Gold Seeks Direction As US Dollar Index Slips

And why is this necessary?

Because the Eurozone economy is in free-fall.

Remember, currencies trade on a relative basis. Thus, a less-bad U.S. economy is good news for the U.S. dollar.

Please see below:

(Click on image to enlarge)

Gold US Dollar

Figure 6 - 2020 Economic Indicators for Germany, France, Italy, Spain

Across Europe’s largest economies – Germany, France, Italy, and Spain – economic activity is rolling over (To explain the chart, alternative economic indicators are high-frequency data like credit card spending, indoor dining traffic, travel activity, and location information.)

And underpinning the irrationality, the deceleration is happening as the euro is strengthening.

Makes sense?

Well, considering Spain’s retail sales dipped further into negative territory on Monday (Dec. 28) – coming in at – 5.8% vs. – 5.3% expected – the data speaks for itself.

(Click on image to enlarge)

Gold US Dollar

Figure 7 - Spain Retail Sales Constant Prices (Source: Bloomberg/Daniel Lacalle)

The bottom line is: the euro bulls are fighting a war they’re unlikely to win. And as the fundamental data worsens, it’s analogous to a platoon losing more and more soldiers. Eventually, the infantry runs out of reserves and it’s time to wave the white flag.

And then what happens?

Well, then history tries to explain how it all went wrong.

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