Ben Bernanke's dollar-supportive words had a chilling and immediate effect on both gold and oil. The commodity duo started to fall apart shortly after comments by the Fed Chairman echoed the sentiment that an unwelcome rise in inflation had raised the central bank's levels of concern and that a strong dollar policy could lead to a more obvious fight against price increases. In a marked departure from the tone heard in previous jawboning sessions, Mr. Bernanke linked the declining dollar to the rise in inflationary pressures.
Therefore, his drawing a line in the sand as to the amount that the dollar could or should fall by, effectively obviates the death plunge in the currency that oil and gold had been eagerly awaiting since September. The greenback took off on a sharply higher trajectory following Bernanke's words. The risk to the downside for gold has now been significantly augmented once again. In the interim, George Soros put the oil bubble at the top of the list of causes of the inflationary trend the US has been experiencing. It is possible that today will be recorded as the turning point for the dollar - something that we noted yesterday in the Dessauer comments.
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