Commodity Trade Mantra

All posts under ‘US Dollar’

Dollar nowhere near Bottoming out, Gold nowhere near Topping out

Despite two rate hikes & impending balance sheet reduction, the 10-year yield has moved 15% lower since early March while USD has been weakening, both contrary to many forecasts. While USD has been falling, Gold has rallied over $200 since December 2015 to its current mark at 1,276.70. Now there are many potential catalysts to move make the 20%+ seen in Gold look small.

Supremacy of US Dollar as Global Reserve Currency is Doomed

A relief rally is likely in the US dollar, although that doesn’t mean the rally will get very far, nor that the dollar’s downtrend is done. While several indicators are suggesting that it will take at least a breather here, if it does break down the consequences for the dollar are likely to be dire—and this could be the message of the super bullish gold and silver.

Dollar's Long-term Downtrend will have Positive Impact on Gold Prices

The charts for the dollar index continue to look grim. On the 8-month chart we can see it dropping away beneath a parabolic downtrend that is accelerating to the downside. If this parabolic downtrend continues to force the dollar lower it should have a positive impact on the gold price, although it hasn’t thus far. Further significant weakness in the dollar should of course be bullish for gold and silver.

China-Saudi deal "Yuan for Oil," Another step to the Grave for the Dollar

As China imports more & more oil, the idea of paying for oil in yuan instead of the US dollar becomes more critical. China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar. If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974.

US Dollar Headed Significantly Lower with Lower Highs & Lower Lows

Lower highs and lower lows mean one thing — a downtrend. That’s what the US dollar is in now. This downtrend is happening despite anticipated rate hikes. So maybe ask yourself, what if the Fed doesn’t hike rates? What will the US dollar do then? We’ve had some good news on consumer confidence and manufacturing. But that’s the icing on a pretty disappointing economic cake.

Stronger Demand & Weaker US Dollar To Push Gold Prices Higher

The peaking of US real yields and the downward pressure building on the US dollar are positives for gold prices. Meanwhile, we expect global jewellery demand & investor demand to pick up in line with the overall improvement in the global economy and in gold demand centres in particular. It would be the first time in five years that demand will be higher than supply.

While the World Binges on US Dollar, Gold Awaits the Purge

The best thing to do is continue carrying a piece of your assets in Gold and Silver to hedge when (not if) the USD falls. Gold will be easily north of $2,000 soon after the world is done converting its currency risk into USD. Then they will be left holding the bag as our Fed pulls the plug. and then you will be buying dips at $1800 and selling rallies at $2500.

The Correlation between US Dollar & Commodities is now Broken

Commodity prices have traded in a strong inverse relationship with the US dollar over the past decade or so, but this relationship broke down in late 2016 and the breakdown looks here to stay. Commodities generated strong returns in the Q4 of 2016 with the Goldman Sachs Commodity Index moving 9% higher despite a stronger dollar which gained about 7% against major currencies.

Inflation, US Dollar, Gold & the Interest Rate Action by the Fed

The evidence of inflation is starting to emerge. When will the markets begin to see that the Fed is not serious about nipping inflation in the bud? We don’t know the answer but any rate increase could be the one that looks too timid and too late compared to the inflation data. As the markets begin to take note, the dollar will weaken and gold will once again behave like an inflation hedge.

Petrodollar Dumpers - Russia & China Dominate Global Gold Production

China is way ahead in gold production & Russia isn’t far behind. Russia surpassed U.S. gold production for the first time in 25 years back in 2014. With cheap operational costs, expect the Russian gold rush to continue. Russia and China are already actively dumping U.S. Treasuries for gold. And together they are now openly defying Washington’s geopolitical plots. Devalued paper for gold.

Did Gold Prices Really Fall Over Trump’s Speech?

If Trump pursues a weak dollar policy, it has clear inflationary consequences, which is good for gold prices & euro. If Trump pursues a strong dollar policy, it will almost certainly lead to a Chinese maxi-devaluation & to an emerging-market dollar-denominated debt crisis. That could be a short-run head wind for gold prices, but as crisis conditions take hold, gold will benefit from a flight to safety.

Reasons why Gold Prices are Rising & the Dollar is Falling

Shortly after the election, the dollar index spiked as gold prices began a quick decline; however, recently the trend has reversed. The factors shown here for upward movement in gold prices suggest more people are beginning to feel less optimistic about the future, given the current political climate and rightful mistrust of institutions like the Federal Reserve.

The Limited Impact that Dollar Strength has on Gold Speaks Volumes

The dollar has hit a six-week high against the euro. The wider forex market, however, tells us that this latest move is mostly euro weakness over French election concerns rather than dollar strength. Into this uncertainty we are continuing to see a pick-up in demand for alternative investments such as gold and silver. We see a bigger upside to gold in the short term.

Are Rate Hike Cycles Good for the US Dollar & Bad for Gold?

Gold does not necessarily rise and fall with interest rates, jewelry demand in India, or any other widely believed nonsense. Rather, gold has moved in conjunction with perceptions as to whether or not the Fed and central banks have everything under control. If you believe as I do, that everything is not under control, or if you want some insurance, then take a position in gold.

Silver Prices Hold Regardless of Dollar Strength - Dips will be Well Supported

The fact silver prices have managed to accelerate higher while the dollar has been strengthening is noteworthy. With base metals generally rallying too, it looks as though silver is attracting industrial buying. A show of dollar strength may act as a headwind, so we would not be surprised to see prices consolidate at lower numbers; but we expect dips will be well supported.

China, Price Inflation & Weak US Dollar - A Perfect Storm for Higher Gold Prices

We can see two roads higher for gold prices from here, the first would be a return of significant price inflation and weakness in the U.S. dollar. The second route to higher gold prices would be the return of safe haven buying, driven by serious geopolitical turmoil, China obviously would be at the forefront of that, and perhaps a shock to the global financial system.

What is President Trump's US Dollar Policy?

Let’s take a look at what Trumponomics really means for the direction of the US dollar. If the Trump Administration really wanted a weaker US dollar they would ask for Janet Yellen’s resignation & appoint someone even more dovish than she is. A successful implementation of Trumponomics equates to a stronger US dollar, higher bond yields & rising borrowing costs.

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