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« NovaGold Resources, Randgold, Agnico-Eagle and Kinross Gold | Main | PM Stocks Fight Back with a 5.28% gain on the HUI »
Saturday
Feb062010

Gold remains a Dollar Play

USD Chart 05 Feb 2010.JPG

The inverse relationship between gold and the dollar remains intact as the improvement in the dollar has knocked gold back. The question now is just how much further can the dollar climb.


Taking a quick look at the chart of the US Dollar we can see that the USD has gained around 8% since hitting its low in December 2009 and that the technical indicators are now in the overbought zone with the RSI crossing above the '70' level to stand at 74.76. Of course the dollar can always go a lot further as being liquid in these times of uncertainty does have an attraction.

However, this gold bull is up and running and not to be involved will prove to be costly in the future as it makes new all time highs. Nothing has really changed in terms of the fundamentals and paper money will continue to lose its value as each government continues to magic it out of thin air.

Sooner or later one of these countries will default on its debt and if the white Knight does not appear it will signal the end to the way most people think about investment, savings, true value, etc. And what could a white knight offer, yes thats right, some more electronic currency as worthless as the last lot.

Stick with the PMs.


All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated.

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Reader Comments (10)

Greetings Gentlemen on this Superbowl Sunday! Having been in the physical market now almost 4 years I view the current correction as quite healthy and expected. I will on this day be adding to my position some additional silver bars.

I hope it's a game but I think Manning is gunna put on a clinic today, we shall see, eh?

Snakeman Scott

February 7, 2010 | Unregistered CommenterSnakeman

Agreed, US$ is topping with Greece, Portugal and Spain debt issues the reason. The European Union will step in, if needed and not allow the aforementioned countries to default. Therefore, a good time to begin entering into Silver, Gold and Platinum stocks/options for a seasonal trade until May.
Any thoughts on buying PUTS on the US$ for a short term trade?

February 7, 2010 | Unregistered CommenterMark

Snakeman,

Its on here at about 12 noon, a keen member of the team tells me that they are two of the best attacking football teams around so expect a high scoring game....

Colts to win 37-24!!!!!!!!!

All the best have a great day across the pond.

February 7, 2010 | Unregistered CommenterGold Prices

A small correction is in order on this article. The U. S. dollar index DID NOT bottom in December 2009. The bottom tick (prior to the current rally) was registered on November 26.

February 7, 2010 | Unregistered CommenterBob

Mark,

Somebody has coined the phrase PIGS, Portugal, Ireland, Greece, Spain, which is an unfortunate expression, but we have had the BRIC countries so the mind boggles at just what the next group will be named - ??????

On the PUTS on the dollar situation, I doubt if we will cover it here on this site, however over in the Options pit, they are having discussions on a number of new plays including the dollar as their scope is a much more wider ranging than this one than this one, which is PMs in the main. You could take a look at this link:

http://www.gold-prices.biz/busy-times-for-optiontrader/

Its all a question of identifying and then catching the wave.

February 7, 2010 | Unregistered CommenterGold Prices

Bob,

Point taken and thanks.

February 7, 2010 | Unregistered CommenterGold Prices

Apologies, its I for Italy and not Ireland

February 7, 2010 | Unregistered CommenterGold Prices

Gold Prices you were not wrong, Here in Europe it is actually spelt PIIGS to include both Ireland and Italy. Your USA readers should note that Italy has the largest gold reserves in Europe despite the European Union trying to force them to sell. They flatly refused so do not write them off. The Italians have their heads screwed on better than many people realise

February 8, 2010 | Unregistered Commentergold bug

gold bug,

Thanks for the clarification, its very much appreciated. Having uprooted ourselves from the UK in 2007 to try life down under, our perspective has changed a little. I do remember that the Italians had flatly refused to sell their gold and of course we agree with them 100%. However, the EU wields all kind of powers and may well put pressure on Italy to part with some of it.

February 8, 2010 | Unregistered CommenterGold Prices

I believe the Italian central bank has one of the highest physical gold holdings in the world, something like #5 in the world? Seems the Italians understand things better than a whole lot of countries. Maybe gold-rich Germany ought to lead the way and sell some of their gold before they "force" other countries to sell theirs? With the current healthy consolidation in the PM market, gold Bears paint a gloomy picture. But nothings changed. We're nowhere near where the PM market was in summer/fall 2008 after that prolonged correction and long buying opportunity. I'm staying the course and buying (100oz silver yesterday), and more if it goes sub $14/oz. If Italy sells, china will snap it up. Gold Bears will have to go into hibernation, truely.
-Snakeman Scott

February 8, 2010 | Unregistered CommenterSnakeman

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