Gold vs. U.S. Dollar Decoupled

…at least for one trading session. Belisarius was occupied with his new firm in last few days so his blog suffered a little; now he’s back fully operational. Back to the theme; yesterday someone took a large position in gold and surprisingly moved the precious metal up on a positive dollar day. Media and blogosphere are full of various theories and reasons for the action. From India’s central bank buying MMF gold (Bloomberg story: IMF Sells Gold to India, First Sale in Nine Years) to “informed” buyer taking the position ahead of today FED interest rate decision/statement and rumors of big financial institution in trouble.

Chart 1. Gold Futures

GOLD 03112009

Source: Bloomberg

Chart 2.EUR/USD

Source: Bloomberg

Source: Bloomberg

I, as not exactly a “gold bug”, don’t think that a gold rise has got anything in common with nothing else then strong demand for the precious metal. Sure, the sentiment is inclined in further rise, I happen to believe gold will rise further, but also think that noting else than sentiment exists here.

Concerning U.S. dollar (where the sentiment is exactly the opposite to gold) I believe that the weakening has its finite short term limit, as effusive dollar debasement would soften the demand for U.S. government debt.

ADP unemployment which came at -203k MoM vs. -254 last month and Challenger Job-Cut Report which came at 57k vs. 66 the month before suggest a lower unemployment figure this week. Maybe.

Still looking for a short S&P 500 position and looking for a short long dated U.S. treasuries position.

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This entry was posted on Wednesday, November 4th, 2009 at 8:16 am and is filed under Commodities, Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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