I think it is safe to say that Gold has a bone to pick with all currencies. We have written many times about the competition between world currencies to see who can debase the furthest. One minute the gold price hits new highs against the Euro and the next it hits new highs against the Dollar. Soon, it is likely to hit new highs against all.
Today, as the dollar hits 3-month highs against the Euro, it appears the gold price may have finally filed divorce papers against the dollar. Citing irreconcilable differences in their inverse relationship, Gold has claimed the dollar is untrustworthy and that today's rally against the Euro is merely an insincere gesture to reconcile.
Today, the Euro hovers near the $1.30 mark, well off its 120 day high of $1.4244 set on November 4. At the same time, gold prices are up more than $20 per ounce. At the time of this writing gold is $1384 an ounce, virtually the same level it was on November 4, when the Euro was worth some 8% more than the dollar.
Here's the interesting observation. In January, when the dollar was at its weakest level of the year, gold started the year at $1100 an ounce. By November, after months of volatility, the value of the Dollar against the Euro was virtually equal to January levels. Gold, however, left its January prices in the dust, reaching $1382 an ounce by November 4. That's up 25% in 10 months.
From January to November, the rise in gold price was often linked to the weakening dollar. Now, how do we explain today's gold price of $1384 when the dollar has gained back 8% of its value against the Euro since November 4?
With the Fed now committed to printing several hundred billion more dollars to buy Treasuries, it is hard to imagine the dollar maintaining this relative strength. And, with world debt climbing as fast as money can be printed, I think the answer is simple. Gold no longer cares about its inverse relationship to the dollar. All currencies are taking turns at weakening while gold continues a steady rise.
People ask where the gold price is headed. For now, just as there seems to be no limit to growing world debt, and the amount of money to be printed to pay it, there is, arguably, no limit to rising gold demand and rising gold prices.
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