Dollar Pounds Pound

This morning the U.K. currency, (the pound) got pounded again by the dollar, reaching a 13 month low of $1.42 - a far cry from it's September 2008 high near $2.00.At that same time gold prices hovered near $900 an ounce.

If you would have told me then that we could print a couple trillion dollars of stimulus and the dollar would gain strength against this currency, I would have been challenged to reason why.Yet, that is exactly what has happened.

Then, if you would have told me that at the same time gold would trade above $1200 an ounce, well . . . that just can't happen, but it did.So, how do we make sense of this?I think it's easy.The entire world is taking turns devaluing its currency.Everyone is in trouble and each country has to take its turn at dealing with their own debt crisis.

Let's call it AIS.The Alternating Inflation Syndrome.If the world is going to recover from this crisis, global inflation may be the only solution.Note:The U.K. is not part of the Euro.They are experiencing crisis.According to one Bloomberg article, the U.K. will try to cut spending in order to deal with their crisis.If that doesn't work, why not just print some money.

I think from here on out we will see the major currencies alternate positions of strength and weakness as each country or union deals with its own crisis in its own way.

Meanwhile, gold seems to have its eye fixed on the future.Gold demand remains strong, despite dollar strength.As far as the dollar is concerned, imagine how gold prices will react when the dollar takes its turn at weakness.It's easy to see how popular gold price predictions, of $1500 by year end, could come to pass.Thereafter, $2000 gold is well within reach as estimates are for this recovery, if it takes place, to occur over the next 10 years.

And for those of you who will keep vigil over the gold charts for us, look for a sort of tug of war to take place as a strong dollar tries to pull gold prices down, while rising inflation tries to pull the gold price higher.