Gold Market Wire
News, analysis and commentary for gold traders and investors
Strong US Dollar Rally Halts Precious Metals Advance
November 19, 2021 -(Gold Market Wire) - As readers know, we here at GMW are both US Dollar bulls and Precious Metals bulls. We are the outlier who doesn't buy the "US Dollar is finished" mantra that all Goldbugs shout from the rooftops. Still when the Dollar surges, like it has today, it can stop the advance of the Metals. The relationship is not an "inverse monetary proxy", especially not in times of extreme crisis (like today), and neither is every advance and decline parallel. There is nuance to it, which is what makes a market interesting. Despite its detractors, a long USD stance, has been the right one. (Especially since the 1.235 Euro top.) Yes, the metals have required some nimble footwork this year, but being only 2-3% off-side from the high on Gold, from the start of the year...on an outright... while watching the Dollar gain 9% as a differential (!), should tell you something about the strength of the Metals...and the Strength of the Dollar. That, in our opinion, is at trend in motion; and it is only getting stronger.
This morning's action out of Europe has seen a surge in the USD vs. Euro and Sterling, as a result of dove-ish policy recitations in the short-term, but such recitations get market reactions only when the trend is moving that way. These types of policy pronouncements are not like chasing non-farm payroll numbers, which are easy to fade and trade against. They work to degrade the mentality that thinks change is at hand. The make the FX markets stand up and say 'Uh-oh. This isn't going to change any time so... it looks like we're going to have a progressively weaker Euro...keep the foot on the US Dollar buying pedal.' And that is exactly what has happened. We are now a full .60% lower Euro/USD, and trading under 1.13.
The fact that we have, essentially and unchanged Metals market, should, if anything, encourage the Bullish side of the Metals. Given the severity of today's FX action, the Precious Metals market is showing resilience and strength.