The US dollar is down this year and that’s the simple reason why gold is doing well today and is going to continue to do well for the rest of this year.
Just look at a chart of the US dollar index, which has broken down:
This move in the dollar has surprised most people, because of all of the talk that the Federal Reserve is going to raise rates in March and perhaps even after that.
But there are two reasons the dollar is weak.
First of all any drop in the stock market will make the Fed STOP raising rates.
I mean just a pullback of 3% would spook the Fed.
But more importantly the last time there was an interest rate hiking cycle from 2003-2006 the dollar fell too!
And gold went up during those years!
Bloomberg did a story explaining this yesterday:
“The key characteristic of that era was that although U.S. growth was buoyant, so was global growth,” said Shahab Jalinoos, global head of foreign-exchange strategy at Credit Suisse in New York, hearkening back almost a decade and a half. “That period suggests to me there could be more dollar weakness. I don’t see any reason, if things continue, that the dollar can’t be 10 percent lower a year from now.”
The dollar trades against foreign currencies and it’s as simple as that.
The US stock market did well last year, but other markets did too.
And Europe’s Central Bank is set to tighten more and quicker this year in regards to monetary policy than the Federal Reserve.
And the China yuan is coming more and more a reserve currency.
There are so many factors.
Plus there is the political factor of DC dysfunction.
Is there going to be another shutdown?
Is President Trump’s Fed man Jerome Powell going to be the easy money man he looks like he is going to be?
Really there are so many factors that there is not one single factor that is driving this dollar bear trend that is behind it.
The chart makes it clear what is happening in total.
The US dollar index is below its 200-day moving average and that moving average is now sloping down.
It’s in a bear market.
And that’s bullish for gold.
Those that keep predicting gold crashes are fools!
And another thing to notice is that Bitcoin has fallen so far this year while the dollar has fallen too.
This action shows that Bitcoin IS NOT a safe haven against the US dollar.
It just isn’t despite what Bitcoin promoters say about it.
Bitcoin is not gold.
Crypto currencies aren’t even real securities. ICO’s are mostly scams and crypto is crap.
Gold is going up.