Monday, September 15, 2008

Gold and the Dollar -- an Historical Comparison

here is a chart of the Euro over the last four months (inverted):

and here is a chart of the December 2005 Gold contract to expiration:

there are obviously several differences between the two patterns, not to mention the differing time frames, but it's the major similarity that want you to notice: the parabolic climax and the sharp reaction.

in December 2005 all the talk was that gold 'went parabolic', that it was over yada yada. and today we hear disturbingly similar rhetoric and pronouncements about the Dollar.

from August into December 2005, Gold benefited from a huge short covering impulse. once the initial squeeze ran its course, bids abruptly vanished and the price quickly collapsed for a week or so. but that was but the first phase of a major move.

the last few months the Dollar has benefited from a huge short covering impulse, and with the satiation of this appetite, bids have abruptly vanished and the price has started to collapse.

I don't Know if the Dollar will end up following the script at which I'm hinting. I have mixed feelings about it. I will continue to call it as I see it, but I will also continue to caution most readers against getting too involved with these currency speculations. occasionally there are positions in forex to be taken that are strongly supported by the principles of trend and value, which are at the heart of the phenomenology of finance. but for the most part the currency markets aren't suited for the traditional investor.

of course it may be that there are no 'traditional' investors among the modest readership of this blog/feed. maybe ya'll wanna hear about the currency markets and nothing else. I don't Know, because I haven't the slightest clue who 98% of my readers are. (I just hope yer not all web bots.)

hey, why don't you send me an email? tell me what topics you'd like to read more about. or less about. ask me questions. just because I don't normally allow comments on the posts, doesn't mean I don't want to hear from you.