Wednesday, July 27, 2011

Chart of the day is..., long term chart, in various currencies.

For some reason or another, yesterday I found myself watching one of those TV "gold debates" they do on the biz channels up there in the We-Think-We're-Developed nations and as if on cue, the bearish guy on gold trotted out the argument that it's all to do with the dollar and because the dollar (the denominated currency of gold, as he put it) was weak then gold, the "antidollar" or inverse trade, was strong.

It was the typical typical dumbass in suit that has no freakin' idea about what he's talking about. As you can see, the dollar has tracked up in all the currencies featured, including the strong-performing Brazilian Real (other here are Japan's Yen and The Euro). As this next chart shows, it even works on a 12 month chart, with only the Braz Real putting up any sort of resistance to the norm...but gold's still up there.

So what does it mean when ALL currencies are weak against gold? Yes, it could be a bubble in theory, but I highly doubt that. People aren't (just) running away from the dollar, they're running away from all currencies that only have promises or nuclear weapons to back them up, and when the buying is led by world Central Banks and not the cud-chewing public it's most likely that the trend is still your friend on this one.