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| (Home Page) | (How to Buy Gold) | (Gold Coin Images) | (Daily Market Report) | (Live Gold Price) |
| (First-time Buyers) | (News & Views) | (ABCs of Gold Book) | (Gold IRA) | (Buy Gold Coins Online) |
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(About Us) | ||
The intention of The
Golden Chalkboard is to feature a focused selection of data
or rare commentary that I think will be useful to enhance your
insights into the gold market and the monetary system.
Dollar and euro management and the gold price trend
TownCrier
(8/23/04; 11:05:28MT
- usagold.com msg#: 123937)
(Originally posted Monday,
August 23, 2004) Gold today off slightly in dollars, up in euro
http://www.usagold.com/gold-price.html
While the dollar today [August
23rd] enjoys just a little more breathing room from a golden test
of a couple mini-tops at $425-ish, gold in euro-land steadily
draws closer to the very significant EUR350 proving ground, a
most notable breakout target -- in place since February 2002.
The dollar and euro prices of gold since January 2001 have two
distinctly different yet positively reinforcing tales to tell
about the bright future of gold.
At anyone's request I might be found easily persuaded to cobble
together a graphic comparison of the two pictures over that time
horizon.
R.
[A poster subsequently expressed and interest, so here it is...
see below.]
Gold price trends in Dollars and Euros since 2001: Rising trend seen clearly in both, with considerably less upward resistance being demonstrated in dollars.
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As depicted in the above charts, the green arrows, which skirt along the lower regions of gold's price ranges in dollars and euros, show there is a distinct rising trend for gold in either currency. Some analysts struggle with this phenomenon, able to comprehend only that gold is a sort of anti-dollar, and also that the euro is a sort of anti-dollar, and that their respective exchange rates against the dollar should reflect only the same ups and downs of the dollar's relative strength. And in fact, this view is easy to understand if you look at the chart below which shows the performance of the euro exchange rate (priced in dollars) over the same time period.
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You will note from the similarlity of this dollar/euro graph with the dollar/gold graph at the top, as the analysts have, that the euro and gold seem to be plotting exactly the same course -- inverse to the fate of the dollar. They seem to forget that gold is an independent item that can have a relative strength independent of the dollar's fate, and independent of the euro at the same time. This fact is well represented by the top two charts -- that "anti-dollar" gold is performing against both currencies, and is not merely being priced as a flat, steady line in terms of the "anti-dollar" euro.
Conventional wisdom particularly likes to pit the fate of the dollar squarely against the future of gold, saying that the dollar managers (Federal Reserve and U.S. Treasury) dare not allow gold to show any strength lest it bring down the curtains on the dollar's prominent reserve role on the world stage. While further explorations of official skullduggery can be a fascinating pursuit, I am content to simply accept the officially sanctioned (tolerated, blessed, encouraged) developments of the gold derivatives markets and bullion banking as the means necessary to achieve that end.
On the other side, regarding the euro project, there is a mere germ of conventional wisdom, slowly growing, that the euro managers (European Central Bank) do not share the U.S.-dollar's inherent antipathy towards gold. As intimated by the contrasting mark-to-market practice among European gold reserves (versus the dollar's $42/oz method), the perception is gaining traction that once Europe has nurtured its euro into a hale and hearty position of use and confidence among the world's players, it may then encourage gold to break free of its derivative shackles -- as Europe would be in a position to benefit from such a rise in gold value.
Which brings us around again to the point of these graphs. Analysts, fixated out of long habit on the dollar, have recently stressed the $425-ish level as a notable point of resistance for the price of gold. Peanuts to that. Look again at the top two charts, and especially at the nature of the reddish bars of "resistance" that I have marked on each.
Clearly, the dollar (and its mangers) is now demonstrating no ablility and no position of control over the fate of gold. Two whimpy little coincidental peaks in recent weeks is not worthy of a raised eyebrow in light of the preceding run up from $250. Whereas the euro and its managers, on the other hand, have in the second chart shown a picture of control. For the past three years the euro seeds have been carefully nurtured on a rocky proving ground, with every approach of EUR350 brushed temporarily aside as if to say, "Go there and show your strength in Dollarland if you must; these euro roots are yet growing and now is not the time to put this golden bloom on the vine."
That day will come soon enough, but it is not this day. Use well your remaining time to stock up on physical gold while it's still under the influence of cheap derivative-managed pricing. Call the friendly staff at USAGOLD~Centennial today and discuss a diversification strategy that's right for you.
Randy
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