January 12, 2020 - (Gold Market Wire) - Yesterday's we made the case for Gold's anticipation of the US Dollar rally last week, but warned Gold trader's not to get too caught up in strict inverse correlation between the two instruments. Today we can see why. Gold has rallied, while the Dollar has maintained its gains of the past three sessions. Yes, Gold can rally in a stronger Dollar environment, and it does so a lot more than the traditional, "The Dollar is finished; Gold to the Moon!" acknowledge. As the chart picture reveals:

....against:

Now, we dont want to make too much of this. But, the point was to show that while Gold did an excellent job of revealing the Dollar turn, by selling off, we still see Gold as an independent actor. Equally, while much is made of Gold as a barometer of inflation, we would like to assert a general picture of a world economy now in the grip of a deadly deflationary episode. Velocity is so damn ZERO, it can't get any more Zero. Meaning that implicit deflation hasn't caused the Gold price to sell off dramatically. The "inflationista's" theorem would demand. Why? Because Gold is a barometer of confidence, and right now, that confidence is plumbing new depths almost daily... keeping Gold firm. Government seems draconian, and yet without true compass. People are hoarding what little money they have - in abject fear of the future. However, it is worth mentioning when the fear hits the next level of confidence loss, the loss that comes with a "use it or lose it" proposition that means money can't be saved or stored... then we will see inflation, and quite a lot of it.

That day is approaching, and is why Gold sell-offs are likely to be limited - even when the Dollar rallies.