Dollar up, gold up. Bucking the trend?

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switters's picture
switters
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Posts: 744
Dollar up, gold up. Bucking the trend?

Inflationists say dollar down, gold up.  Deflationists say dollar up, gold down.  Some like Mish say dollar up, gold up.  Gold acting as hedge against uncertainty and credit crisis, not inflation or deflation per se.  It's happened before.  Wonder if today's showing is a prelude to a new trend.  What do you think?

JAG's picture
JAG
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Joined: Oct 26 2008
Posts: 2492
Re: Dollar up, gold up. Bucking the trend?

Hey Switters,

Not to mention gold up, oil down, stocks down, gold miners down, silver lagging....

I'm profiting from MIsh's perspective, but I still don't see how gold keeps this up in the long term.

Though with Dr. M declaring an upside target for gold in the $4,000 to $5,000/oz range, if a significant rally occurs in the dollar simultaneously, the real purchasing power of gold could be in the $6,000-$7,000/oz range. 

I tend to think that the recent divergence is not a new trend in itself, but merely a short-term transition into a new de-leveraging trend. 

But it is truly is anybody's guess at this point.

Davos's picture
Davos
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Posts: 3620
Re: Dollar up, gold up. Bucking the trend?
switters wrote:

Inflationists say dollar down, gold up.  Deflationists say dollar up, gold down.  Some like Mish say dollar up, gold up.  Gold acting as hedge against uncertainty and credit crisis, not inflation or deflation per se.  It's happened before.  Wonder if today's showing is a prelude to a new trend.  What do you think?

These days - I'm afraid to even guess at it. But, if I had to: Maybe they are hedging the dollar AND a larger market (Bonds or Equities).

DrKrbyLuv's picture
DrKrbyLuv
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Joined: Aug 10 2008
Posts: 1995
Re: Dollar up, gold up. Bucking the trend?

Hello,

The markets are being pumped in the U.S., China, Germany, etc.  The near 0% QE rates are effectively negative against a currency dropping almost 20% YTD.  The carry trade has pumped markets globally and I suspect they'll go with this as long as possible.  I guess it has to burst or correct eventually but why now?  I think the dollar will decline as long as we have 0%, if nothing else happens.

JAG wrote:

I'm profiting from MIsh's perspective, but I still don't see how gold keeps this up in the long term.

Hi Jeff,  I was wondering about the same thing.  I don't think we can count the dollar out yet.  The carry trade strategy for the big hitters has been to bet on a long term, gradual decline of the dollar.  If the dollar were to stall or start a run-up, it could trigger a flurry of dollar buying to hedge some big volume bets.  This could cause a downward adjustment in the price of gold in dollars.

switters wrote:

Gold acting as hedge against uncertainty and credit crisis, not inflation or deflation per se.  It's happened before.  

Yup switters, I agree 100% percent.  Gold historically does better against deflation as opposed to inflation.  But, gold does best against the debauchery of a currency.  One sad thing is that if gold does go up to $5,000, it may be a troubling sign that the dollar has dropped 78% in buying power (assuming gold at $1,100).  Hold your physical PMs!

I made a mistake and sold a small amount of gold when it hit $1,050.  I figured to make a couple bucks as I thought the market would correct (it worked twice before) and I'd make a few bucks.  I have some silver but it has lagged behind gold.  I was thinking maybe I should take this opportunity to buy some silver low - any suggestions will be welcome :>

Larry 

robie robinson's picture
robie robinson
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Posts: 1192
Re: Dollar up, gold up. Bucking the trend?

A day doth not a trend make.

we're converting some 10oz. gold bars to 100oz.silver for ratio correction

 

husband,father,farmer,optometrist

docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Re: Dollar up, gold up. Bucking the trend?

i think the BRIC central banks may be accumulating gold putting upward pressure on gold and not silver.  This has got to be putting some major pressure on the gold shorts.  I'm waiting to see whether they can cover.

doc -- don't use me for advice.  I am not and do not pretend to be an inviestment professional. (dumb money perspective)

Phil Williams's picture
Phil Williams
Status: Gold Member (Offline)
Joined: Oct 14 2009
Posts: 345
Re: Dollar up, gold up. Bucking the trend?

I am bullish on silver because I think more people are starting to see the logic in owning physical precious metals. I think we are at the very beginning of the individual investors starting to buy physical PMs. Most people don't have tons of money to buy 50 ounces of gold, but if you are really buying PMs for a crisis, then it would seem more logical to own silver in one ounce coins. Obviously much cheaper, but also how often are you going to need to buy something for $1150. Good luck getting change for your gold eagle. Also, the silver market being so small, and the fact that silver is actually being used up.  

docmims's picture
docmims
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Joined: Jun 17 2009
Posts: 644
Re: Dollar up, gold up. Bucking the trend?

Since open a few hours ago  gold is up almost 13 dollars and dollar is down, but not enough to account for the screaming gold price.  This week may be interesting.

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