A sharp transition from deflation to inflation

Today's chart is the US dollar index vs gold over the last two years (actually the last 94 weeks, which is not quite two years).

We have discussed why deflation and inflation are not opposites on this graph previously.

Here we see a sharp transition from deflation to inflation, occurring within a week of May 15 (two months ago). 

Note that deflation is the best condition for gold companies, in terms of improving fundamental strength. It is possible, however, that many market participants believe that inflationary conditions are better. So strength may continue. Past history shows that inflation may give and take away. When the gold price has risen strongly, governments have often applied "windfall taxes", reducing the real gain experienced by the company. And if gold is rising, while the US dollar is falling, and you are a mining company outside of the US banking US dollars for your gold, what is happening to your real income?

In at least one previous article, we have also discussed why silver is a dog during deflation, but outperforms gold during inflation.

And, as in all cases, let the buyer beware!