The Inverse Relationship Between Dollar and Gold → Washingtons Blog
The Inverse Relationship Between Dollar and Gold - Washingtons Blog

Tuesday, November 3, 2009

The Inverse Relationship Between Dollar and Gold

I think gold will do well long-term. See this and this.

But as I have previously argued, I think gold is surging right now mainly due to weakness in the dollar. See this and this.

Indeed, Nouriel Roubini says that commodity prices have risen largely because of the huge carry trade in dollars, and that - when the carry trade unwinds - there will be a huge crash in virtually all asset crashes. And see Tyler Durden's thoughts.

Again, I am bullish on gold in the long-term, but I think there might be a large correction in the short run when the dollar rises.

And contrary to what some people think, I agree with Roubini: the dollar will rally sizably at some point in the not-too-distant future (just like it did during the credit crunch last year), before crashing rather definitively.

Update: Gold and the dollar both rose today, but the rise in gold is being attributed to India's purchase of 200 metric tons of gold.

Note: I am not an investment advisor and this should not be taken as investment advice.


  1. Mish is out with an interesting post that is bullish on gold.

    Nadler Nonsense-"Gold-is-not-in-bull"

    My sense is that the dollar trade is too one-sided and the dollar is becoming oversold. However, I am not an FX trader, so what do I know.

    Gold will likely retreat at some point, and the big questions then is whether it is consolidation or collapse. If gold hold up on a pullback and then begin to advance, as I think it will, then the next leg up could be significant. Although there is a lot of supply soon to come on the market at these prices, The Asians) and Indians are traditionally hoarders of gold. As those economies grow, so will the demand for gold, even in good times. This will put a floor under the market unless supply increases faster.

    A lot of people are treating this recession as a business cycle recession. Others, including me, see it as a credit cycle recession. If the latter is the case, there are other shoes to fall and that will be good for gold, which is a hedge against collapse, both financial (including currency) and real. I think the odds are that the bottom we saw wasn't the actual bottom.

  2. Thanks Tom for the knowledge comment, As the gold price are inching day by day. Its better to make ornament such Diamond Rings, Jewelry to secure our future.


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