I have spent the better part of my 25-year professional career involved in the global currency markets. Throughout that career, the underlying bias for the dollar has been negative. Sure, there have been periodic rallies over the years, but the dominant trend has been and remains bearish.

Let's talk initially about several currencies that have been around throughout that entire time frame. In 1983, when I first started in the business, one dollar bought approximately 240 Japanese yen, 2.13 Swiss francs and .6542 British pounds.

Today, that same dollar would buy about 109.50 yen, 0.9175 Swiss francs and 0.5300 pounds. That's a 54% decline in the dollar against the yen, a 57% decline against the franc, and a 19% decline against sterling over the past 25 years.

Take it back even further to the dollar pegs established after World War II under the Bretton Woods agreement and the trend is even more disturbing. At that time, the yen was pegged at 360, the Swiss franc at 4.375 and Sterling at 2.8. From that point, the dollar has lost 70% of its value against the yen, 79% of its value against the Swiss franc and 33% of its value against pound Sterling.

I think that makes it pretty evident why I'm not terribly encouraged by the 8% rally we've seen off the all-time low in the dollar index over the past month. It certainly doesn't qualify as a reversal of fortunes.

Keep in mind too the starting points for these gain and loss calculations. The yen is actually up 37% from its all-time low at 79.80 (Mar-95). However, 37% of 79.80 and 37% of 360, or even 240 are completely different things. Did you ever wonder why it takes so long to recoup losses in your trading account?

Focus has been on the euro dollar in recent weeks, as it has primarily been flight out of euros that has driven the dollar higher. For this currency pair, euro is the base rate, so it is quoted in euro terms. As the EUR-USD rate goes up, it equates to dollar weakness. As the euro rate declines, it means the dollar is strengthening.

When the single currency first came on the scene in Jan-99 it traded at 1.1800 against the dollar. It ultimately bottomed around 0.8200 in late-2000. Since then, with the exception of a sustained correction in 2005, the euro has moved consistently higher against the greenback.

The EUR-USD rally from 0.8220 (Sep-2000) to the all-time high at 1.6035 (13-Jul) equates to a 95% appreciation in the euro against the dollar. Pretty staggering.

Since the euro peaked last month, it has dropped as low as 1.4815 (12-Aug low). From the all-time high in the EUR-USD rate to the recent low, the dollar has regained a mere 7.6% of its value against the euro. Once again, hardly reason to be encouraged about the long-term outlook for the dollar.

US monetary policy has been one of the primary drivers in the long-term demise of the dollar. Fed funds are at 2.0%, significantly lower than the prevailing interest rate of just about every other major economic country.

At the same time, the Fed has been aggressively growing the money supply to finance soaring deficit spending, a massive trade imbalance and trillions of dollars worth of unfunded mandates. The Fed has also been aggressively pumping liquidity into the banking system in an effort to prevent the credit markets from seizing-up and potentially imploding.

Unfortunately, none of these disturbing trends appear to be on the verge of reversing. Instead, things may actually be getting worse. If the dollar ultimately resumes its long-term downtrend, there is the risk of competitive currency devaluations as countries seek to protect their export markets.

Gold is unquestionably the best hedge against a declining dollar and the resulting inflation. A competitive devaluation scenario will highlight the wealth preservation aspects of gold around the world, increasing demand as global supplies continue to tighten. That makes gold look ridiculously cheap at today's prices.

Gold Market Movers:

US CPI up 0.8% in Jul, above market expectations. This accelerates the y/y inflation rate to 5.6%.

Initial jobless claims for the week ended 09-Aug -10k to 450k, below expectations.

Eurozone Q2 GDP fell 0.2% q/q, better than expected.

Eurozone final HICP for Jul revised lower to 4.0% y/y, from 4.1%.

German Q2 GDP fell 0.5% q/q, better than expected.

German final HICP for Jul revised up t0 3.5% y/y.

Eurozone economy contracts for the first time

U.S. foreclosures rise 55%, bank seizures reach high

Barclays battered on write-down fears

Consumer prices see biggest on-year jump since 1991