GLD Currency comparison chart.

As no currency is on the gold standard, it becomes useful as a measure of currency devaluation when they are compared. Many people have talked about a double top in gold, but that is only true when viewed in USD. In most other currencies gold is far more expensive than it was at the 2008 peak. This anomaly comes from dollar strength during the resent economic down turn which in turn flattened the rise in gold prices because we measure gold in $.

Over the past 3 months we have see gains in most major currencies against the dollar, most notably in the GBP and USD. The eur has been flat against gold with generally no more than a 2% price fluctuation and has been useful as a comparative constant.

In real terms Gold IS 15% cheaper in Australia than it was 3 months ago where as it is within a couple of percent to the USD. Gold is and has been pulling back for months, it is just hidden by the USD metric.
You notice that even the Euro which has been so constant of late is starting to pull away from gold and hence the dollar.
Since the inverse H&S in the dollar index failed it is mirroring the downward channel in Gold. They are both in a downward trend. This is also the exact point when the Euro started its divergence from Gold.

I had calculated this devaluation to adjust my target price for gold over the next quarter and arrived at 13.5%. My original target for gold in March was 760 to 780 range based on 2002 up trend line. When you add the 13.5% you get to 860/880 which just happens to be the 200 ema. Thus it have decided that that is the entry as foreign buying will come in in force after what is relatively a 50% pull back.

GLD

I also feel that treasuries are starting to price in an interest rate hike in the fall, based on reaction to today’s lack of deflation concern in the fed statement. The hike simply will not come and we end up in another round of dollar devaluation with Gold at it’s lows for the year. Enter the inflation trade.