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The Inverse Relationship Between Gold and the Dollar
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.
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i'm not sure about the conflicted part....
Seems to me that Nadler has been a bear since gold was at 700. At the very least he has predicted a trading range ( constantly revised upwards ) with a large prepoderance of negative information and his fair share of scorn about the GATA theories. No basis of knowledge or anything but I wonder if the India deal gets closed via December delivery and bails out another government proxy short position.
ok....it doesn't take a rocket scientist to know about the inverse relationship between gold and fiat since gold is settled in dollars....
despite being a gigantic rat turd with a dense swarm of flies nadler is right....
but because he is a gigantic rat turd, he overlooks supply factors not the least of which is barrick unwinding its retarded faux hedges and china's encouragement of its people to buy gold....
"China's encouragement of its people to buy gold...."
And don't forget the US. Why is this happening? Because their populations have too much money. The quickest way to syphon wealth from a population is to get them to invest in a "asset" that can be quickly manipulated.
When all the Gekkos have bought their physical gold the express elevator will take a trip to the ground floor. See you all there suckers, I mean Gekkos.
By the way, dollar and gold both up today. Marketwatch's take:
Or, the futures are up on news that India actually has a central bank.
Let's say Roubini is right about the dollar carry unwind scenario, what would happen? Sell other currencies, buy dollars, right? Unwinding the carry causes an increase in demand for dollars. I have to have them to unwind the trade. Run on dollar denominated assets into dollars. The same run on banks occurs as last time. Fed sees this and bails out the world again (Tyler article from a couple of weeks ago).
But here's where I disagree... do any of the institutions that are being run on to supply dollars for the unwind have any major long positions in gold and silver? If the answer is "No" and they're actually sitting on massive short positions, then they have to close those out if gold and silver do not fall with a rising dollar. There's no absolute relationship with between gold and the dollar. Surely they can appreciate at the same time.
The dollar carry unwind only causes a corresponding fall in gold and silver if those instutions unwinding the trade are sitting on long gold and silver positions.
YOU ARE ABSOLUTELY CORRECT ABOUT ANY ABSOLUTE LINKAGE OF GOLD TO THE DOLLAR. THE ONLY LEMMINGS GOING OVER THE CLIFF WILL BE $$ CARRY TRADERS AND SPECULATORS, AND HEDGERS. I CAN ASSURE EVERYONE YOU CANNOT RUN ME OUT OF A HAND OF POKER WHEN I'M HOLDING ALL THE ACES .
As with Oil, it seemed impossible that it could get to $35 while it was at $147. Gold is a crowded trade and once the suckers are in, we will see a classic and fierce unwind.
Fade central banks. Always.
"Gold is a crowded trade and once the suckers are in"
Let's call them Gekkos.
Gold is a crowded trade and once the Gekkos are in....
Here comes another Prechterite cockroach.
in 5-10 years you might be right....
I am not sure what Nadler's agenda is, but to assert that gold is not in a bull market, or that its gains are only due to the fall in the dollar is utter nonsense. For Exhibit A, please see the website of Nadler's company here:
http://www.kitco.com/gold_currency/charts.htm?USD
Now, click the different timeframes across the top of this page, and you will see that gold is in a long term bull market against every major currency. Nadler's comments are a real head-scratcher for me. I would love it if someone could enlighten me.
Mish has some comments on Nadler as well:
http://globaleconomicanalysis.blogspot.com/2009/11/nadler-nonsense-gold-...
Nadler isn't an idiot. He's a cog in the gold price suppression scheme. He manufactures permanently bearish information on “gold fundamentals,” and the papers parrot his opinions almost daily. He’s a stooge working for the banksters. I sent him an email once asking for his opinion regarding dollar devaluation, the direction of the gold price, and interest rates. I thought gold prices might go up given the circumstances last fall. He sent me a reply with an attachment. The attachment was a poorly written essay of sorts. His main thesis was that constitutional money was always a stupid idea, gold’s only utility is that it can be made into trinkets and sold to Indians (Asians), and that the Fed will fix everything that’s wrong with the economy- eventually. Oh yeah, he also insinuated that Ron Paul was an idiot and to be ignored as well. The entire paper was drenched with pretentiousness and backed, not with logic and data, but with his “expertise” in the gold markets. He’s a professional bullshit artist and propagandist. I used to read his commentaries and take him seriously until I figured this out. At the time I was debating as to whether or not I should buy gold in the $800-850 dip last fall. I almost didn’t because I read the tripe that dickless monkey spews every day. Thankfully, I trusted my ability to reason over his ability to bullshit.
