Matt and members..if one buys the deflation story many would say
gold is unlikely to rally.Of course I get that, BUT at the same
time why can't gold rally on the basis of wealth protection and
lack of believers in ANY fiat currency and at the same time the USD
rally for other reasons.Is it so problematic if they rally in
tandem?Many seem to be trying to push the case that the gold
rally may fail and then the USD will rally off as a
result.Now the lack of movement in the dollar is giving gold
breathing space to go higher.BUT ..simply why can't they just
move in tandem for different reasons .Are many of us just
trying to force the need for the USD and gold to move opposite to
eachother a bit too much.
Of course gold can rally alongside the USD's foreign exchange
value. It did so already between Dec 2008 and Feb 2009 and also
spectacularly from late 1978 till Jan 1980 alongside USD strength
vs. other currencies. Gold rises regardless of currencies when
there is a loss of confidence in the official monetary system as a
whole. However it would be unusual for Gold to rise during the
first phase of a multi month rally in the US dollar. As was the
case last year, even when gold is in a powerful bull market it will
typically decline in US$ terms during the first 1-3 months of an
intermediate-term advance in the Dollar Index. (info. from Steven
Saville of the Speculative Investor).
Thus the current breakout either means that the USD will
breakdown OR it is a golden fakeout. Hence caution is still
warranted.
However I think it depends on how bad deflation and the economy
got. If you had a depression and strong deflation, people
would have to sell gold, not because they want too, but because
they need to sell assets to raise cash, everything gets sold
basically to raise cash, even good assets; just like if you haven't
eaten for a week, you'll glady sell your gold coins so that you can
eat etc. Again it depends on how bad things get or don't get,
if things don't get bad and there is no depression, then people
will probably hold on to it etc. Regardless, gold looks good
for now
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Why can't gold and the USD rally?Any comments
Posted by hurricanemalta on 4th of Sep 2009 at 11:28 am
Matt and members..if one buys the deflation story many would say gold is unlikely to rally.Of course I get that, BUT at the same time why can't gold rally on the basis of wealth protection and lack of believers in ANY fiat currency and at the same time the USD rally for other reasons.Is it so problematic if they rally in tandem?Many seem to be trying to push the case that the gold rally may fail and then the USD will rally off as a result.Now the lack of movement in the dollar is giving gold breathing space to go higher.BUT ..simply why can't they just move in tandem for different reasons .Are many of us just trying to force the need for the USD and gold to move opposite to eachother a bit too much.
Any ideas??
Of course gold can rally
Posted by Vida on 4th of Sep 2009 at 11:59 am
Of course gold can rally alongside the USD's foreign exchange value. It did so already between Dec 2008 and Feb 2009 and also spectacularly from late 1978 till Jan 1980 alongside USD strength vs. other currencies. Gold rises regardless of currencies when there is a loss of confidence in the official monetary system as a whole. However it would be unusual for Gold to rise during the first phase of a multi month rally in the US dollar. As was the case last year, even when gold is in a powerful bull market it will typically decline in US$ terms during the first 1-3 months of an intermediate-term advance in the Dollar Index. (info. from Steven Saville of the Speculative Investor).
Thus the current breakout either means that the USD will breakdown OR it is a golden fakeout. Hence caution is still warranted.
Of course anything can happen. However
Posted by matt on 4th of Sep 2009 at 11:44 am
Of course anything can happen.
However I think it depends on how bad deflation and the economy got. If you had a depression and strong deflation, people would have to sell gold, not because they want too, but because they need to sell assets to raise cash, everything gets sold basically to raise cash, even good assets; just like if you haven't eaten for a week, you'll glady sell your gold coins so that you can eat etc. Again it depends on how bad things get or don't get, if things don't get bad and there is no depression, then people will probably hold on to it etc. Regardless, gold looks good for now