirtley.

But the direction of the precious metal and dollar are destined to diverge again -- and when they do, gold may or may not come out a winner.

The global markets are currently focusing on Europe's troubles, feeding a rally in the dollar, yet gold is still trading at around $1,100, said Kirtley. "So if gold can make gains, or even just tread water whilst the U.S. dollar rallies, it will soar if the greenback was to begin to drop."



Trending on the Web

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

A lot

of people in other countries desire that shiny rock too as their currencies implode, especially the EUROzone...

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Last few weeks - Gold On Its own

It seems the last few weeks that gold has not followed that automatic inverse relationship to the USDX dollar index.

Almost like gold is about to do the predicted gold breakout (dollar fall) that has been predicted forever.

But - you could also argue that the dollar gold relationship is still present. It is the Euro that is falling. Gold and the dollar stayed constant - they both went up against the euro.

Because of current volatility and algorithim trading I think we will see the gold breakout in hindsight.

We will not recognize it when it comes because all fiat currencies will behave in a volitile manner.



"We can see with our eyes, hear with our ears and feel with our touch, but we understand with our hearts."