The Gold/Euro wait
Der Invest
Informant
Randy Buss
17 November 2004
Currently there is a battle in the markets, in my opinion. The
battle is between a world waking up to the fact that the world's
reserve currency may in fact not be a reserve currency at all
given the US's fundamentals and a world which likes to think
that "business as usual" will last forever. Of course
nobody wants to see a complete meltdown of the US Dollar - because,
likely, then all hell would break loose - nor, on the other hand,
do they likely believe the US is in a healthy state of finances.
So the external trading partners of the US are likely looking
for the elusive "right level" to keep the whole machinery
ticking over albeit with a downward US Dollar bias. At least
that is how I read it. And, I must say, when things start getting
overly talked about on the negative side, then that is a time
when we might should expect a correction of some sort. Will that
correction upwards happen for the US Dollar? People, and currency
traders, around the world have billions riding on that question
right now.
Another thing that is talked about a lot of course is the inverse
relationship of US Dollar and Gold. This too has been much talked
about - and with good reason. But here in Europe things are a
bit more staid. People here are more conservative I would say
and take longer views of the market, if they are in the markets
at all. That is not a judgement of investment savvy, or not,
just an observation.
Take a look at these pictures below - Gold versus US Dollar and
the Euro:
Now I see some significant
things in these graphics : Firstly, the Gold/USD shows a teacup
and handle formation which is bullish and which has just broken
above the previous resistance level set in early 2004. In fact,
that teacup has been forming for the last 10 years! Secondly,
the Gold/EUR shows a more erratic behaviour. As I have spoke
about several times, the "gold bull" has not really
even begun yet in either Euro or Swiss Franc terms. Yes, there
have been some gains these last 4 years, but not nearly on the
terms of the gains compared to the US Dollar. But then again,
neither the Euro nor the Swissie have lost 40% of their purchasing
value in the last 3 years. The thing I am waiting for is the
3,50 level on the lower graph (Gold/Euro) to be significantly
breached to the upside. At that point this whole gold thing becomes
a much more global occurrence than just a weak-dollar-american
one. Equally, should the gold advances in US dollar terms outpace
the US Index (verses Euro) then this too will catapult the Euro
price of Gold. That is simply the cross-currency risk (or advantage)
which all nations contend with since commodities are priced in
the Empire Dollar.
If and when the Gold price breaks out in Euro and Swiss terms,
then I should think that more European investors would join in
the metals fray. Let's keep a vigilant watch on these charts
over the near term.
16 November, 2004
Randolph Buss
Any remarks or comments - All feedback is gladly accepted (good,
bad, indifferent). editor@dinl.net.
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Disclosure
and Disclaimer Statement: This document is intended for informational
purposes only. DINL is not a registered financial advisor in
the USA. Not advice or intended as advice. The author has not
received any payment or reimbursement of any nature for writing
this article. The author's objective in writing this article
is to raise awareness within the reader and to further their
understanding of international and/or monetary issues and to
encourage their own further due diligence / research. Neither
the information nor the opinions expressed should be construed
as a solicitation to buy or sell any stock, currency or commodity.
Investors are recommended to obtain the advice of a qualified
investment advisor before entering into any transactions.
© Copyright 2004 DINL / R. Buss
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