Strong Dollar Trade Chart 1: The price of Gold began its parabolic ascent as in the summer of 2007 moving from approximately $665 to over $1000/oz. as the DXY (U.S. dollar) gapped lower on Fed actions to combat the credit bubble.
U.S. Dollar quietly surging higher and this morning kisses the closing level of July 24th last year, which marked multi-year highs.
Last night’s macro in a word is terrible. China PMI and German manufacturing offer no relief for commodities and they are linked.
Dollar Chart (DXY) still very impressive reversal to strength looking over last 1.5 years.
Weak U.S. manufacturing data could be good news for gold bugs, having now officially contracted for the third month in a row and flaring up speculation that the FOMC will initiate another round of quantitative easing (QE3) at the next scheduled meeting.
Federal Reserve Chairman Ben Bernanke did not introduce a third round of quantitative easing (QE3) in his speech at Jackson Hole on Friday. But he did put forth the framework for what one analyst termed “QE forever” — which could lead to permanently high oil prices.
China has been actively weakening the yuan (CNY, quote) recently in preparation for a falling dollar because of more economic stimulus measures. Due to this market action, major oil stocks such as Ecopetrol (EC, quote) and Sasol Ltd (SSL, quote) are becoming more attractive with dollar strength inversely correlated to the price of crude.