Gold vs USD
by, 23rd-June-2009 at 01:51 PM (633 Views)
Talking gold can be a sensitive subject here because you can never tell if you are in the company of a goldbug...
But, what the heck, if there's money in it, why not?
Three charts, chart1- 60 min DXY chart, chart2 - Gold futures weekly, chart 3 - Gold daily.
Chart1 shows it takes only relatively small bounce in the US$ to knock the gold down a fair chunk (refer to the gold daily chart).
But if you buy the suggestion that it's due to safe haven type of flight to safety investment tactic, then, you really need to ask this question on how come gold is not considered as a safe haven this time?
The US$ and US$ based assets are safe haven and gold is not? Funny that...
In any case DXY and the US$ I suspect will be moving range bound as suggested in one of my earlier post elsewhere. The rationale in this scenario rests entirely on the need to stabilise the US$ and the cost of borrowing just so the US can press on with their QE without showing too much strain causing a wholesale loss of confidence in the US$ and US's ability to rescue its economy from a severe recession.
What better rationale or justification in telling the whole wide world that the US$ and US$ based assets are safe havens.?
Assuming this marketing tactic works and US$ is again believed by the "people" of the world that it is safe and it is worth, say at the current "value" - can you hear the collective sigh of relief from all the vested interests among the big global palyers? The USA is happy again because it can now sell more bonds, the EU is happy because the EUR is dropping and the W.European banks won't have to face up to the pressure of writing off more bad loans in E.Europe; the Japanese are happy coz the Yen is cheap again, and the Chinese, their 760bln US$ asset is safe...
Nice and happy all round. And why not?
But what about gold?
Tough man. If the US$ were to nudge higher, gold I think will drop lower to about 860... yes measured in US$. At the moment, it's still not that obvious and certain that the drop will come as shown by the weekly gold chart - the up trend is still in tact but shaky.
By next week may be we will be able to detect a firmer trend, but meantime, if you are holding gold, or gold stocks... errh, good luck and plenty of it too.