"Curiouser and curiouser," cried Alice, in a statement that
could be readily applied to today's gold trading session.
Granted, she was referring to talking rabbits and litigious queens, but
that the dollar took a sizeable turn to the downside today, and gold followed
it even further into the red, has to rank as a similarly fantastic
occurrence.
The the dollar is down about 0.4 percent at last check, but June gold is
down considerably more -- as much as 2 percent off from the day's highs for
the yellow metal.
That's not an easy thing to do. Not only are the fiat dollar and gold at
opposite ends of the philosophical spectrum, they are also at opposite ends
of the mathematical see-saw: Since gold is priced in U.S. dollars, every tick
down in the dollar against its trade partners puts an equal amount of pricing
pressure on gold in the upward direction.
So there have to be some very powerful forces at work to push gold lower
along with the dollar ... just as it takes a special situation to drive gold
and the dollar upward in unison.
Consider that both assets are considered "safe havens" in times
of financial stress or uncertainty. For example, when the Swiss dropped their
euro peg, the entire currency market was thrown into chaos, sending both the
dollar and gold higher.
This should give us a clue as to what happened today. From all
appearances, one would think that investors are becoming less worried -- or
perhaps simply numb -- to geopolitical fears or a Greek exit from the euro.
Yes, a relief from these tensions could send both the dollar and gold
downward. But no -- digging into the situation, it seems that the dollar
dropped today on the back of more disappointing economic data (downturns in
durable goods orders and business investment). The view is that the ongoing
economic slowdown will convince the Fed to postpone rate hikes even further,
perhaps into 2016, and that’s negative for the dollar.
Of course such a view would be exceedingly bullish for gold, so something
else is up.
My buddies on the conspiratorial end of the spectrum will undoubtedly
place blame at the feet of cartel forces, and frankly I can't find any better
explanation in this case. I'm not one to blame every daily move in the gold
market on surreptitious, malevolent forces, but I do believe that gold is
pushed
around at key points. (In fact, I think the burden of proof is on anyone who
claims the opposite.) Today seems like one of those days when someone was
simply out to get gold, or there was a distressed seller in the market. ...
-----
To subscribe to Gold Newsletter, please visit:
https://jeffersoncompanies.com/gold-newslette...gold-newsletter
* * *
