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To: HEY4QDEMS

I don't understand. Could you say more about why the gold price means that the dollar is doing well?


19 posted on 05/09/2006 3:54:58 PM PDT by stop_fascism
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To: stop_fascism
No, high gold prices generally mean the dollar is doing badly.

In 1980 the dollar was at one of it's lowest values since before WWII and gold was way up.

I suspect the US dollar is down right now although I haven't been following it lately.
24 posted on 05/09/2006 3:59:18 PM PDT by HEY4QDEMS (Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.)
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To: stop_fascism
One other point to remember is that up until the Great Depression, the US Dollar was on the gold standard.
Had FDR not taken us off the gold standard, (he took us off silver as well), then yes the Dollar would be doing very well when Gold is doing the same.
32 posted on 05/09/2006 4:12:19 PM PDT by HEY4QDEMS (Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.)
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To: stop_fascism; HEY4QDEMS

re. gold & dollar relation.

Well, yes and no. The relationship is not causal, although it can be. In the case of today the simultaneous decrease in dollar exchanges and increase in gold are related only by circumstance. Besides, the dollar exchange drop is nowhere comparable to the gold/dollar increase.

Like oil, gold is up because of 1) demand in Asia; 2) insecurity in geopolitics. Were the dollar related to this, its value against other currencies would have dropped vastly more than it has. The dollar's recent drop v. the yen and the euro is more about expectation that the Fed will slow its interest increases, thereby making dollar holdings less attractive. However, as with the dollar drop of last year there's a limit. The problem is that things based in dollars are too valuable, especially US Treasuries and the U.S. stock markets. Investment in the U.S. remains the best quality investment in the world. There are higher returns elsewhere, but the U.S. stands as the global hedge.

Oil and gold prices reflect international consumption and international tensions. The dollar value is down due to the same, but the reality of U.S. economic and political strength keeps getting in the way of dollar bears who hope for a more drastic drop that would correlate to the gold/oil prices.

When investors wake up in xx months (place your bets here; I'm thinking early Autumn) and find that the world has not ended, both oil and gold will drop. The dollar probably won't change much either way.


43 posted on 05/09/2006 4:50:57 PM PDT by nicollo (All economics are politics)
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