Gold Price Stutters on Dollar Strength

Perhaps dollar strength is a misleading term. There's nothing in the US economic position to suggest that any serious rally in the dollar's strength against other currencies is likely in the short term. Indeed one would expect it to remain weak and decline further.

As we have noted continuously over the past months, the value of the dollar and the price of gold have been going hand in hand with an inverse relationship, so its hardly surprising that the gold price fell back into the $730s after reaching the heady height of $747, a 28 year high, at one time yesterday as a brief period of strength was seen in the dollar relationship to other major world currencies...

And gold is becoming more and more expensive to mine. The NBF report noted by my colleague Dorothy Kosich today suggested that it may soon take a true gold price of $600 to make a new gold mine pay in terms of exploration, operating, capital and sustaining costs. If this is indeed the case, then this does put an effective gold price bottom in place as new mines are required to replace declining production from old ones, and with supply and demand pretty well in balance, a serious shortfall in production could also increase gold price strength.