Today we will look at why the inverse relationship between the dollar and gold has broken down since March of 2008 and what it means.
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See Full Video Transcript Below
Today we're going to look at the dollar index and gold and why I think the next move higher in gold and silver for that matter is going to be explosive historically the dollar has traded inversely to the price of gold but I'm going to show you why since 2008 that hasn't been the case and in my opinion it's a symptom and a signal that all fiat currencies are going to implode in value versus real money versus gold and silver versus commodities tangible goods before I go into that though let's talk a little bit about what happened yesterday at Jackson Hole well it wasn't a Jackson Hole it was a virtual speech for the Jackson hope symposium and revert to the FT here what they said their headline yesterday it says pow sends strong signal fed could dial back stimulus this year central bank chief declare declares clear progress on US labor market in speech at Jackson Hole I can tell you the FT you can't trust them this headline is very misleading because it wasn't a strong signal if it was a strong signal we wouldn't have seen the stock market continue higher to make new all-time highs we wouldn't have seen the 10-year drop we wouldn't have seen the dollar drop we wouldn't have seen gold and silver trade strongly to the upside no the market was very comfortable with what Powell said the market is telling us that pow is not going to rock the boat he's going to keep stimulating he's going to keep increasing the inflationary environment he even said that we're very far away from a rate increase and they could change the tapering stance very quickly something could come up and they could use any excuse and do I trust eft no and I've spoken about this many times some of you might not have seen this this is an editorial that they did that they wrote the person who wrote it didn't even put his name on it and it was from April 2004 and it's this here Going, Going Gold so that's the kind of publication the FT is they're trying to help out the central bankers they hate gold they told people that it was pointless holding gold bullion they said the pointlessness of holding bullying continues to sink in and the price of gold at the time was 400.65 I think it was around 220 pounds per ounce right now we're over 1300. they they've done a great disservice to many savers with this editorial I think I was so outraged not outraged but I was like man this is like this is ridiculous they didn't have the term back then fake news I was ready already in the gold market I had started stacking in 2002 and I thought this was pretty outrageous their reason of course is that central banks are in control of everything and that you don't need gold and they were wrong then and they're wrong now about pal so that's my view on that tomorrow of course tomorrow night London time I'll be doing my usual live stream and we are going to touch upon what's happening between Saudi Arabia and Russia the agreement that they signed at a military expo I think Prince Bin Salman he was there in Russia at a military exposition or expo and he signed a military and agreement with the Russians and I think it's very significant in terms of what it means for the petrol dollar I'm gonna cover that tomorrow on my live stream at 9 00 p.m London 4 p.m eastern time so you can ask me any question you want about the petro dollar and I'll try to answer answer it as best as possible so now let's go to the dollar index and there's a lot of people even in the alternative but especially in the mainstream who say that gold is not doing well because the dollar is strong yes maybe in the short term that might work out but I wanted to show you a couple of very long term charts going back to 1971 which of course is a very important year that's when Richard Nixon suspended the convertibility fixed convertibility of the dollar into gold temporarily for 50 years it's been so of course and ever since then the dollar has been a fiat currency backed basically by force which is part of what the petrodollar is and also backed by faith and confidence that people have in the dollar of course before that the dollar was as good as gold and I think that faith and confidence is getting very thin and that's why it's important that the powers that be keep the gold price under control keep people out of buying physical gold right but the charts don't lie yes there is manipulation but if you look at a line chart which is interesting because it's just the closing prices and these are monthly charts and they're logarithmic so it's a percentage change chart and the dollar index was devised back in 1973 and why was that well because prior to 1973 all the major fiat currencies and prior to 1971 they were fixed against each other because they measured value and they're just a measure or a weight right and it's like it makes sense that things are fixed some people would argue oh it's not a free market but an inch is fixed a weight a pound or a kilo is fixed height is fixed feet or meters speed is fixed if we kept changing speeds and other measures the world would be a crazy place and is it any wonder that our