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- Forecasts - Gold/Silver/Platinum/Shares/ Oil/Dow/ Treasuries
- Gold in different Currencies.
- Comex positions/ Commercial Shorts,
- Indian Demand this week.
- The de-coupling of gold from the € & the $.
- The €.
- Gold Exchange Trade Fund opens in Europe.
- Recent Sales under the C.B.G.A.
- Will Germany Sell?
- The Oil crisis.
- Portfolio Progress in other parts of the Globe /Prospects for the US $
- Short & Long-Term – DJIA - 10-Year Bond - CRB - Gold: Oil Ratio - Technical Analysis - Gold Price: Long/Short term in the U.S. $ - International Gold Markets
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The De-Coupling of Gold from the € & the $
As we said in the market section above, the de-coupling of the gold price from the $ and the € is now complete. Initially it was thought to be a shift, a sort of one-off adjustment, but it 
has now developed into much more. The most notable feature of the week has been the climb in the € price of gold to attack the €400 level, in the wake of a weakening €. It was not quick to rise with the $, but it did so in the second half of the week and rose in terms of the U.S. $ to show it had de-coupled.
Market players tend to treat such events as simply changing formulae in the market and don’t weigh the implications of the fundamentals behind the changes. Because of this the price moves tend to be minimised until the full force of fundamentals moves are felt. But this de-coupling is a huge change and one that has to be understood properly. It confirms that the ‘Bull’ market in gold is set to begin properly!
What is happening is that € holders are seeing their currency fall and gold is describing the fall better than the $ is, because the $ is falling as well. Both currencies are taking strain, but because we tend to look at one from the other it is difficult to focus on what is making them both weaken.
Just as the Fed is raising rates to be able to tackle expected inflation coming down the pipe, so their actions demonstrate the reality of their fears, despite the core inflation appearing benign at present. Why inflation? The oil price has dropped back from $70 a barrel but remains at a rising average well above previous levels seen before. Few people are convinced that the oil price has stopped rising. Most accept that in the medium term the oil price has some way to rise, possibly to average $70 - $80 in the future. These prices have to be passed onto the consumer at some stage, so as to restore profit levels. If this does not happen the net effect on the global, not just U.S. economy, is the same as increased taxation, a direct withdrawal of spending power from all levels of the economy, particularly from the consumer’s pocket. This will lead to a diminishing of growth levels if not a recession. The global economy does not simply recede it adjusts to favoring the cheapest goods and moving away from the more expensive goods, as a first line of defence against a recession. This favors Chinese products over others. The full picture of this move is to structurally change the global economy in favor of the Asian economies over the Western ones.
Over time the currencies of Asia ascend in terms of their place in the global economy, whilst the developed world currencies will reduce their presence in the global economy. Such structural adjustment has begun in terms of the valuation of the Yuan in China ready for the day the Yuan takes its place on the world scene, pushing aside the U.S. $ and the €, to some, if not a large extent.
Bear in mind that the Yuan is the currency of 1.4 billion people and the $ the currency of around 300 million people. The growth in wealth need only be proportionally smaller for the wealth of China to overtake that of the U.S.A. Of course the entire globe will face the same pressures from the oil price and subsequent inflation or recession, including Europe and China. But it is the € and the $ whose currencies are sufficiently global to reflect the uncertainties facing us all. Not surprisingly the Europeans will be far faster to turn to gold than the average U.S. citizen.
The sagacious Investor takes action on this well before the event. So the Investment demand for gold that will be necessary to take gold to new heights is beginning and will grow over time to a significant proportion of gold purchases. In the light of the already tight Supply & Demand balance in the market place for gold, even small moves into gold by large Investors has a very big impact.
Add the two situations together and you can see why gold has de-coupled from both the € and from the $.
Global Watch – The Gold Forecaster covers the items listed above in the Index
One of these is: -
Recent Gold Sales under the Central Bank Gold Agreement
Since the second year of the Central Bank Gold Agreement began on the 27th of September 2005, these have been the approximate level of sales from the signatories: -………….
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