Lately, the dollar has been making a comeback and, as usual, gold is tanking…[That being said,] however, the timing of the dollar’s resurgence is a bit curious. Perhaps not coincidentally, gold began tanking just as the dollar was advancing against the yen. [Why do I say “Perhaps not coincidentally”? Read on.]
So writes Chris Preston (www.wyattresearch.com) in edited excerpts from his original article* entitled The Real Reason Gold Prices are Falling.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Preston goes on to say in further edited excerpts:
The gold bear market lingers on … with no clear end in sight. Gold prices have…dipped below $1,200 an ounce for the first time since 2010, accelerating in recent months. This is not the gold we’re used to – the precious metal that rose faithfully every year for the last decade.
Gold & the Stock Market
Gold’s demise can be partially blamed on the strong performance from the stock market. Despite a recent pullback, stocks have advanced 17% since November, knocking down record highs like bowling pins along the way. [As a result,] investors haven’t had much to fear or, at least, they haven’t acted like they’re afraid of anything. In the absence of volatility, investors have little use for a safe haven like gold but that’s not the only reason gold is tanking…
Gold & the USD
Stock performance isn’t what usually determines which way gold is going but the dollar is. Historically, gold has moved inversely to the value of the U.S. dollar. Take a look at this 10-year chart:
Gold & QE
Lately, the dollar has been making a comeback and, as usual, gold is tanking…[That being said,]however, the timing of the dollar’s resurgence is a bit curious…In the past, Federal stimulus efforts [QE1 & QE2] have led to a devalued dollar… [with] the U.S. Dollar Index declining by an average of nearly 4% [and] gold gaining in price by an average of 24.5%. This time, however, the opposite has happened. Since Ben Bernanke announced QE3 last September, the dollar has increased 4%, while gold has plummeted.
Gold & the Japanese Yen
Why the difference? The yen is mostly to blame because, in an effort…to fix its own struggling economy and combat deflation, Japan enacted its own monetary easing policies, thus grossly devaluing its own currency, the yen, [making it] the cheapest it’s been relative to the dollar in almost four years…Perhaps not coincidentally, gold began tanking just as the dollar was advancing against the yen. Check out this chart courtesy of StockCharts’ John Murphy:
The above doesn’t look like a coincidence. Add in the fact that monetary easing in Europe has also devalued the euro, and suddenly the dollar looks like the most valuable piece of paper in the world again – even in the midst of America’s own quantitative easing.
In essence, rampant monetary easing in some of the world’s largest economies has lowered the currency bar to abnormally low levels. Compared to itself, the U.S. dollar doesn’t have the same value it did before QE3 began. Compared to other dwindling currencies, however, the dollar is as strong as it’s been in years.
U.S. dollar strength – and yen weakness – is weighing heavily on gold prices right now. A turnaround in gold may thus depend not on when Ben Bernanke says it’s time to pull the plug on QE3 … but when the Bank of Japan puts the brakes on its own monetary easing.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.wyattresearch.com/article/the-real-reason-gold-prices-are-falling/29984 (©2013 Wyatt Investment Research & Business Financial Publishing LLC; Click here to try Top Stock Insights, free.)
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Everyone personally holding physical gold and silver, as we have been recommending, has no margin call to meet and no reason to sell. This is a temporary situation, and it will pass. Now is not the time to panic, as that is the intent of the central planners/bankers in forcing gold and silver through strong support levels. Stay the course. To the extent you can, continue buying the physical metal.
What happened?! is the question so many are asking about Friday’s waterfall in prices. A better question is, “Why?” Outside of the insiders, no one really knows. Yes, there can be some fairly cogent explanations, lots of glib answers, but no one knows, for sure. What we do know for sure is that the market is always the final arbiter [and this is what the market is saying:]
The paper gold market is being used to shake the bullish tree harder this time than any time before because of what is to come. Fear is the most powerful emotion in markets and it is being used perfectly to enrich the grand names of finance at your expense. We are right in front of that time when the market performs a classic bottom both in shares and physical. From this point gold is going to and through $3500 [so] if you are unable to buy at this time there is one thing you can do – to get into the fight and out of the stands. That act is do nothing, and do not capitulate. Let them play the price game, but give them nothing whatsoever of yours. Words: 758
By its obvious and concerted attack on gold and silver, the U.S. government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt. For Americans, financial and economic Armageddon might be close at hand….
David Mcalvany covers the reasons behind the major pullback in metals on April 12, and where they may go from here, in this most enlightening and re-assuring 8:14 minute video.
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In my article of April 5th, posted here, I maintained that in the next year, and particularly for the next three to six months, a liquidation phase in the current cyclical bear market in gold would likely develop,,,[causing gold to] fall sharply. [Below are the 8 reasons I mentioned back then which still remain relevant today.]