Meanwhile, the stubbornly low inflation in Europe (actually concerns about deflation), and worries about the economic recovery in the euro-zone, has the U.S. dollar surging higher against the euro and most other global currencies.
That is a serious negative for gold if it continues. Gold tends to move opposite to the dollar. For instance, gold’s long bull market ended in 2011 when the dollar began what has now been a more than three-year dollar rally. And gold managed its 2013 rally only when the dollar declined temporarily.
By the way, the rising dollar may have implications beyond commodities priced globally in dollars, like gold and oil.
Investors should also consider the potential impact of the rising dollar on the earnings of U.S. companies with international operations. Profits in foreign country currencies will take a hit when translated back into dollars if global currencies remain depressed related to the dollar.
This article is brought to you courtesy of Sy Harding From The Street Smart Report.