Thursday , 25 July 2024

Japan’s Role in the U.S. Dollar’s Rise – and Gold’s Fall (+2K Views)

Lately, the dollar has been making a comeback and, as usual, gold is tanking…[ThatGold-bars-on-100-and-50-dollar-bill 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 ( 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 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.]

* (©2013 Wyatt Investment Research & Business Financial Publishing LLC; Click here to try Top Stock Insights, free.)

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  1. Commentary on gold’s recent tailspin provides insights into what pundits are genuine and what pundits are just hot air. Japan financial institutions dumped gold for yield in April, but what sites or commentators recognized this?

    Certainly not this “buy silver crash J.P.Morgan” inside scamster.

  2. Said another way, the Central Banks are doing their best to drive the perceived value of PM downward! I say perceived, because Gold and the other PM’s value is really just a function of what the public accepts as its value by those seeking to sell on any one day but for the rest of those holding PM’s they are like stocks in which the price you bought at and the price you sell at determine the amount you either gain or lose.

    I’m thinking that most PM investors, they are now either just holding onto their PM’s if not adding additional PM’s to their portfolios in order to lower their total PM basis amount and/or waiting for the reversal to happen.