The other currency

The U.S stocks surged yesterday as the Fed and Janet Yellen said they would continue the central bank’s policy of providing monetary stimulus to bolster the economy. This is music in the investors ears!

 

«What would cause the committee to consider a pause in tapering is a notable change in the outlook,» Janet Yellen said. Republicans don`t want to fight anymore, so he house voted to raise the government`s borrowing l limit. This will continue until March 2015.

 

Asian and European stocks is up today, as the investors cheered Janet Yellens stance. Gold is down today. USD have always had an interesting relationship with Gold. When gold is rising the dollar has declined in the long term, but that is not true, in the short term, so the relationship can be tenuous at best. Take a look at the charts, and you can see for yourself. You can see a strong negative correlation to a strong positive correlation and back again.

 

This relationship can be linked to the Bretton Woods System. International settlements were made in U.S dollars and the U.S goverment promised to redeem dollars at a fixed gold rate. Bretton Woods Systems was dissolved in 1971. When gold is discussed, talk of the U.S dollar usually ensues.

 

Gold and U.S dollars can be seen as a trading pair like EUR/USD or other currency pairs, but it is important to remember that gold and currencies are dynamic and have more than one simple input.

 

Gold is impacted by far more than just U.S dollar, inflation or war. Gold can be traded all around the world as a global commodity and it reflects global sentiment. Not only a sentiment of one economy or group of people.

 

It seems like a new bullish trend have started, but be careful and take a look at the gold, equity markets and the U.S dollars during the 2008 financial crises. Gold plummeted like the stock market, and the U.S dollar skyrocketed. This is just a reminder.

Gold

 

Reports today:

 

10:30:00am EUR ECB Precident Drahi speeks        
10:30:00am USD Crude oil inventories        
01:01:00pm USD 10-y bond Auction        
02:00:00pm USD Federal budget Balance        

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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