The dollar index broke below its 50 day moving average this week while you thought it would rise to 120.
Hey you got to like that. I said 4 weeks ago that I suspect the dollar index would break down to 101 range, and then climb up to 120 range. Having it occur a week late for me, don't matter. You know I didn't expect the dollar index to climb to 120 during this week, but only to start. The XAU is overvalued relative to GOLD. Gold is now over valued relative to currencies.
I want to tell you a secret: the XAU has run out of sellers and the substantial premium it is selling above the POG is indicating a Bull Market in Gold is on the short term horizon.
Not so. You never run out of sellers, but the seller often over charge for the bounty. Mutual funds are not beggers, but are choosers. If they have cash outflows, they must equalize by selling. A small move in the CRB or GOLD/oil can push those funds outflows buttons fast. If you look at the ABX results, you can say that at 2+ times production cost GOLD can find a lot lower price to reach. What gives the gold holder the right to expect such a large premium on gold production. Add to that that NEM will be entering the hedging programs soon, and you end up with more gold entering the markets. ABX choose to increase their forward sale hedge, not decrease. So the reality for gold is very bearish, at best slightly negative.
Who is smarter? The BOE or the Investors who are holding the stocks in the XAU?
BOE is smarter. Cause if you are a holder of the XAU or gold stocks, then you are competing against a country that could affect you. Yet you can hardly effect it. Gold price rises, they may unload faster.
The dollar, IMO, will retest its lows from last fall and might very well break below that level too. Who is selling the dollar here?
The richest country in the world... Japan. I don't buy the comments that Japan and Asia are out of their problems yet. The currency effect from 135 yen that the BOJ stopped back last years, needs to enter the reflex of then. A drop to 110 yen may not be impossible, but even then the POG will decline.
I'm surprised at you, especially you. A rising gold price in any currency is the same as the objectively falling value of that currency.
Except in this case you need to look further. The POG in YEN has been falling dramtically. That's the effect of an appreciating currency. Add the Euro spike, even pound spike, and the US Dollar index gives a disproportiante result
Euros, POG is now lower then in Jan 99 {-9.4% from Jan 98}
Yen, POG is now lower then in Jan 99 {-28.5% from Jan 98}
USA, POG is now lower then in Jan 99 {-13.9% from Jan 98}
UK, POG is now lower then in Jan 99 {-9.85% from Jan 98}
CDN, POG is now lower then in Jan 99 {-13.6% from Jan 98}
Play all you want:
pacific.commerce.ubc.ca
play special attention to the drawing rights... they tell a story that the US Dollar index misses.
Hutch |
