I can hear readers now, saying the gold bull has started and Doug Eberhardt missed this one. I disagree. You’ll see below what I think is going to happen and today we saw gold take off higher but not because of a falling dollar. Something will change this dynamic and it may have already started with gold falling $7 from today’s high of $1,240.
ECB President Mario Draghi is speaking tomorrow and naturally I view this as dollar bullish as it is every other time he speaks. Europe will be implementing more QE in March and Draghi has said he will do “whatever it takes” with monetary policy. This means there may be surprises in store and it also means that it will be dollar bullish.
Someone came onto one of my articles to claim there is no correlation between the dollar and gold for December through today. I naturally always claim this. So I pulled the data and here is what I wrote back to him.
Dollar hit a high on Dec. 2nd of 100.49
Gold was $1,055.40 that day, close to the lows.
Dollar hit a low of 95.24 on 2/11/16
Gold was $1,241 that day, right at the high.
2011 to today, dollar has been in a bull market.
2011 to today, gold has been in a bear market.For you subscribers; It’s all about the dollar no matter what anyone else may say. I make the case in my book Illusions of Wealth that as the deflationary contraction unfolds, it will be dollar and treasury bullish. This is why I have been a big fan of buying TLT on dips and TLT longer term. It’s simply a Euro and Yen analysis that makes me this way whereby these 2 currencies make up a little over 70% of the Dollar Index. This is what most don’t get when it comes to what the dollar really is; a representation of other currencies. As bad as things are here, for anyone that can do simple math, things are worse in these other countries (and for Europe the countries that make up the Euro individually). You throw in a proactive Draghi and Abe and I believe it is easy to make these assumptions. This is why I see more pressure on gold to get it under $1,000. The U.S. will be “perceived” as the safety net. Treasuries too. Then eventually gold. I just think we get a repeat of 2008 first where gold lost about 30% and the dollar shot higher. Big Short Part 2.
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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