The "elephant in the room" in financial markets lately is the U.S. dollar, which has climbed relentlessly from its May 2014 low at 78.91 to Tuesday's high of 98.60. That amounts to a whopping 25% advance.
The upmove, especially recently, has put deflationary pressure on the commodity complex in general and on gold prices in particular.
Spot gold has declined from around $1400 last May to a Nov. 2014 low at $1137. But remarkably, since then and despite the skyrocketing dollar, it has remained "stable."
Is it possible that deflationary pressures on other commodities -- oil, copper and grains -- in an environment of depreciating non-dollar currencies has buoyed demand for gold in foreign-denominated paper?
Be that as it may, it would appear that while dollar-induced deflationary pressure might be absorbed by the gold market, perhaps U.S. equities are starting to feel deflationary forces from the Greenback.
After all, U.S. equities represent the one asset class that has not experienced a bout of deflation since the advent of QE six year ago.
Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking.