Gold and The US Dollar

Jordan Lindsey – JCL’s Forex

Although long term I am very bullish on Gold I am not in the habit of buying things while they are trading at their all time highs. For as long as the Federal Reserve continues to print easy money the current rally will continue with equities and commodities (gold) rising and the $USD continuing to be devalued.

Eventually the Fed will begin to pull in liquidity from these over inflated levels while rising interest rates to fight inflation. Depending on how well that high wire balancing act while driving at 60 miles per hours goes will so also the value of the us dollar.

If inflation gets out of control Gold & Silver will appreciate in value, not only as a hedge against inflation but also in this unique case against the value us dollar which could be in jeopardy of defaulting for the first time in history.

I would not bet against the dollar for too long. The US Dollar and Japanese Yen have proven themselves to be safe heavens in times of crisis and if you believe there has been no recovery and the fundamentals of the economy are increasingly worsening than you have to be bullish the USD & JPY short term.

That would also mean being bearish gold, oil and all commodities in the short term as they are all traded in dollars and once the dollar beings to gain in value commodities including gold will devalue in value. Are you able withstand a 20-40% correction in gold, do you want to? Or do you find it more prudent to buy into that weakness in order to hold long term as a hedge against the US Government actually defaulting on the dollar.

In the interest of full disclosure I am bullish gold and commodity based currencies (AUD, CAD) and bearish the USD for the long term, however now I am selling my long gold/silver positions into these current highs as well as closing my short USD positions and have just begun buying the USD into this weakness. I am not taking short positions on gold only taking profits on long positions and will add to my positions on retracements starting at 20%.

Be a trader, learn to think for yourself, don’t follow the heard because the herd is always on the wrong side of the trade.

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