Thursday, February 11, 2016

Gold Rockets: Up $65.00 an Ounce--What Does It Mean?

Gold is exploding this morning. It is now up $65.00 an ounce.

1 year chart

I suspect that what is going on here is much bigger than just a move in gold.

On Monday in the EPJ Daily Alert, I wrote:
[T]he US dollar is showing weakness today against the yen, pound and trade weighted index.
The decline in the dollar over the last 3 months appears significant, against the trade-weighted dollar.
The dollar is weak again today:

1 year chart

I wrote this in the EPJ Daily Alert on Tuesday:
The Decoupling of Oil and the Dollar
Here's just a market activity note that I want to point out.

The US dollar and oil were trading pretty much in sync up until recently. The dollar would trade higher on any oil weakness.

Now, we are seeing oil and the dollar showing weakness at the same time. Oil is down today by 3.75% as I write, but the trade-weighted dollar index is also down. I think this is significant and that the October 2015 peak in the trade-weighted  may have been significant. The dollar isn't weak against all currencies, but it appears to be cracking.

If the US dollar can't find strong support when most of the oil export  countries are desperately attempting to raise dollars, then there has to be major selling of dollars from other regions.

When the oil price fall stops and the oil producing countries are able to slow their aggressive dollar seeking, the downside in the US dollar could be exceptionally strong. It will create much additional pressure on the domestic price inflation front.

I have written many times in the ALERT that when gold truly gets going, daily price gains in the $50 to $100 range will be common place. Today's action is the first indication that this will occur, but the decline in the dollar (while oil is down)  is probably even more significant. The globe is stuffed with dollars, if we are seeing the start of a flight from the dollar, it could be dramatic and have major repercussions in the United States and globally.

Buckle your seat belts.


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