I had a conversation today with an investor who informed me that gold simply couldn't rise in the face of a higher dollar because gold was priced in dollars.
For some reason this investor assumes that bull markets are rational. Rationally speaking a rising dollar should cap the price of gold since it takes fewer dollars to buy an oz.
However let me pose a question. Was it rational that oil continued to rally all the way to $147 a barrel last year despite a dollar that bottomed in March? Oil is priced in dollars after all.
How about the fact that oil continued to rise day after day even though the global economy was already obviously in recession and tankers were sitting in the gulf with no place to unload their oil. Was that rational?
Bull markets aren't rational folks. They are a product of 1. Supply and demand imbalances and 2. Human nature. At some point fundamentals leave off and human greed takes over. Otherwise known as higher prices beget higher prices.
I guarantee you that eventually the course of the dollar is going to become meaningless to gold (it may be already). Those insisting that gold prices be controlled by the dollar are going to get left behind in the dust.
Eventually gold is going to trade on its own supply and demand fundamentals and that will have nothing to do with the dollar. Then at some point further down the line gold is going to trade on nothing more than human greed.
I suggest one ignore the dollar and instead stay focused on gold.