Tuesday, December 18, 2007

The Gold/Euro Bond

As Gold Goes, So Does the Euro
With the U.S. economy spiraling out of control and U.S. interest rates heading lower, I'd say it's not very likely that gold will head significantly lower anytime soon. Also, with shaky times in the U.S. economy, money tends to run to gold as somewhat of a "safe haven."
Nonetheless, I'd rather be wrong and make money. So if gold does fall, look for the dollar to bounce, and the EUR/USD exchange rate to head lower. The dollar wouldn't have much trouble gaining until gold finally hit its 200 simple moving average (red line on the price chart).
Bottom line: If gold goes up, the dollar should fall and the EUR/USD will rocket higher. If gold breaks downward, the dollar will regain some life and head higher, causing the EUR/USD to plummet lower. And that's your directional indicator of the day on the U.S. dollar!

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