Monday, November 13, 2006

The Ugly Looking US dollar Index

Nothing but bearish head and shoulder patterns right now in the US dollar Index charts. Long term, intermediate term, or short term. No wonder the gold price is looking so bullish.

The long term head and shoulder pattern is projecting a US dollar Index down around 50, so there are a number of years to go in the gold and silver bull markets:
(click on 10 year chart for enlarged view)

The less valuable a US dollar is, the more US dollars someone is going to want for the same amount (weight) of gold.
(click on 2 year chart for enlarged view)

(click on 6 month chart for enlarged view)

The smaller Italian central bank announced a while ago that they will be diversifying out of US dollar. The smaller UAE's central bank has announced the same. If some one wants to get out the small door first, the smaller central banks have the best chance as they don't have huge amounts of USD denominated assets to get rid of. They will not move the price of gold up and the US dollar down as much as the larger central banks would. It could be that beads of sweat are collecting on the foreheads of central bankers. Meanwhile they are probably all hoping that a panic does not develope.

Russia and China are making the same type of noises.

Remember a couple of years ago when Argentina announced more than once that they were actually buying gold for their central bank's reserves? Now that was getting a jump on their competition because there is not much gold out there compared to the monstrous amounts of US dollars that are going to increasingly be looking for gold.

Dubai gold trading volume reaching new highs:
"DGCX trading scales new heights"

"Something's up" and it's not the US dollar Index.

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