Strong Dollar and Weak Gold ?
Daan Joubert
Bush has made the health of the US economy and its markets an issue in the War on Terror – according to the new Bush doctrine, if any of the US markets should fail, it would mean a victory for bin Laden and al Queda.
The US dollar is a key in this battle. A firm to strong US dollar is essential if inflows of foreign funds are to be maintained – firstly to prevent a foreign sell-off of US assets and secondly to keep the dollar itself steady given the large trade deficit. …
A strong gold price could also trigger a melt down of the US dollar. Although the slogan “Gold is Dead” has often been heard over the past 5-6 years, the fact is that people of wealth have long memories and when they can no longer trust the dollar, Gold will become King again – as is happening in Japan.
The gold price has moved consistently higher, despite rumours of sustained attempts to keep the well-established lid in place, and has been threatening for some weeks now to blast through the psychological $300 level. …
Under these circumstances it would be really very strange if US authorities and vested interests failed to intervene in these markets – and were not doing all they can to keep the dollar on an even keel, perhaps even gaining slightly all the time, in order to keep foreign investors not only happy but also willing to send more money to the US.
This effort, by extension, also implies moves to contain the gold price below $300, and preferably well below that level. …
Anything could still happen, but the author has a good deal of confidence that this time around it will not be as easy to keep the lid on the gold price – and the dollar healthy, as a currency in wide demand – as what it has been in the past.
Which means, of course, that alert investors stand to make a good deal of money from the opportunities that seem likely to present themselves over the next few months.
This applies to both a steeply rising gold price and, conversely, a plummeting US dollar – in whichever order.
