Gold shows signs of strength despite strong dollar

By Markets Covestor

Gold prices are usually inversely correlated to the value of the US dollar.

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If the greenback moves up, gold moves down and vice versa.

 

 

One can see from the following chart that this relationship played out in 2008 as well as 2011/12.

 

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Gold revival?

I’m surprised how gold has acted during the recent run of US currency strength.

While the U.S Dollar Index reached a 10-year high this year, gold only briefly dipped below the critical $1,200 support level and has even gained in value.

Note what happened during 2005 and 2009 after dollar spikes (not marked on the chart): gold started to rally.

In addition, the brief dip below $1,200 showed how quick buyers stand ready to defend that level.

We are not exposed yet in the portfolios, but looking for entry points with compelling risk versus reward.








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Photo Credit: Eric Golub via Flickr Creative Commons

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