Stay focused on the long-term. Sometimes we need to take our eyes off the daily gold and silver prices and remind ourselves why it's a MASSIVE Gold Bull Market.
How important is the Dollar Index level 80?
Take a look, you decide?
Chart 1: US Dollar Index looking towards the abyss
Gulp!
The Dollar Index is a trade-weighted, index of the US Dollar against other major currencies. It's hanging from a cliff.
Nothing can replace fresh air below 80. This has never been broken in currency history. Some argue that the index's composition changed and it would now be underwater if it used the old weightings. Maybe so. Trades are influenced by charts. The above chart shows that 80 may not have been tested enough times to be able to fall.
In intermarket parlance, there is a positive relationship between Bond Prices (and the US Dollar) It means that, if the US Dollar moves lower than Bond prices, interest rates rise accordingly. So, it is easy to trade, right? It's not that simple, but there's a catch. A significant and ever-changing time lag must be taken into consideration. The Dollar has reached new highs in 2002. Mid-2003 was the lowest point at which interest rates hit their highest level.
As the Dollar continues to deteriorate, interest rates will rise. This is despite Asian Central Banks' efforts to convert Dollars into US Bonds. Rates have been artificially kept low by the shenanigans of the US Central Banks. Market forces win and the trend is clearly towards higher interest rate.
Real tangible assets provide a balance to the paper financial assets, such as Bonds and Dollars. We prefer one's that don't have to be financed by debt (Real Estate), and aren’t economically sensitive (Oil and Industrial Metals). This leaves us with our favourite - gold!