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Falling U.S. Dollar Inflates Markets



January 25, 2012 – Comments (1) | RELATED TICKERS: JJC , UUP , GLD

This afternoon, the Federal Reserve Bank announced that they will keep the fed funds rate at zero to a quarter percent until the end of 2014. This statement by the central bank has caused the U.S. Dollar Index to plummet intra-day. As we all know by now, when the dollar dips the markets flip. Everything in the market has rallied higher. Gold, silver, copper, oil, and just about every other commodity has soared since the announcement. The SPDR Gold Shares (NYSE:GLD) have jumped higher by $4.19 to $166.21 a share. Gold is the ultimate barometer of inflation and it will usually lead the stock market.

As long as the U.S. Dollar Index continues to decline these markets are likely to inflate. Should the U.S. Dollar Index eventually find a low and rebound that is when the stock and commodity markets will pullback and decline lower. Until that time the inflation rally is alive and well.

Nicholas Santiago

1 Comments – Post Your Own

#1) On January 25, 2012 at 5:33 PM, cbwang888 (25.76) wrote:

" Gold is the ultimate barometer of inflation and it will usually lead the stock market."

No. Gold wasn't leading the market higher when US T-bonds lost its AAA+ credit rating in July last year. Gold went up 300%+ in the last decade while SP500 index is doing very little.

Copper bottomed in late 09/2011, it is a better indicator for the general market. 

USD index is US vs basket of currencies, which contains USD itself. When many of these currencies are in the easing mode, gold will continue to rise over longer period of time with corrections from time to time.


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