Gold & The Dollar Moving Up Together?

Continuing my observation on the US dollar and the carry trades, a slight twist has started to appear that could confuse some casual market observers. Previously I have talked about how the weak US dollar propelled the stock market, the price of oil and the price of gold. Now I’m seeing gold could be making another move upward at the same time as the dollar continues to regain its strength. This seems to contradict the weak dollar, higher commodities prices, and the strong dollar, lower commodities prices scenario.

But did you recall what I wrote back on November 16 about where the price of gold could reach? I stated in that post in order for gold to reach the next level near $1300, it will be a different catalyst other than the weak dollar. And I believe this trend change for the dollar and the price of gold to move up together is due to a new catalyst. This catalyst could be the resurgence concern on the long term inflation due to the massive liquidity the Fed has injected into market and the possible early rate hike from the Fed, or a short term catalyst like the possible preemptive military strike on Iran to remove the threat of Iran developing nuclear weapons. These possible catalysts could cause the dollar and the price of gold to move up in unison. And yes, short term, the price of oil could spike up as well due to possible short term interruption of the oil supply from the possible military action. In regardless which scenario is at play, from the price action of the dollar and the price of gold, they are definitely appear to be moving to a higher level.

Here are the latest charts with my commentary. Click on them to get a larger view.

GLD



DXY



UUP



FXE