BALTIMORE, MD – What I’m about to show you could be the most important chart of the past decade for precious metal investors and speculators.
What we’re looking at is the US Dollar Index.
For those of you who don’t know, this index is a futures contract by the New York Board of Trade and is a trade-weighted average of six foreign currencies against the dollar. Currently, the index includes Euros (EUR), Japanese yen (JPY), British pounds (GBP), Canadian dollars (CAD), Swedish kronas (SEK) and Swiss francs (CHF).
You can see how these currencies are weighted below.
The USD Index started in 1973 with a base of 100 and is relative to this base. This means that a current value of 81.55 would suggest that the U.S. dollar experienced an 18.45% decrease in value over the time period.
But the real significance today is the 32.492% decrease in the index value since the beginning of 2002.
Recently the dollar index has broken below its most recent level of support and is now trading at one of it lowest points in history.
It doesn’t take a mathematician to figure out that this is an incredibly bearish signal. If the 80 level is broken, look out below.
The dollar index has been tested the 80 level five times since 1978. This time I believe that it will break 80 decisively. That will send gold and silver into orbit as well as precious and base metal stocks.
Gold futures rose overnight Thursday as the dollar continued its slide against major currencies after Labor Department data for April showed the smallest increase in payroll employment since November 2004.
Gold for June delivery gained $4.90 to $689.30 an ounce on the New York Mercantile Exchange this morning.
Other metals prices were also mostly higher. July silver added $0.60 cents to $13.57 an ounce, July platinum rose $6.70 to $1,317.50 an ounce and July copper was up $0.18 cent to $3.7445 a pound.
On the supply side, gold warehouse inventories rose by 268,962 troy ounces to stand at 7.9 million troy ounces as of late Wednesday, according to NYMEX data. Silver supplies fell by 1,040 troy ounces to stand at 131.3 million troy ounces as of late Thursday, while copper supplies fell by 68 short tons to 33,003 short tons.
Until next time,