Currencies and Gold. Yardeni Research, Inc. November 18, Dr. Edward Yardeni. Mali Quintana. thinking outside the box

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1 Currencies and Gold November 18, 211 Dr. Edward Yardeni Mali Quintana Please visit our sites at www. blog. thinking outside the box

2 Table Of Contents Table Of Contents Large Speculators in Currencies 1 Trade-Weighted Dollar 2 Euro & Pound 3 Yen & Won 4 Canadian & Australian Dollars 5 Real & Peso 6 7 : Nominal & Real 8 Gold vs. Dollar 9 Gold & Commodity Prices 1-11 Gold & PPI Inflation 12 Gold & CPI Inflation 13 Gold, Dollar, & Political Cycle 14 and US Federal Deficit & Debt 15 & Central Banks 16 Relative vs TIPS Yields 2 November 18, 211 / Currencies and Gold www.

3 Figure 1. US DOLLAR INDEX (US dollar index x $1,) 11/ EURO FX (contracts of 125, Euros) - Large Speculators in Currencies - YEN (contracts of 125,, Japanese Yen) 11/ CANADIAN DOLLAR (contracts of 1, Canadian Dollars) /8 11/ POUND STERLING (contracts of 62,5 Pound Sterling) AUSTRALIAN DOLLAR (contracts of 1, Australian Dollars) / / Source: Chicago Mercantile Exchange, Commodity Futures Trading Commission. Page 1 / November 18, 211 / Currencies and Gold www.

4 12 Figure 2. BROAD TRADE-WEIGHTED DOLLAR INDEX* - Trade-Weighted Dollar day moving average / * Broad index is a weighted average of the foreign exchange rates of the US dollar against the Euro Area, Canada, Japan, Mexico, China, UK, Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia, India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile, and Columbia. Source: Source: Board of Governors of the Federal Reserve System. 9 Figure 3. MAJOR TRADE-WEIGHTED DOLLAR INDEX* /1 7 2-day moving average * Major index countries whose currencies are included are the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. The Euro Area includes Germany, France, Italy, Netherlands, Belgium/Luxembourg, Ireland, Spain, Austria, Finland, Portugal & Greece. Source: Source: Board of Governors of the Federal Reserve System Page 2 / November 18, 211 / Currencies and Gold www.

5 Figure 4. EUROZONE (US$/Euro) - Euro & Pound day moving average Figure 5. UNITED KINGDOM (US$/Pound) day moving average Page 3 / November 18, 211 / Currencies and Gold www.

6 6 Figure 6. JAPAN (Yen/US$, inverted scale) - Yen & Won day moving average Figure 7. SOUTH KOREA (Won/US$, inverted scale) day moving average Page 4 / November 18, 211 / Currencies and Gold www.

7 .8.9 Figure 8. CANADA (C$/US$, inverted scale) - Canadian & Australian Dollars day moving average Figure 9. AUSTRALIA (inverted scale,a$/us$) day moving average Page 5 / November 18, 211 / Currencies and Gold www.

8 - Real & Peso -.6 Figure 1. BRAZIL (Real/US$, inverted scale) day moving average Figure 11. MEXICO (Peso/US$, inverted scale) day moving average Page 6 / November 18, 211 / Currencies and Gold www.

9 Figure 12. GOLD PRICE IN DOLLARS (daily, ratio scale) day moving average / GOLD PRICE IN EUROS (daily, ratio scale) GOLD PRICE IN POUNDS (daily, ratio scale) GOLD PRICE IN YEN (thousands, daily, ratio scale) Page 7 / November 18, 211 / Currencies and Gold www.

10 - : Nominal & Real Figure 13. GOLD PRICE* (dollars per ounce, ratio scale) 11/ day moving average * Gold price is weekly from and daily thereafter Figure 14. GOLD PRICE: NOMINAL vs. REAL /CPI 8 Oct CPI = 1 on Source: US Department of Labor, Bureau of Labor Statistics and Haver Analytis. Page 8 / November 18, 211 / Currencies and Gold www.

11 - Gold vs. Dollar Figure 15. FOREIGN EXCHANGE VALUE GOLD PRICE* (trade-weighted dollars per ounce, weekly) 11/ * Gold spot price times trade-weighted dollar of major currencies. Source: Haver Analytics and Federal Reserve Board of Governors Figure 16. GOLD PRICE & THE DOLLAR (weekly) (dollars per ounce) Trade-Weighted Dollar of Major Currencies /18 11/ * Gold price is weekly from and daily thereafter. Source: Haver Analytics and Federal Reserve Board of Governors. Page 9 / November 18, 211 / Currencies and Gold www.

12 Figure 17. GOLD & CRB RAW INDUSTRIALS PRICES* (weekly) - Gold & Commodity Prices - Gold Spot Price* (dollars per ounce) CRB Raw Industrials Spot Price Index (1967=1) / * Gold price is weekly from and daily thereafter. Source: Haver Analytics and Commodity Research Bureau Figure 18. GOLD & INDUSTRIAL METALS PRICES (weekly) * (dollars per ounce) CRB Industrial Metals Spot Price Index** (1967=1) /18 11/ * Gold price is weekly from and daily thereafter. ** Includes copper scrap, lead scrap, steel scrap, tin and zinc. Source: Haver Analytics and Commodity Research Bureau. Page 1 / November 18, 211 / Currencies and Gold www.

