The Gold Dollar

The gold dollar was a United States dollar coin produced from 1849 to 1889. Composed of 90% pure gold, it was the smallest denomination of gold currency ever produced by the United States federal government. When the US system of coinage was originally designed there had been no plans for a gold dollar coin, but in the late 1840s, two gold rushes later, Congress was looking to expand the use of gold in the country’s currency. The gold dollar was authorized by the Act of March 3, 1849, and the Liberty head type began circulating soon afterward. Because of the high value of gold, the gold dollar is the smallest coin in the history of US coinage.
The gold dollar link is divine and stands till date. There has been only one prior instance since 2004 (2) when Dollar and Gold strengthened together. The current situation (6) is also witnessing a move up on DOLLAR index and Gold simultaneously. Conventional thought may find it perplexing how this could happen. But just like everything, correlation is cyclical. There is high correlation, low correlation and negative correlation between two assets. This is what is happening between DOLLAR and GOLD. The negative correlation of past years is moving to a positive correlation. But then paper and hard assets can not move in sync for long. This is why one of the assets has to give in. Either Dollar should stop strengthening or Gold should come down.
One would say why this positive correlation can not last for some more time. Yes it can, but now that both dollar index and Gold are heading towards historical highs, we are reaching inflexion points where we could see this positive correlation break down. A gapping USD only confirms that inflexion point might be near.
Our Gold topping view hence is under pressure. It was under pressure since Gold broke above 900. We were singly negative on Gold and positive on all the rest of the metals. We illustrated many reasons to validate our view, but Gold continued to break all our projected resistance levels starting 900, 940 and now is pushing higher to psychological 1000 levels. A breakdown in the DOLLAR-GOLD parity is what will give us further confirmation. A turn down on dollar here would suggest that Gold is indeed heading higher and any dip from current levels will not take us to new intermediate lows. While a break on dollar to new highs would keep us on our preferred negative view on gold.
On the negative side, time oscillators continue to suggest a topping Gold than otherwise. Any dip from current levels could see prices pushing lower till end of Feb, early Mar.
We have carried anticipated and happened cases on PLATINUM, SILVER and SILVER INDIA spot. We were positive on PLATINUM since 800 levels and now it has broken psychological 1000 and headed higher. ZINC and COPPER are at key supports. Our ‘screaming buy’ view on ALCOA stands challenged now that it is retesting previous lows. Though the prices held above anticipated supports, they failed to push higher. A break at previous lows would be negative. We will review after prices push back above respective levels. Overall, the metals case seems a bit overstretched now and if Gold had a tough time turning down, exhausting trends on rest of the metals should see some supply pressure coming in across the board. But till that happens Gold 1,000 could be some news to watch. At this stage we remain ‘Up and Topping’ on the metals complex.
Enjoy the latest WAVES.GOLD
REUTERS RICS: XAU=, XAG=, XPT=, CU-NYC, .SPGSIZ, SPGSIA, .NSTL
ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM
ORPHEUS RESEARCH AT REUTERS – USA