Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar and Euro Influence on Gold Prices

Commodities / Gold and Silver 2013 Nov 06, 2013 - 10:20 AM GMT

By: Bob_Kirtley

Commodities

There are many factors that come into play when trying to determine the direction of gold and silver prices that go beyond supply and demand. As we know gold has an inverse relationship with the US Dollar (USD), although there are historical exceptions such as the one we witnessed in the gold bull market of the 80’s, when both were rising at the same time. We may well see both gold and dollar rise in tandem in the future, but for now they are tending to move in opposite directions.


The performance of the USD can be observed when we view it against a basket of currencies as per The US Dollar Index. The US Dollar Index provides us with a value of the USD relative to a basket of foreign currencies. The performances of those currencies within this basket have an effect on the dollar. There are only 6 currencies in this basket and they are weighted as follows:

Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight

We can see that the Euro is by far the largest component representing 57.6% of this Index and therefore merits being watched closely, so we will take a quick look at it today.

The Euro Chart

We can glean from the chart that the Euro has lost some ground recently, which in turn has had a knock-on effect on the USD. Speculation over a rate cut gained some traction when inflation in the Eurozone dropped 0.7% for October raising the ugly specter of deflation. Should we get more in the way of dovish comments from the ECB then we would expect the euro to continue its decline.

While all eyes are on the US employment figures due out this week, we should also keep one eye on Mario Draghi, President of The European Central Bank and his pronouncements on monetary policy. Up to now his words have had a calming effect on the Eurozone but just maybe they are wearing a tad thin, so some decisive action may be imminent.

The US Dollar Chart

The USD chart shows us that it has support at the ‘79’ level which it has tested no less than 5 times in recent months. Each time it has managed to bounce and rally to higher ground suggesting that it could be difficult for the USD to fall further.

Once again the employment numbers will take center stage, good, bad or indifferent they are a major consideration for the policy makers at the Federal Reserve. Any hint of tapering the bond buying programme would add support to the USD but we doubt that this will occur this year. Conversely, further relaxation of monetary policy with the Fed becoming even more accommodative, would lead to the USD weakening, putting upward pressure on gold prices.

Conclusion

Our central planners are playing an increasing bigger role in the determination of the future direction of their own countries currency. It is a widely held belief that inflation is a more favorable condition to have to manage than deflation. By weakening their currency they hope to boost exports, thus creating employment for their citizens. The manipulation of currencies is set to continue with the race to the bottom being alive and well.

When trying to analyze the future direction of gold it is now critically important that we include the currency war, as this arena in dollar terms, dwarfs many of the other considerations. Try not to ignore the actions of our political masters and the central planners as their words and actions will impact upon currency gyrations, which will spill over into the precious metals market.

Also be aware that this is a tiny sector of the market and can be pushed in either direction, should it be deemed a requirement by those who think they know what is best for us.

The bear trend within the gold bull market is still with us and gold’s near term direction remains somewhat hazy, however, we think there could more to go on the downside and that the bottom still lays ahead of us. Also be aware that a sudden increase in QE could blow this scenario out the water.

In a nutshell we need to be patient and to do the hard yards in terms of due diligence, so sleeves up, head down, game face on and hit it. Also keep your powder dry as bargains do come along from time and you will need the cash to take full advantage of those opportunities.

Got a comment, fire it in, the more opinions that we have, the more we share, the more enlightened we become and hopefully our ‘well informed’ acquisitions will bear the fruits of our labor, sooner or later.

Take care.  

Bob Kirtley
Email:bob@gold-prices.biz
URL: www.silver-prices.net

URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in