13 Figure 19. GOLD & LIGHT CRUDE OIL PRICES (weekly) - Gold & Commodity Prices - (dollars per ounce) CRB Futures: Light Crude Oil (dollars per barrel) /18 11/ * Gold price is weekly from and daily thereafter. Source: Haver Analytics and Commodity Research Bureau Figure 2. GOLD & CRB FUTURES PRICES (weekly) (dollars per ounce) CRB Futures Price Index (1967=1) /18 11/ * Gold price is weekly from and daily thereafter. Source: Haver Analytics and Commodity Research Bureau. Page 11 / November 18, 211 / Currencies and Gold www.

14 Figure 21. GOLD PRICE & PPI - Gold & PPI Inflation - * (dollars per ounce) Producer Price Index (yearly percent change) Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Oct Oct Figure 22. GOLD PRICE & PPI (dollars per ounce) Producer Price Index Ex Food & Energy (yearly percent change) Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Oct Oct Page 12 / November 18, 211 / Currencies and Gold www.

15 Figure 23. GOLD PRICE & CPI - Gold & CPI Inflation - * (dollars per ounce) Consumer Price Index (yearly percent change) Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Oct Oct Figure 24. GOLD PRICE & CPI * (dollars per ounce) Consumer Price Index Ex Food & Energy (yearly percent change) Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Oct Oct Page 13 / November 18, 211 / Currencies and Gold www.

16 Figure 25. GOLD PRICE* (dollars per ounce) - Gold, Dollar, & Political Cycle - Nixon Ford Carter Reagan Bush Clinton Bush Obama / * Gold price is weekly from and daily thereafter. 16 Figure 26. TRADE-WEIGHTED DOLLAR (dollars per ounce, weekly) Nixon Ford Carter Bush Clinton Bush Obama Reagan / Page 14 / November 18, 211 / Currencies and Gold www.

17 - and US Federal Deficit & Debt - 15 Figure 29. GOLD PRICE vs. US FEDERAL DEFICIT Oct 2 Federal Deficit (12-month sum, billion dollars) GOLD PRICE vs. US FEDERAL GOVERNMENT BORROWING Federal Borrowing (as a percent of nominal GDP) Oct GOLD PRICE vs. US FEDERAL DEBT Q2 2 6 Federal Public Debt Outstanding (as a percent of nominal GDP) Source: US Treasury Department, Board of Governors of the Federal Reserve System and Flow of Funds. Page 15 / November 18, 211 / Currencies and Gold www.

18 - & Central Banks Figure 3. GOLD PRICE vs. US TREASURIES & AGENCIES HELD BY CENTRAL BANKS 11/ US Treasuries & Agencies Held By Fed + Foreign Central Banks (trillion dollars, nsa) (US dollars per ounce) Source: Federal Reserve Board and Haver Analytics Figure 31. US TREASURIES & AGENCIES HELD BY: (billion dollars, nsa) 11/ Fed + US Commercial Banks (US Dollar/Troy Ounce) Source: Federal Reserve Board and Haver Analytics. 2 Page 16 / November 18, 211 / Currencies and Gold www.

19 Figure 32. GOLD PRICE* RELATIVE TO S&P 5 - Relative / * Gold price is monthly average from and weekly (Tuesday) thereafter. Source: Standard & Poor s Corporation and Wall Street Journal Figure 33. S&P 5 RELATIVE TO GOLD PRICE* 11/ * Gold price is monthly average from and weekly (Tuesday) thereafter. Source: Standard & Poor s Corporation and Wall Street Journal. Page 17 / November 18, 211 / Currencies and Gold www.

20 11 1 Figure 34. GOLD PRICE* RELATIVE TO EXISTING HOME PRICES - Relative Sep /Average Existing Home Prices * Gold price is monthly average from and weekly (Tuesday) thereafter. Source: Wall Street Journal and National Association of Realtors Figure 35. GOLD PRICE RELATIVE TO CRB PRICE INDEXES Relative to CRB Futures Price Index Relative to CRB Raw Industrials Spot Price Index 11/ Source: Commodity Research Bureau and Wall Street Journal..6.2 Page 18 / November 18, 211 / Currencies and Gold www.

21 1.2 Figure Relative - GOLD CASH PRICES RELATIVE TO PLATINUM CASH PRICES / Source: Standard & Poor s Corporation and Wall Street Journal Figure 37. GOLD PRICE RELATIVE TO SILVER CASH PRICES / Source: Standard & Poor s Corporation and Wall Street Journal. 5 Page 19 / November 18, 211 / Currencies and Gold www.

22 Figure 38. GOLD PRICE AND 1-YEAR TIPS YIELD - vs TIPS Yields - 11/ year TIPS Yield (inverted scale) (dollars per ounce) Source: Board of Governors of the Federal Reserve System Figure 39. GOLD PRICE AND 5-YEAR TIPS YIELD 11/ year TIPS Yield (inverted scale) (dollar per ounce) Source: Board of Governors of the Federal Reserve System Page 2 / November 18, 211 / Currencies and Gold www.

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