This past week has seen a strengthening US dollar drag gold down but some analysts are suggesting this is just setting up a great buy opportunity for gold (and silver) as a large part of the reason for the USD strength is both not ‘real’ and is also bullish for gold itself. The USD has reached historical highs (see graph below) and is well into overbought territory spurred on by the ECB announcing its even lower “lower bound” near zero rates and commencement of asset purchases (money printing), the Scottish YES vote looking more likely, and then Japan revising down even further their Q2 results with GDP down (worst since Q1 2009), business spending worst since Q2 2009 and consumer spending the worst on record; all of which means the world’s most aggressive monetary stimulus program will continue if not increase. The ECB, Scotland and Japanese actions sent the Euro, Pound and Yen down and the USD up. The continual (misguided?) expectation of US interest rates rising too is a large factor. But the fact the USD is rising largely because others are falling and the fact that the very reason for the others falling (excepting the Pound) is the creation of too much paper money should give owners of gold and silver comfort as they hold real money which ultimately prevails. Oh, and of course sharemarkets rallied on the ECB and BoJ news as the free money show continues. The question is how long before this house of Fiat cards comes down?
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