Of course one could argue that because gold's value is stable over time, the rise in the dollar price of gold is due to the fall in the dollar which would be, strictly speaking, correct.
But I don't think this is what Nadler means. What he obviously means is that it is the fall of the dollar against other currencies that is driving gold's rise. But as I point out above, all fiat currencies are falling against gold.
i agree with the inverse. that said, even if the dollar rallies my sense is that sensible investors will believe the debt to be so large that holding gold is the safest investment.
Quite right. 'Dollar as Safe Haven' is last year's story. Who in their right mind, given all the toxic crap soaked up onto the Fed's balance sheet since last year, all the trillions of debt assumed by the Treasury, collapsing tax revenues from which to service this debt and the clear (if still publicly unstated) goal of the administration to devalue the currency, would still consider running to the Dollar for safety?
I speculate that this correlation has been broken since the middle of July. Something had happened at that time, I do not know what it was. My guess is that the financial structure had been dislocated. This cause gold jump now.
Jon Nadler is an IDOT! (An "Often Wronger", if you will).
GW, please stop quoting idots, because the conclusion you draw from their work will be "often wrong".
You have had some good articles, this is not one of them.
if there ever was a time in our national history that we need a george washington, this is it. but not this george.
this george = bob....
Quoting Jon Nadler... LMAO... This site is jumping the shark predicting gold and silver crashes and USD surges like every day now. Get a clue.
Thank you for highlighting yet another insightful piece George Washington! Saw this interview last night and found it to be the single most salient synopsis of the fundamental picture from an actionable point of view that at least I can recall. Our next installment Thursday morning may very well feature some of Jon Nadler's explicit findings / opinions while addressing the technical profile of gold at all time nominal highs when denominated in $USD versus gold plotted in various other G-8 denominations. Simply TOP notch analysis from Jon Nadler with an extremely wide range of topics discussed, as per Gold. And kudos to both Laura Crigger and hardassetsinvestor.com, what a well-done interview, hats-off to them for it
Jon Nadler is a fucking idiot.
Nadler isn't an idiot. He's a cog in the gold price suppression scheme. He manufactures permanently bearish information on “gold fundamentals,” and the papers parrot his opinions almost daily. He’s a stooge working for the banksters. I sent him an email once asking for his opinion regarding dollar devaluation, the direction of the gold price, and interest rates. I thought gold prices might go up given the circumstances last fall. He sent me a reply with an attachment. The attachment was a poorly written essay of sorts. His main thesis was that constitutional money was always a stupid idea, gold’s only utility is that it can be made into trinkets and sold to Indians (Asians), and that the Fed will fix everything that’s wrong with the economy- eventually. Oh yeah, he also insinuated that Ron Paul was an idiot and to be ignored as well. The entire paper was drenched with pretentiousness and backed, not with logic and data, but with his “expertise” in the gold markets. He’s a professional bullshit artist and propagandist. I used to read his commentaries and take him seriously until I figured this out. At the time I was debating as to whether or not I should buy gold in the $800-850 dip last fall. I almost didn’t because I read the tripe that dickless monkey spews every day. Thankfully, I trusted my ability to reason over his ability to bullshit.
"and that the Fed will fix everything that’s wrong with the economy- eventually."
He is right in part. The US Treasury will fix it via higher taxes and more tax loopholes for corporations and the wealthy.
Nadler's a loon, with whom the words 'Top notch analysis' should never be associated. Except, perhaps in a satirically humorous manner.
to run a regression you'll need the historic (let's say 50 years) price of gold & price of dollar vs. a basket of currencies (i would go for a Canadian and Swiss currency - boring normalized growth and business cycle in the last 5o years.)
I could run a regression, but I am rather lazy. My guess inverse relation between those two is present only during tough economic times, during normal business cycle those two are not strongly correlated. (again it's my guess)
I could run a regression, but I am rather lazy. My guess inverse relation between those two is present only during tough economic times, during normal business cycle those two are not strongly correlated. (again it's my guess)