<<the euro will bring competition to the dollar>>
European central banks hold about US$800 billion as reserves.
These CBs desire a strong Euro (its the very essence of the EU - in order to compete with the remainder of the world one must facilitate trade with a strong currency).
Have heard suggestions European CBs will sell USD to buy Euro in order to bolster introduction of Euro and help make it a strong reserve currency. Hence, by implication, unless gold is sold by Euro CBs, the dollar will decline vs gold and other many other currencies.
Also, European economy will strengthen whereas US econ strength is priced into the DOW. Hence, possibility that European equity markets will draw funds from US equities.
In sum, this looks like a recipe for the USD to decline against Euro and other strong currencies. With gold priced in USD the price of gold would drop against other currencies. US FED will possibly have to raise US rates to defend USD.
Is this the reason for: 1) recent stronger price of gold, 2) current stories that US fund managers are personally selling to increase cash, and, 3) the recent stories that US fund managers are selling US Treasuries to buy gold?
One of the main props under the US bull market was the unwinding of inflation and related Boom/Bust cycle. That is old news now. The market rewards those who play the new news, not yesterday's story.
As an ex-Securities Analyst (30 years) this really feels like the developing top to the DOW.
Is it time to hedge a major correction by increasing gold exposure? My worry is that Greenspan, et. al., will defend against a flight to gold. |
