The relationship between commodities and the US Dollar
A number of comments today on the USD and its relationship with gold and commodities in general. With the dollar breaking out and technical pointing to a potential 100 level on the dollar index we consider what that might do to commodities.
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Current Reuters CRB Components
Subgroup
Markets Subgroup
Weight
Energy Crude Oil, Heating Oil,
Natural Gas 17.6%
Grains Wheat, Corn, Soybeans 17.6%
Industrials Copper, Cotton 11.8%
Meats Live Cattle, Lean Hogs 11.8%
Softs Coffee, Cocoa, Sugar. Orange Juice 23.5%
Precious
Metals Gold, Silver, Platinum 17.6%
Thank you guys,for commenting on the CRB
Kashkari to the rescue!
Yes, Al, that’s how the dollar is measured, against other currencies. The thing is, the USDX because the dollar really is getting stronger (gaining purchasing power) or it can go up because the other major currencies are getting weaker (losing purchasing power).
Too many investor fail to recognize this and assume that if the USDX is rising, then the dollar must really be strong.
Looking at the gold chart, not the USDX chart, is the best way to know which one it is.
error second line: should say: “…the USDX CAN GO UP because…”
Another way to look at it: the dollar can APPEAR to be strong by simply losing purchasing power at a much slower rate than other currencies. SO, if it goes to 113 because the euro and yen are collapsing, gold can easily rise at the same time.
I stress this all the time because even people who should know better often don’t seem to get it. Doc clearly does get it, btw, and I agree with his comments on gold today as well.
I agree 100%. I don’t think this point can be stressed enough. When it comes to commodities and gold, it is important to take a world view. Only analyzing gold and other commodities from a USD perspective is a big mistake because your measurement tool is made of rubber.
Yes….. In the land of the blind, the one eyed man is king. The Euro and Pound have really been kicked down lately so the USDX can’t help but go up. In fact, if you look at the Euro against almost all currencies, it is lower. I think lately it is really a vote AGAINST Euroland rather than a vote FOR the USD. Gold was sharply higher against Euro today.
http://stockcharts.com/h-sc/ui?s=%24GOLD:$eurusd
Against most foreign currencies (I use a USD Bear fund for comparison) , gold is looking pretty good the last few days.
http://stockcharts.com/h-sc/ui?s=%24GOLD:udn
So my conclusion is that gold and USD are going up together lately and it ain’t dead just yet. I think that this will continue for the next while.
Good charts there, Paul.
King dollar is back!
Being early is the same as being wrong
So,when will you be arriving,James?
The point I was trying to make is that gold and silver are a very small part of the crb.
It, the crb index, can go up or down depending inversely on dollar strength. But it can go up or down because of action in non-precious metal activity.
With a good harvest softs can be in good supply to send the crb down.
Or oil can send the index up or down, seasonally.
So movement of the crb does not nessarily say a lot about precious metals, unless extra info is added.
I agree with that, that’s why I mentioned both gold and the CRB, not just one of them. In fact, I don’t believe that gold should be in the CRB at all.
Congratulations to KE Report for taking off the USD blinders and finally acknowledging the elephant in the room. I had really grown tired of the constant remarks on the daily move in gold when the USD has been jumping up and down like a kangaroo. Hopefully it continues and the next time you opine on a move in gold you will also frame it in context with the move in the USD versus other currencies and money flow around the world.
First Majestic Silver Corp. (AG)
Valuation Up in the Clouds, but No Silver Lining
http://www.kerrisdalecap.com/wp-content/uploads/2016/09/First-Majestic-Silver-Corp.pdf
Impact Silver is 152% more First Majestic this year and IPT priced in FR just hit a new four year high today. That’s why I prefer the juniors.
http://stockcharts.com/h-sc/ui?s=IPT.V%3AFR.TO&p=D&yr=1&mn=0&dy=13&id=p84106135059
+1
Oop, should read “Impact is WORTH 152% more…”
The crb index contains oil though. Unless Matthew is using another index.