Everyone wonders if the dollar has turned around. The answer long term is no way. Short term, however, we may see another surge in the dollar.

The levels to watch for are 80 on the USDX and 1.38 in the USD/Euro. They are not the same thing, and one or neither may be hit. The 80 level in the US Dollar Index is a huge resistance level. So far, it gotten to 77.5 or so, and it may not get any higher. But 80 is going to be the absolute end of the rise because every country around the world will sell their US Treasuries like mad at that level.

The Euro is a tough call. 1.38 is one forecast in the FX world, but I’ve also seen 1.36 and 1.4. I personally think 1.4 is in the cards, maybe this week. We hit 1.46 this past Tuesday after getting almost that low last Friday.

What this means for gold is the question. Gold and gold stocks do NOT have to be hit as hard as the Euro. We saw a major wash-out in mining shares a week ago, and they have bumped up toward end of this week. They could go lower but a lot of selling pressure has been spent. A new batch of hedge funds went out of business a week ago, including one in Australia that apparently barfed up 150,000 silver contracts.

Gold in the meantime is bumping into seasonal demand and investors returning from holidays. There are widespread shortages of physical gold because everyone is trying to buy gold coins, bullion, whatever. This shortage is real and documented. It feels like investors are smelling something really bad hitting the US economy pretty soon. The past few weeks have been pretty convincing in terms of newsflow that things are getting worse in the US.

That’s why the dollar rally was surprising, but hey, they always try verbal intervention at critical times, in this case a well-timed comment from Trichet about the ECB not raising rates, and often there is trading manipulation. But FX markets are difficult to manipulate through money because the amounts involved are so huge. In this case there seems to have been quite an effort at manipulation, which might be some indication of how severe things will be soon.

Where we are at present is some lingering suspicion that the dollar may continue to move higher, so it probably will. Watch for those levels this coming week.

But then September starts and gold will start to stengthen. If a financial crisis hits, gold will move up more quickly. If not, it may range trade for a while, probably above $800. But by mid to end of Spetember the rally will start in earnest.

It is possible in some circumstances that gold will stay flat or even rise if the dollar rises. But the chances of the dollar rising for more than the next few weeks are very slim.