Gold vs US Dollar

I am noticing some unusual behavior in the gold and US dollar index.
The reader will note that in August gold moved sideways with not much for gyrations higher or lower. During the same period, the dollar index moved up and down significantly in the range of 3% or so within the month.
In the last 6 weeks we see gold moving steadily upward by $USD150 to $USD 1100. A gain of nearly 16%.
On the other hand, we see the US dollar index slide from 78 to 75, or about 4%.
The magnitude of the upward move in gold is causing me to wonder, has gold decoupled from the stock market and the US dollar?
If the dollar rebounds, as I suspect it will in the next few months, will gold continue to climb or drop back and present us with a good buying opportunity?
Has fear gripped the minds of many investors that fiat currencies are preparing for a race to the bottom?


  1. PW, I do not understand why the dollar will rebound when the U.S. issues massive debts through treasury auctions. What will cause the dollar to rally? What will be the catalyst?

  2. The best answer I can give at this point is to quote part of an article by Andy Xie. I will post is shortly.

  3. I think the realization that the growth picture, particularly in the US, is not as robust as the last three to six months might indicate, could cause the reigniting of deflation fears. This will cause another round of flight to safety, buyoing the dollar and treasuries and causing a sell-off in risk assets. PS - I just discovered your blog (linked on MarketWatch) and I really like your approach. I will continue to check for updates, which is the first 'amateur' blog I will do so for.


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