The US Dollar and Gold showing a reflected 'crossover' patten. (update 1)

As discussed in Oil on a 25mth cyclical bull run? Update 3 - oil resumes incline and Stock indices split form the real economy., I don't think in the near term there is going to be a stock market correction. There is now a trading range for indices and traders are buying and selling with in that range (shown in a later post). So there is a degree of immunity to 'bad' economic news and an upward euphoric optimism is now in place.

Below is one of my favorite graphs (US Dollar index and Gold price), only because it shows the build up (gold) to the massive equity sell off that occurred post Lehman's collapse (September 2008). Gold peaking in March 2008 as the USD tanked.

The USD crossover (declining) from gold occurred on the 9th April 2007 and 6th August 2007 (indicated in red horizontal lines). The final crossover from gold as the dollar maintains it's decline took place on the 1st December 2008. Then a somewhat recovery on the USD on the back of pre risk aversion on the 22nd December 2008. The USD then rallies to the 2nd March 2009 again pre risk aversion and countering stock lows on the S&P (November 2008) and Dow (March 2009).

Still below the gold trend line as the US dollar fails to recover, notice on the graph how the USD has completely gone south with gold moving further up, of course this shows a similar patten post Lehman's collapse and the huge equity sell off's that ensured. Yet stocks are still rallying even with the USD declining and gold stable and rising

All and all gold is still seen as a safe haven, with a non existent yield return on the USD it's a no brainer where the USD is heading.

(A side note re: USD destruction. As the worlds base currency disappears into a valueless abyss. This is now putting a lot of pressure on the Asian export markets and other countries commodity backed currencies. If the USD doesn't recover soon (which it won't) we may see devaluation in Asia and Australia to keep their currencies at a low level against the USD (for the export markets to recover). If Asia get's involved in devalution war with other local cuurencies, again gold will be the winner.)

As mentioned on this blog, we could see rallies in global stock markets throughout the summer (Northern Hemisphere) and possibly maintained towards the end of 2009. The only sell (which will be absolutely massive) will be on a major 'shock'. In the meantime gold will continue upward and may even go further if the 'shock' entails a major geopolitical/economic event.

USD index/Gold (click on grap for larger image)