Why the dollar is set to plunge

The US dollar strengthened during 2005 despite America's massive twin deficits. But with hints that the US interest rate-tightening cycle is drawing to a close, the greenback's luck may have run out.

We have long held the view that the extraordinarily strong gold price since February 2001 was, first and foremost, the key signal of prolonged dollar weakness. Since last year gold's signal has been broader based, pointing an accusing finger at fiat money generally. Gold, as money, is in control.

Wednesday 3rd May's reading for the US Dollar Index was 92.4. Recently we said, when the reading was at 95, that the dollar's fall would gather greater momentum below 94.6. That is exactly what happened, decisively and speedily.

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