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Gold vs USD , the conventional economic theory is out the window


Srikorada's picture

By Srikorada - Posted on 17 March 2009

Gold and USD used to trade inverse with a negative correlation factor. But Since last year, it has been reversed and they now trade together. As Charlie Munger said "Once decade's wisdom is stale for the next one", I guess we are in for a big change in economic theory and the models built on conventional wisdom. I wonder what the hedge funds are doing who hedged their bets long vs short on Gold vs USD.

Ofcourse, the reasons for this phenomena are very simple. Every country's fund managers are flocking to USD and the respective countrie's citizens are flocking to Gold even demanmding the physical delivery of gold bars to their homes.

What we can learn from this is thet we should continually update our views on the marketplace and be open to the constant and sudden turns in economic theories.

Now, if you any of you have any investing ideas on this new phenomenon, let us all know.

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