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What does the rising price of gold tell us about the health of the U.S. Dollar??

*Dow Theory Letters, by Richard Russell, July 15, 2008

“I said it three years ago, I said it two years ago, I said it a year ago, I said it six months ago, and I’ll say it again today. The Achilles Heel of the United States is the dollar. The reserve status of the US dollar is absolutely critical to the health of the US. If the dollar begins to lose it’s reserve status, the US economy will be in shambles.

Gold is now on the move. It’s taking more and more dollars to buy an ounce of real money — gold. This is the market’s way of saying that it trusts the value of the dollar less and less. You may like gold as I do, but the rising trend of gold is a red flag for the health of the United States. The rising dollar price of gold is telling us that both the US economy and the dollar are in trouble.

The US is the only nation in the world that can print the currency that its own debt is denominated in. That’s an unbelievable ‘gift.’ But the US has been doing too damn much printing and too much debt creating. The world recognizes this, and it’s systematically moving away from dollars. Nations are now creating Sovereign Wealth Funds that buy tangibles while at the same time they’re getting rid of unwanted dollars.

Right now almost everything from stocks to the Dow to homes to food is losing value relative to gold. I tell you it’s ominous. And it’s all the more ominous because 95% of analysts and economists don’t recognize or understand what’s going on. They’re ignorant of the message that rising gold is sending us, and worse — their ignorant of the very meaning of gold.”

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

Aftershock Investor