Comments on: The Gold-Dollar Correlation Explained and Why it Broke Down http://www.darwinsfinance.com/gold-dollar-correlation/ Financial Evolution: Education, Adaptation, Achievement Tue, 16 Mar 2010 05:17:59 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: jaker http://www.darwinsfinance.com/gold-dollar-correlation/comment-page-1/#comment-3179 jaker Mon, 23 Nov 2009 13:59:50 +0000 http://www.darwinsfinance.com/?p=1222#comment-3179 I'm thinking that the dramatic drop in the US dollar was a combination of 3 aspects: 1.) US gov't over-spending 2.) China making a push to remove the dollar as the benchmark currency, and use a weighted basket of currencies instead 3.) Iran/other OPEC countries making a push to move the denominated currency for oil to the EURO from the US dollar all of these attributed to the fall of the US dollar. nonetheless, the one thing that Sadam Hussein taught us is that if you are ever running for your life, be sure to carry US dollars with you (he was found with a suitcase of $200k in US dollars). I’m thinking that the dramatic drop in the US dollar was a combination of 3 aspects:
1.) US gov’t over-spending
2.) China making a push to remove the dollar as the benchmark currency, and use a weighted basket of currencies instead
3.) Iran/other OPEC countries making a push to move the denominated currency for oil to the EURO from the US dollar

all of these attributed to the fall of the US dollar. nonetheless, the one thing that Sadam Hussein taught us is that if you are ever running for your life, be sure to carry US dollars with you (he was found with a suitcase of $200k in US dollars).

]]> By: Darwin http://www.darwinsfinance.com/gold-dollar-correlation/comment-page-1/#comment-3177 Darwin Mon, 23 Nov 2009 13:06:58 +0000 http://www.darwinsfinance.com/?p=1222#comment-3177 Thanks for your comments. Shawn/Jaker - I'd just be careful trying to trade this routinely; these commodity trends are generally secular in nature and can go on for years. I'm still confused as to why gold continues to run, especially when we knew a year ago that our government was spending like drunken sailors and debasing our currency, but for whatever reason, it's taken this long to really blow past $100/0unce. Greg, Early part, yes, the world flocked to safety and took absurd/negative yields just to get their money out of other instruments (virtually all liquid asset classes) and bought Treasuries/USD. FF to today, I don't see the dollar trend reversing any time soon, nor do I anticipate a rate hike increase with unemployment over 10% (which I don't think is going away any time soon). However, I do believe a bubble is forming in the carry trade and we may very well see a mass reversal as investors head for the exits - perhaps not even facilitated by any particular market committee action, but just a stampede that is unexplainable at the time, but makes sense in retrospect. As such, I've tiptoed into gold, but I haven't made any large bets on currencies. Thanks for your comments.
Shawn/Jaker – I’d just be careful trying to trade this routinely; these commodity trends are generally secular in nature and can go on for years. I’m still confused as to why gold continues to run, especially when we knew a year ago that our government was spending like drunken sailors and debasing our currency, but for whatever reason, it’s taken this long to really blow past $100/0unce.

Greg,
Early part, yes, the world flocked to safety and took absurd/negative yields just to get their money out of other instruments (virtually all liquid asset classes) and bought Treasuries/USD.

FF to today, I don’t see the dollar trend reversing any time soon, nor do I anticipate a rate hike increase with unemployment over 10% (which I don’t think is going away any time soon). However, I do believe a bubble is forming in the carry trade and we may very well see a mass reversal as investors head for the exits – perhaps not even facilitated by any particular market committee action, but just a stampede that is unexplainable at the time, but makes sense in retrospect.

As such, I’ve tiptoed into gold, but I haven’t made any large bets on currencies.

