The US Dollar Index, which tracks the value of the US Dollar against other major currencies, has been on a strong uptrend over the last three months. This is due to US Federal Reserve officials signaling that rates will remain low for quite some time. Meanwhile, European Central Bank officials are also signaling that they will keep interest rates low for a while longer. In the UK, Bank of England Governor Mark Carney indicated that there would be no immediate increase in rates.
All this seems to be bullish for the US Dollar. However, the US Dollar Index is being driven by two factors – fundamental and technical. Fundamental, which refers to economic news from the US and global markets, is driving this move. Economic data has indicated that consumers are now saving more money. This has led to lower spending on unsecured items such as credit cards and home loans. Consumer confidence is also at an all-time high as the US Dollar Index climbs.
On the other hand, technical factors are preventing investors from pulling out of their stocks. The US Dollar Index is not closely related to the economies of other countries. Thus, if the economy of a country starts to go south, it doesn’t have an effect on the value of the US Dollar. However, this isn’t always the case. Traders often fear that a country’s financial problems will spread and cause a panic buying or selling in the US Dollar, which can result in a large reversal of the market.
As a result of the above reasons, analysts and traders continue to watch international news for any sign of a potential reversal in the US Dollar Index. They look for any indication that a country’s economic data will reverse its recent trend and start to fall. This has been happening for quite some time now, but investors have been reluctant to act on the news due to the lack of reliable and believable information available.
However, US stocks and the US Dollar Index have already reversed the trend. In fact, the recent news received media coverage in some of the world’s largest newspapers. Investors and traders have been jumping onto the opportunity presented to them by the recent developments in the markets. Global Stock Market Trends shows a US Dollar Index, which has reversed directions and investors have begun to buy gold stocks, which are usually only seen during times of major market losses such as these.
Gold is seen by many investors as a defensive investment. It does not show up as one of the main performers in stock market trends, so the psychological effect is that investors will tend to stay away from it until there is a major breakout. In the case of gold stocks, we see that a major breakout has already happened. US Dollar aims higher as liquidation sweeps global stock markets
This sudden rush in buying puts pressure on the market which is already experiencing quite strong pressures due to the recent slowing down of global stock markets. The recent announcements by Federal Reserve Chairwoman Ben Bernanke and the Bank of England that they are raising interest rates is expected to prompt a major push on the market. Gold and US Dollar Index both are seen to take a significant dive in their direction as investors get ready to unload their stocks which are already under pressure due to an increase in the banking rates and central bank stimulus package.
It is important to note that if you are holding any form of gold investment it would be prudent to prepare yourself for an inevitable sell off. As investors sell their stocks, cash will start to pile into gold reserves. If the price of gold starts to move up, you will need to look at your gold stocks to determine if they are safe or not. If you are holding physical gold in bars or coins, it would be wise to sell all of them before the prices start to move upward again.