Pretty boring day for the metals, but they were up slightly with the dollar also up. Most everyone who reads these words know I am still counting on a dollar run higher and it seems more are seeing it that way. The jury is out on how much of an effect this will have on precious metals. We have to look at longer term charts to get away from the day in and day out micro view. You can see the potential of the dollar move if we do get the meltdown in the Euro and Yen and even a move by the Chinese with the Yuan which I expect. Look no further than the Asian financial crisis for a potential timeline example of how things can unfold.
While the chart isn’t exactly true to scale because the data goes back 43 years, it is close enough. The dollar and gold move inverse of each other over time. From a micro level they don’t always do so. This entire move higher in gold can be mostly related to the dollar moving lower against primarily the Yen and Euro, but the Yen needs to reverse course because they have no alternative. Europe has their own issues with banks that despite stress tests claiming for most except the oldest bank in Europe that all is well. Remember, these tests did not include Greece or Portugal. With Germany heavily funding Greece’s bailout along with the IMF who has seen its leader Lagarde come under scrutiny (being sued), is this really the beginning of the end for Europe? One has to wonder.
The dollar will still be your key no matter what noise comes out about negative interest rates or what is happening at the Fed. Watch it and watch gold react inversely. Charts don’t lie and neither do patterns that have a 43 year track record. And neither does the data out of Japan, Europe and China.
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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