The Bottom Line on Gold, the Dollar, and the EuroLouis James The most egregious (or just plain silly) example is that gold often drops when the euro drops. This happens, not because theres anything wrong with gold at such times, but because gold is priced in dollars. Instead of being thought of as a store of value in many investors minds, gold is viewed as a hedge against weakness in the dollar. But what are dollars priced in? Nothing, actually. Unfortunately, in todays world currencies are valued in many peoples minds by their strength in foreign exchange markets. At any rate, the dollar is frequently valued in relation to its main competitor for reserve currency status. In other words, to many players in the market, the dollar is priced in euros. So when the euro gets slammed, the dollar rises, and this apparent strength of the dollar makes gold seem less attractive as a hedge, and gold sells off. In our view, this set of relationships clearly shows the error of those caught in this trading paradigm. The euro is not backed by gold, nor anything at all. Its a floating abstraction, even more nebulous than the dollar. Gold is a solid commodity, the ultimate safe haven people all around the world turn to when the acceptance of paper currencies and other assets is in doubt. Theres no valid reason for gold to gain and lose value in concert with the euro its merely an artifice of both gold and the euro being not the dollar. This point is clearly evident in a longer-term chart of the same variables as above. And which would you like to speculate on, going forward? The answers are crystal clear to us here at Casey Research, and they form the basis of our recommendations in our metals newsletters. Louis James, Casey Researchs metals and mining investment strategist, knows the ins and outs of the junior mining sector and has an uncanny ability to sniff out the best prospects. Learn how he does it and more important, how you can put his expertise to work for you. linkwithin_text=Related Articles: 