Disconnect

The dollar has rallied and the eurozone is collapsing. What does this mean for Gold?

It seems there has been a disconnect of metals to economy. The ECB has kept it’s interest rate low in order not to slow the economy more than it is. This should bode well for precious metals, but demand is low as the eurozone is facing deflationary pressure and investors are flocking to the dollar instead as the US economy there has shown signs of rebounding. Still the US is showing weakness as well, and if the eurozone collapses, we could be looking at a serious reversal of the ever so fragile recovery of both the US and world economy.

So in the interim there is some deflationary pressure downward, perhaps to the $1300 level for gold and $25 for silver, but when confidence crumbles for european and the world economy, we should see investors flocking back to the yellow metal.