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That is why one must view the chart to gauge which view will dominate. If Eurogold takes out the psychological and technical resistance level of 1000, then maybe we have something. For now, it is range bound.
The USDX has gained 5.5% since early May of this year and is currently working back to the top side of a more than two year long range trade. There is some light resistance near 84 with more formidable resistance near 85. If the Dollar breaks through both levels, one would have to say that a run to 88-89 is not out of the question.
The Daily chart shows a powerful uptrend underway. Simply put, it has become a matter of dueling economic performances. Traders are looking at the relative performance of the various nations/zones whose currencies comprise the USDX and compared those to that of the US and are voting in favor of the US.
This strength in the Dollar also tends to depress commodity prices in general. One thing that concerns me is that we are getting a surge higher in the Dollar at exactly the same time we are getting more and more confirmation of a bumper corn and bean crop. As a rising Dollar makes US grain/beans more expensive on the global market against our competition, prices may have to take into account the higher Dollar. Translation – foreign buyers of US grain may be waiting for prices to fall yet further than they otherwise would have to help offset the stronger greenback.
One last thing- this rise in the US Dollar is not going to make it any easier for gold to rise in price. In foreign currency terms, gold is doing okay, especially Eurogold but as said before here many times, it is geopolitical events supporting the metal.
As far as Europeans are concerned, an interest rate environment such as the ECB is creating, is a two-edged sword. On the one hand, it lowers the opportunity cost of holding gold since bonds there pay next to nothing and thus incentivizes ownership of gold. On the other hand, the stronger Dollar ( via weaker Euro) raises the price of the metal and thus makes it more expensive to buy and own.
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