GOLD AND THE EURO

The price of gold fell on Monday. That should not surprise anyone and marked the straight daily decline at the lowest price of the day. The September contract closed at $946.70.  
 
Gold's weakness has come about due to the recent rally in the value of the U.S. dollar. All advisors had investors looking one way when it came to the dollar. A yawning fiscal deficit - the cost of creating perhaps sufficient demand to permit economic recovery - would be sufficient to send the dollar plummeting towards earth in a death spiral, according to most.

That train of thought hit a railroad on Friday when the dollar rallied in light of allegedly positive economic news. We say this because the script calls for dollar weakness in light of strengthening economic news. A decline in the rate of unemployment to 9.4% should have seen the dollar plunge against the euro to $1.45, which would have been a new high for this recent move. One could equally argue that the Canadian dollar and Australian dollar should have rejoiced at the prospect of a rebound in activity driving commodity prices further forward.
 
But the whole exchange rate dynamic fell to pieces on this news. Commodity dollars partially eased while the British pound fell into a funk of its own. Recent signs that the economic recovery was becoming bolder were dashed when the central bank unexpectedly asked the government if it could do more to stimulate the economy through its asset purchase program. That perspective undermined the recovery philosophy.
 
Given the incredible weight of opinion behind the prospect for a euro recovery, there is seemingly much disappointment over the failure of U.S.- lead recovery to boost its fortunes while simultaneously sinking a torpedo into the side of the dollar.
 
In this light the price of gold is suffering. The employment report in one sense removes a shroud over economic prospects and although it hardly reveals recovery, it does undermine the prospect for depression. Gold in that light has suffered. Gold in a sense almost needs one of two scenarios to hurry up in happen. It either needs a trend of accelerating consumer prices or it needs evidence of the onset of deflation.
 
Current trends show that while European wholesale producer prices are worrisomely low, the state of consumer price inflation is hardly cause for concern. In the event that Europe is genuinely lagging the U.S. recovery, this lack of volatility might end up curbing investors' enthusiasm for gold as a hedge.

All entries are now in for Friday's free drawing
on the closing price of December corn futures.

The winner will get a FREE Subscription to
Global Resources Alert.

Watch out for the key crop report from the USDA
later this week, which is likely to help
create volatility for agricultural prices.

Bearish on U.S. government bonds?
Global Resources Alert
Subscribers know which bond-based ETF
to buy to take advantage.

The Supreme Council of the Secret Order of Jurojin

Tyche Research