Gold’s Price Movement is not a Gold Story. It’s a Dollar Story
Many analysts have recently asked: Is gold’s bottom in? Today, we wish to doubt that doubt a small bit.
When people ask if a bottom’s in, they’re wondering if a dollar cost of bullion has depressed low adequate nonetheless to buy.
The dollar cost has come down utterly a bit — roughly 50% from a all-time high of $1,900 when it got down to about $1,050. It’s adult a small bit given then, that has many investors wondering if that was a bottom.
Here’s how we cruise about it…
I cruise bullion as money, and we cruise of a dollar as a flighty asset.
When we see a low dollar cost for gold, it only tells me that there’s a unequivocally clever dollar.
When we see a high dollar cost for gold, it tells me that there’s a unequivocally diseased dollar.
So if bullion went from $1,900 an unit to $1,100 an ounce, to me, that’s a 50% boost in a value of a dollar.
If bullion goes from $1,100 to, let’s say, $1,500, or potentially a lot higher, we would cruise of that as a devaluation of a dollar.
That’s an critical distinction, and not only when looking during gold. Analysts contend bullion has come down… though really, scarcely each commodity in a universe has left down.
Iron ore, copper, oil, sugar, wheat, coffee, etc. When we demeanour during other currencies, too; a Australian dollar, New Zealand dollar, Canadian dollar, and now newly a Chinese yuan, Japanese yen — each one of these currencies and line has left down opposite a dollar.
What that tells me is that it’s not unequivocally about a macroeconomic story. And it’s not unequivocally about any one of those line or currencies. The story is unequivocally about a dollar. What we have is a super-strong dollar. As a dollar strengthens, a dollar cost listings of line go down.
So what’s function to bullion is not singular to only gold. It’s something that is inspiring all of a other line and currencies we mentioned too. That’s critical to bear in mind. Remember, gold’s cost transformation is not privately a bullion story. It’s a dollar story.
Courtesy: Jim Rickards for The Daily Reckoning