The U.S. Dollar Index is approaching levels not seen since 1992. The reasons are fairly obvious. Global interest rates are on the rise and our own interest rates have been on hold for 8 straight meetings. As foreign interest rates rise, foreign currencies generally strengthen, weakening the US dollar on a relative basis. The Fed could act to raise our rates and strengthen the dollar, but we don't see that occurring - at least not at this time.

Refer to Chart 1 below to see how the recent changes in Fed policy have affected the U.S. Dollar Index. The green arrow reflects the beginning of 13 interest rate increases that spanned two and one half years. The red arrow reflects the beginning of 17 interest rate decreases that spanned two years. The black arrow marks the beginning of a period of status quo, where interest rates have not budged.

In 2002, the U.S. Dollar Index began tumbling, and notice what happened to the Gold and Silver Index as shown in Chart 2. A weaker dollar will result in higher gold and silver prices. If the dollar continues depreciating, be sure to consider upping your exposure to the XAU.

If opportunity knocks, be prepared.

Chip Anderson
About the author: is the founder and president of He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at, and provides updates about new features or additions to the site. Learn More
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