Dollar Down, but Gold Flat

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Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 561
Dollar Down, but Gold Flat

The dollar was down substantially today, equities were up in a big way, but gold was pretty flat.

I wonder why gold did not perform . . . . anyone have any rank speculation they might want to share?

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Dollar Down, but Gold Flat

Not really surprising that gold took a breather from it's rapid rise.

I still think the outlook for gold is positive- I sure hope so anyway, I have a bunch of it.

 

Ken

 

macro2682's picture
macro2682
Status: Platinum Member (Offline)
Joined: Sep 3 2009
Posts: 554
Re: Dollar Down, but Gold Flat

USD and gold do not have perfect negative corelation.  As currencies, both are used to purchase things (in this case to purchase stocks).  People sitting on piles of money (be it gold or USD) may be getting nervous that they are missing the rally in stocks.  As a result, some people will use USD to buy more stocks (Sell USD, buy Stocks) - Others may use gold to buy more stocks (sell gold, buy stocks). 

High inflation (dollar devaluation) with the government doing nothing about it is the scenerio for gold to spike past $2000/oz.

High inflation (dollar devaluation) with the government raising rates to combat it is the scenerio where stocks are the only place to hide - and gold underperforms

Gold prices were pretty depressed during the years that Volker jacked up interest rates.  Nobody wants to hold a 0% asset when rates are 15%.  A bullish psychological milestone like Dow 10K, may have sparked concerns among gold investors that the time for rates to tick up is upon us.  My view is that this is definitly not the case.  I bet Ben won't lift rates until he absolutely HAS to.  He is like a hostage, and the housing market has a gun to his head.

The dollar has now given back all of the gains it had since the begining of the stock market dislocation.  Before, the dollar was weak and we had lots of stuff (expensive houses, stocks, other assets...).  NOW, the dollar is just as weak as it was, only we have much less stuff.

 

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