Last week we saw an aberration in the price of gold seeing both it and the U.S. dollar decline at the same time. I made comments about this abnormal behavior in Why Are Gold and Silver Prices Falling As Dollar Declines?
I listed in that article a multitude of reasons why the price of gold will move higher in the future. Five days later, we see the return of the trend of gold higher with a break down in the dollar. But we also see oil down today with silver, platinum and palladium higher.
Gold and Silver Price Trend Is Down
Gold and silver have been declining in price of late after a stellar year in 2010 seeing gold rise in price over 30% and silver over 70%. These metals are due for a breather as we really didn’t see the dollar break down in 2010. Most of the buying was coming because of speculation about quantitative easing and future inflation expectations. This in turn pushed the price of gold and silver higher.
Now that the news of this round of quantitative easing has been priced into gold with speculators pushing the price even higher for the short term, the metals have come down off their highs with many speculating the gold bubble has arrived.
The short term trend for gold and silver is lower and it will be interesting to watch the dollar and how far down they let it go. But keep in mind, the dollar index going lower is only an indication of the currencies that make up the index moving higher. This doesn’t paint a true picture of currency strength.
My next article will address the issue of how the U.S. dollar, as represented by the Dollar Index, doesn’t give investors a true indication of real dollar strength or weakness. No one else is talking about this type of analysis, but it’s probably one of the most important articles I will have written to date.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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