Live London Gold News Wire

NEW in the last 5 minutes www.usagold.com --LIVE NEWS--
UK economy grows 1.0 pct between July and September, ending 9-month recession....	02:49 The San Diego Union-Tribune - Business
British economy grows 1% in the third quarter, surpassing estimates	02:49 MarketWatch - Commentary
Sell MCX Gold Dec around Rs 31000; SL Rs 31090: Fortune Fin	02:48 MoneyControl.com
Cameron: 'Still much to do, but economy is healing'	02:48 ITV News - Business
Britain Exits Recession With Strongest Quarterly GDP Growth in Five Years	02:48 IBTimes.co.uk - Economy
Australian Dollar Outlook - 25/10/2012	02:47 IBTimes.co.uk - Global Markets
Forex: GBP/USD rallies on surprising UK Q3 GDP	02:47 FXstreet - Forex News
Venezuela cut gold holdings by 3.733 tonnes in August: IMF	02:46 Business Recorder, Pakistan
Spanish, Italian banks buy govt bonds in Sept: ECB	02:46 Business Recorder, Pakistan
Britain Probably Out of Recession as One-offs Boost Growth	02:46 ThisDay Live
BREAKING NEWS: UK emerges from recession	02:46 TheBusinessDesk.com
Real-time PAYE a real worry, hears Treasury committee	02:45 Accountancy Age - Analysis
5 to 10 minutes old www.usagold.com --LIVE NEWS--
Pound Advances Before Data Forecast to Show U.K. Recession Ended	02:44 Bloomberg - Markets
DRDGold Q1 gold production up	02:43 Moneyweb - Across the Atlantic
Britain moves out of recession	02:43 FT.com
Fisher: UK economy has been flat, not in recession	02:42 The Economic Times
UK out of recession as better-than-expected GDP rises 1%	02:42 Investment Week
Aussie miner Resolute Mining tries to trump Chinese move on gold miner Noble	02:41 The Economic Times - International Business
BoE's Fisher says UK economy has been flat, not in recession	02:41 The Economic Times - International Business
Euro Down In The Wake Of Poor Economic Data	02:41 ForexPros.com
Shekel continues slide against dollar and euro	02:41 Israel Business Arena - Business
Spanish, Italian banks buy govt bonds in Sept - ECB	02:40 Yahoo! UK & Ireland
10 to 15 minutes old www.usagold.com --LIVE NEWS--
Breaking News: Recession is over	02:39 TheBusinessDesk.com
Britain finally emerges from double dip recession	02:38 Citywire - Money
Treasury: Economy 'on the right track'	02:38 ITV News - Business
Osborne: 'These figures are a sign the economy is healing'	02:38 ITV News - Business
UK crawls out of recession as GDP up 1%	02:38 Citywire - New Model Adviser
U.K. Economy Surges 1% as Britain Exits Recession	02:37 Bloomberg - Regions
Forex Flash: RBNZ hawkish in Wheeler's first communiqué – TD Securities	02:37 FXstreet - Forex News
15 to 30 minutes old www.usagold.com --LIVE NEWS--
The Germans Are Coming for Their Gold	02:34 CNBC.com - Europe
Sterling rises on expectations of solid UK growth	02:32 Reuters.co.uk - Currencies - UK Pound
Gold now top conflict mineral in Congo: Report	02:31 WHIOTV.com, Ohio - Business
UK out of recession	02:31 TheBusinessDesk.com
Gold futures open higher at Rs 30,875	02:31 The Hindu Business Line - Markets
EL-ERIAN: 'Sputnik Moments' And Leap-Frogging Innovations Could Ignite The Economy	02:28 Business Insider - Finance
Canon cuts outlook, hit by euro crisis	02:27 The Economic Times - Economy
Reuters Today: Britain probably out of recession	02:26 Reuters.co.uk - UK Business (Video)
Scientists change the colour of gold	02:23 The Economic Times
From Ozzie's Gold Gloves to Knight's rings, sports stars sell memories, beat tax increase	02:20 Orlando Sentinel, Florida
30 minutes to 1 hour old www.usagold.com --LIVE NEWS--
Editor’s Morning Forex Review: One-Offs Boost UK Growth	02:19 ForexSpace
Forex: EUR/SEK spiked 8.7000 after Riksbank	02:17 FXstreet - Forex News
BoE's Fisher says economy has been flat, not in recession	02:15 Reuters.co.uk - Business & Finance
A rural economy summit was hosted at Hurstbourne Priors	02:11 Basingstoke Gazette
Canon cuts outlook, hit by euro crisis, China boycott	02:11 The Economic Times - International Business
Gold follows equities higher in Asia	02:09 Business Day - Markets
Forex Prices at 09:00	02:08 MoneyAM
BOE’s Fisher: UK economy has been flat, not in recession	02:07 ForexLive.com
Forex Flash: UK GDP expected to show a bounce back in growth – ING	02:07 FXstreet - Forex News
Italy: Wage Inflation (MoM) up 0.1% in Sep; (YoY) grows 1.4%	02:07 FXstreet - Forex News
Forex: EUR/GBP trapped at 0.8080/0.8100	02:07 FXstreet - Forex News

The Dollar Index and Gold

by Peter A. Grant

Oct 22, AM
(from USAGOLD.com) --

The dollar index has probed above the 80.00 level today as weak corporate earning, continued uncertainty surrounding the eurozone debt crisis and persistent global growth concerns prompt renewed risk aversion. The 80 level in the DX seems hauntingly familiar. In fact, it pretty much defines the midpoint (actually 80.20) of the range that has dominated since the index initially fell below 80.00 back in September of 2007. Since then, the dollar has passed back and forth across this level many times.