]]> By: Greg http://www.darwinsfinance.com/gold-dollar-correlation/comment-page-1/#comment-3173 Greg Mon, 23 Nov 2009 07:38:56 +0000 http://www.darwinsfinance.com/?p=1222#comment-3173 I agree. Very good article. I've been trying to better understand something. I was short EUR/USD in Aug-Sept 2009 at about 1.55 or so, but then reversed when everything went haywire, and interest rates dropped thinking that the US dollar would decrease in value. Ooops. From this article, it appears that what happened is the dollar increased in value because "the rest of the world views the US dollar as the safest currency in the world" and "the dollar strengthened considerably against all foreign currencies". Am I understanding this correctly? Fast forward to today... It appears that gold has to reverse at some point because we will eventually run out of buyers. Researching this issue is how I came across this article. Do you expect the dollar to also reverse course? Also, what do you expect to happen once they begin to raise interest rates? They have to at some point, right? I believe the next meeting is December 15, 2009. Do you expect the dollar to increase in value (i.e. EUR/USD to decrease in value), and for gold go drop? I'd rather not be on the wrong side again, so any information would be appreciated. Thanks, Greg. I agree. Very good article.

I’ve been trying to better understand something. I was short EUR/USD in Aug-Sept 2009 at about 1.55 or so, but then reversed when everything went haywire, and interest rates dropped thinking that the US dollar would decrease in value. Ooops.

From this article, it appears that what happened is the dollar increased in value because “the rest of the world views the US dollar as the safest currency in the world” and “the dollar strengthened considerably against all foreign currencies”. Am I understanding this correctly?

Fast forward to today… It appears that gold has to reverse at some point because we will eventually run out of buyers. Researching this issue is how I came across this article. Do you expect the dollar to also reverse course?

Also, what do you expect to happen once they begin to raise interest rates? They have to at some point, right? I believe the next meeting is December 15, 2009. Do you expect the dollar to increase in value (i.e. EUR/USD to decrease in value), and for gold go drop?

I’d rather not be on the wrong side again, so any information would be appreciated.

Thanks,

Greg.

]]> By: jaker http://www.darwinsfinance.com/gold-dollar-correlation/comment-page-1/#comment-3091 jaker Tue, 17 Nov 2009 18:25:44 +0000 http://www.darwinsfinance.com/?p=1222#comment-3091 Great article. I stumbled upon this when researching gold as an investment - not to long, but to short. i think that gold will be the next bubble to burst, as folks will soon realize that gold does not pay the bills. Thus, I'm looking to buy put options on gold. thanks! Great article. I stumbled upon this when researching gold as an investment – not to long, but to short. i think that gold will be the next bubble to burst, as folks will soon realize that gold does not pay the bills. Thus, I’m looking to buy put options on gold.
thanks!

]]> By: Shawn C. http://www.darwinsfinance.com/gold-dollar-correlation/comment-page-1/#comment-3057 Shawn C. Mon, 16 Nov 2009 02:44:37 +0000 http://www.darwinsfinance.com/?p=1222#comment-3057 I am a trader of S & P Futures and I found this article while fishing around for the strongest market to watch before 9:30 on a trading day. In other words, what leads S & P futures prior to the cash market opening at 9:30 est. Would it be best to look at Gold, Oil or the Dollar as it traded in Europe the night before as a strong indication strength or weakness in the S & P before the day starts? Like most traders I look at volume as my strongest indictor. Before 9:30 however, there really isn't any on the S & P Futures. What market is really the leader prior to the day starting? Oil, the Dollar or Gold? I am a trader of S & P Futures and I found this article while fishing around for the strongest market to watch before 9:30 on a trading day. In other words, what leads S & P futures prior to the cash market opening at 9:30 est. Would it be best to look at Gold, Oil or the Dollar as it traded in Europe the night before as a strong indication strength or weakness in the S & P before the day starts? Like most traders I look at volume as my strongest indictor. Before 9:30 however, there really isn’t any on the S & P Futures. What market is really the leader prior to the day starting? Oil, the Dollar or Gold?

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