Now what are we all to do
When the money's got a hold on you?
--Simply Red
Many have been blaming the US dollar's recent rally for weakness in gold. The idea is that gold is the 'anti-dollar.' As the value of the dollar drops, then more are required to buy an ounce of gold.
For perspective, I pulled monthly charts for the USD and gold since 1990.
One can see that the dollar rally, which began earlier this year, merely brings the USD toward multi-year resistance in the 87ish zone. However, the USD remains on the lower end of its range since 1990.
Gold, on the other hand, has pulled back about 40% from a hyperbolic move that ended in 2012. Yes, much of that move corresponded to the dollar's decline from high to low between 2002 and 2008. And that will have an outsized influence on statistical correlations calculated between the two series. But eyeing these two charts clearly suggests that other factors have influenced gold price besides the changes in the USD.
Stated differently, viewing gold's movement as the function of dollar movement presents an incomplete picture of the dynamics at play.
position in gold
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1 comment:
Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium.
~Murray Rothbard
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