Coming off its 2001 peak at 121.00, the DX actually first approached 80.00 in December of 2004, when it established a temporary bottom at 80.39. Arguably the dollar (as measured by the dollar index) is effectively "unchanged" over the past seven years.

Noting how the financial press is very quick to attribute price fluctuations in gold to the rise and fall of the dollar, my colleague Jonathan Kosares posed the following question in our October newsletter: "If the dollar index is so important to predicting and explaining the value of gold, then how does one explain that seven years after hitting the low of 80.77 (close), the dollar index is still trading in the same range - just above 80 today - yet gold has quadrupled?"

Falling back on the perceived inverse correlation between the dollar and gold is easy to do. As I write about the gold market every day, I have done it many times myself. If you look at this daily chart of the dollar index, with the gold price overlayed, you can see why:

Chart by NetDania

However, it's always worthwhile to take a step back and re-familiarize ones-self with the longer-term perspective. The monthly chart drives home Jonathan's point pretty effectively; gold's secular bull market commenced in the midst of a dramatic rally in the dollar index from the late-90s through the early-00s.

Chart by NetDania

After the dollar index peaked, it lost a third of its value over the course of about three-years. The corresponding correction in gold was less than 20%, at which point the yellow metal rebounded, while the dollar resumed its fall. From its high in 2001 at 121.00 to its low in 2008 at 70.79, the DX plunged 41.5%.

During the worst days of the financial crisis, we saw the DX and gold become correlated as investors delevered and sought safety both in gold and the greenback. While gold went on to establish a series of new all-time highs, ultimately reaching $1920.74 a little more than a year ago, the dollar index recovered less than a third of the losses realized in the preceding years before coming under renewed pressure.

During the more recent consolidative phase the two markets have been inversely correlated. Nonetheless, Kosares goes on to suggest that "the long accepted inverse correlation between the dollar index and the gold market is flawed and needs to be abandoned. Not just because it fails to explain the last seven years of gold’s performance, but it stands to only become more irrelevant, and even potentially misleading, moving forward."

What's important to remember, is that the DX is a measure of the value of the dollar relative to other major currencies. The zero interest rate policies, competitive currency devaluations and interventions of the last several years have forced down the values of many currencies simultaneously. In that context, it's not surprising that the dollar is at best treading water in a draining pool. "Race to the bottom" is a phrase bandied about by many that have made note of the escalating currency wars.

What's truly significant from a consumer's perspective is that the purchasing power of the dollar has eroded significantly against the things most families spend their money on, seemingly in conflict with the perceived stability of the dollar.

On average, the items charted above are 45% more expensive than they were in January 2005, with gasoline costing double. I would expect the FOMC to reiterate today that "inflation has been subdued," although anyone who goes to the grocery store or drives would likely beg to differ.

The takeaway here is: Don't be deceived by the relative "stability" of the dollar index, nor the notion that inflation is subdued. The gold market is trying to tell us something; in fact, many things. And one of them is that there are indeed price risks peculating just below the surface of this subdued economy. Gold is a critical component in a well diversified portfolio, that can truly shine in an inflationary environment.

Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets.

NEWSLETTER SIGN-UP

Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Gold dealers index of gold coin images - popular investments

USAGOLD Bulletin Board

Just released!
The all new Third Edition

Chapters

Reviews

Preview

Order

The Third Edition of this classic how-to details gold's rising prominence in the global financial arena and offers insights as to what this surprising and historic shift in sentiment might mean to the gold market of the future. It also suggests practical guidelines for adding gold to your portfolio drawing from the author's nearly 40 years experience in the gold business.

"Highly recommended!"
The Midwest Book Review

1-800-869-5115
Marie, Extension #106

Looking for the right
gold firm?

Competitive rates
Safe, quick delivery
Zero complaints at BBB
Friendly, professional service
Recognized industry leader

You just found it.

USAGOLD
Celebrating our 39th year
in the gold business.

Seven reasons
high-net worth gold
investors choose
USAGOLD

Video Roundtable:

Fundamentals pave way
for gold breakout

Precious Metals Trading and Storage Program
Competition for the ETFs
with a delivery option

VISIT OUR NEW PAGE!

Gold's Secular Bull Market
Past-Present-Future

Good Stuff !

P.O. Box 460009
Denver, Colorado 80246-0009

1-800-869-5115 (US)
00-800-8720-8720 (EU)

303-399-6759 (Fax)

[email protected]

Office Hours

6:00am - 7:00pm
(U.S. Mountain Time)
Monday - Friday

American Numismatic Association
Member since 1975

Industry Council for Tangible Assets

zero complaints

Thursday October 25
website support: [email protected]
Site Map - Privacy - Disclaimer
The USAGOLD logo and stylized gold coin pile are trademarks of Michael J. Kosares.
© 1997-2012 Michael J. Kosares / USAGOLD All Rights Reserved

Daily Gold Market Report

The Dollar Index and Gold