Thanks to Christopher Aaron @ iGold Advisor for jogging my brain this afternoon. Chris was kind enough to send me his thoughts and analysis.
His piece brought my mind back around to an unusual environment… as the Markets grow increasingly complex over time. I was reminded of the prior positive correlation of the Dollar and Gold – 1982 to be exact.
As you can see – it’s been awhile since the US dollar and gold price moved in the same direction.
Gold being priced in dollars – the traditional correlation has been inverse. The most recent and short-lived Positive Correlation was in January of 2009 when the rally in the US dollar corresponded with the rise in the gold price – out of the 2007-2009 Finacial Crisis – both Gold and the Dollar rose together.
During 1982 recession hit many countries including the United States… The rise in gold prices can be partially attributed to future inflation problems (i.e.. Stagflation during the late 70’s and into 1980).
That was then… a paired movement in the value of gold and the US dollar suggested central banks around the world were losing credibility.
The US dollar has been falling for some time now – the twilight of its immense seniorage privilege could be closer than we imagine.
Gold usually informs the market that investors are worried about global economic stability outside of the US and preparing for the worst – this of course is tradition… it is missing due to an intense effort to stifle the Price of Gold and Silver since 1934. Since 2011 – this effort has intensified orders of magnitude.
Often things just get screwed up, this may well be one of those periods. We shall see – this was to serve as merely a subtle reminder – we can expect the unexpected – it’s not irrational, we simply don’ know until it ex-post.
Will it happen again, It could… than again, the DX could simply fall to 70 and that would be spectacular for Gold & Silver – but rather ruinous for our Nation.