financial and monetary world our crazy places no but what I wanted to show you is that yes historically when the dollar has dropped versus the major currencies as you can see here from the early 70s up until let's say 1980 that led to a much higher gold price and then when Paul Volcker let rates go almost up to 20 we saw that gold topped and had a pretty long bear market 20-year bear market up until 2001. of course the dollar started coming off in the mid-80s but that didn't seem to impact gold it kind of kept gold pretty much pegged around 400 and then in 1996 we had a big move in the dollar index from almost 80 to around 120 by 2001 and you can see that gold made its final move lower on that move higher in the dollar versus other fiat currencies down to 250 but ever since 2001 as you can see gold is being moving higher no matter really what the dollar index does and 2008 was a very important year I think for my theory that the next move higher in gold will be explosive and it also confirms my theory that for the long-term companies or individuals or governments that hold a lot of reserves in different fiat currencies they're doing the wrong thing in the long term in my opinion because it's almost a losing game to hedge dollars with euros or Aussie dollars with Canadian dollars or Brazilian real with some other fiat currency because they're all sinking versus gold and that's what 2008 well the period since 2008 shows us because as you can see here the dollar made a new low in 2008 just above 70 as per the dollar index and that was in march and I remember that day very well that was the day that JP Morgan had to take over a failing Bear Stearns that was in march of 2008 and gold got up to 1030 on this chart is just below a thousand because it's a closing monthly basis and the dollar got down to 70.69 or thereabouts if I remember correctly and the dollar now has risen of course it has done well versus other fear currencies we are at 92 but don't forget as well that back in 73 when the dollar index was kind of inaugurated it started at a hundred so the dollar is actually down since then of course there was no euro but the euro is just a derivative of the old legacy European currencies so yes the dollar is down since 1973 and gold of course since 1973 is up multiples as you can see by the chart so the trend is higher for gold lower for fiat currencies and I would say that the move higher in the dollar since 2008 hasn't been confirmed there is no confirmation so how do we do a confirmation study for the dollar index because the dollar is the only major reserve currency well we look at it versus gold because that's how it's been looked at in the past when the dollar is strong gold is weak and vice versa but we haven't seen that this time because the dollar has been strong versus the other fiat currencies but gold instead of dropping maybe to 500 or 400 which would make sense because the dollar's gone from 70 to 92 and even above 100 and gold is still at 1800 despite the fact that when the dollar bottomed in 2008 at 70 gold was at a thousand so you would think gold would be way below a thousand and that's why I think people need to be patient people who have been holding physical gold and silver for a long time like me you need patience because the next move higher is gonna be even more explosive because when the dollar starts keeling over it's gonna put gold and especially silver on steroids and the other thing that this chart shows because it's a monthly chart and it's also a closing basis only chart just have a look at last year yes we had a a big drop in gold in march but it doesn't even show on the chart the consolidation we've had for over a year in gold and silver eventually are going to be a blip on this chart and the dollar doesn't even have to drop that much but as you can see by the long-term trend here we've had lower highs and lower lows so I I've spoken about this before I think the dollar index topped in January of 2017 and we're going to bottom again in the dollar index but it's going to be probably around 20 23 20 25 and that's because the cycles in the dollar index tend to last you know the up cycles and the down cycles tend to last anywhere between six to eight years sometimes a little longer so if you take six years from 2017 you get to 2023 and you add maybe two years it could be 24 or 25 so again though yeah if you're holding dollars and you think well the dollar is going to go down versus other fear currencies I'm going to buy Swiss francs or Singapore dollars no because it's not they're not going to perform as well as gold and silver in those currencies so maybe corporations that need liquidity and fiat currencies multinational corporations will hold those fiat currencies for short-term operations in the long term though as I've said many times there's only one way to hedge the sinking fear currencies and that's through holding real money physical gold and silver so there you go if you enjoyed this video make sure you hit the like button please share it far and wide think about subscribing to my channel if you haven't yet and you can also follow me on Rumble, Twitter, Facebook and all these other platforms below here I wish you all a great weekend take care bye
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