The price of gold, which has climbed for years like a blood pressure reading for anxious investors, has recently plunged to its lowest levels in three years.

Obviously this is something difficult to forecast, but we think the gold bull market is over (even though it has bounced back up in recent weeks).

And John Murphy has an even better explanation in terms of gold’s relative strength not only to the Dollar but to other currencies. According to him, although a falling dollar is good for gold, the shiny metal needs to outpace all currencies (not only the dollar). And that’s not happening.

Here is what he had to say regarding the end of the gold era, in his recent newsletter:

Chart 1 starts the discussion by showing the Dollar Index (green line) falling to a seven-month low last week. Gold prices jumped as a result (orange line).

When gold is in a major bull market, it’s not enough for it simply to rise in dollar terms. It has to also rise in foreign currency terms.

This is what it looks like when Gold is in a major bull market (compared to Canadian dollar, euro, Aussie, pound, swiss franc):

But gold is not underperforming foreign currencies… all five currencies did better than gold (which lost -27%) recently.

Even the Yen (the weakest currency last year) is doing better than Gold!



Tagged with:  
Share →