News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
Subscribe to receive our market report service:
Market Info
Feature coming soon.
Thank you for your patience

Gold Market Wire

News, analysis and commentary for gold traders and investors

FX Watch

The US Dollar is Always "Finished".

June 24, 2020 - (Gold Market Wire) - We hear it day after day in the world of Gold: The US Dollar is "finished". Websites are named after it; it is heralded daily in the Metals press read by the Goldbugs; we hear youtube pundit after youtube pundit from commodity great Jim Rogers to James Turk, Eric Sprott and everyone else who sells Gold for a living. But the one thing that could never be countenanced by any of them is that the US Dollar and Gold could rise together. That is simply unthinkable. Today's action against the antiopdeans (especially) as well as the Euro and the ever-embattled Pound Sterling, says otherwise. Gold is strong...and so is the US Dollar.

When people proclaim the death of the US Dollar, of course, they never really put a date on it. The jargon is presented in a form that is always market relevant, but the clarification is always that the timing is unknowable. That makes the commentary worse than worthless, because it is merely conjecture. In markets, early is wrong and costs you money...and everyone who has shorted the dollar against the Euro or just about any other currency other than the Japanese Yen, has bled to death while waiting for the 'cavalry' to arrive. Well, they still aren't coming anytime soon....and today's action is proof of it.

In addition to the timing aspect, no one ever really says what the US Dollar collapse is going to be against, in the currency world. In the 2008-18 period it was always supposed to be against the Euro. But, that didn't work out as planned. So the mantra was abandoned. As the monthly chart shows, the recent rally hasn't even taken us back above the reaction highs of 2015/16/17/18 or 19.

"chart chart" speaks louder than "jaw jaw"

And still the unvanquished proclaim the end of the US Dollar.

But to date, the Chinese Reminbi hasn't over-taken the Dollar yet as it was supposed to, as the Goldbugs assured us. Why would it when the world is in a state of competitive devaluation? Perhaps Bejing is more powerful than some acknowledge, in keeping their currency so low. They've certainly done better than the Japanese and the Swiss, who have tried and failed to (respectively) devalue and peg.

And off on the fringes, the Gold backed Ruble also never happened. Did they forget that this one has been around since the 1970s? Yes - for those too young to remember, or who haven't consulted the archives - the idea of a Gold backed ruble was a regular fx chant back in the days of the Soviet Union.

So given all that, then the US Dollar simply had to collapse against the only other serious contender - i.e. the Euro. Right? But, beset with its own structural problems (like a debt consolidation that never took place amongst members), that didn't happen in the 2008-18 decade.

And it hasn't happened since 2018 either.

Now, none other than Stephen Roche has chimed in -calling for a 35% Dollar devaluation (against?) over the next two years. Well, at least he put a time frame on it. But, the contrary play has always been long Dollar/long Gold (and for that matter long stocks, until recently). You can always tell 'em by how much they are hated. So after 5+ years in the wilderness the Gold crowd is getting some relief... if they haven't been stopped out/liquified years ago.

Yes, eventually they will be proven right, when the long awaited currency "reset" finally happens and the Dollar will face its "Gotterdamerung" (trans: Sunset of the Gods.). Which it will. But will you be considered "right" if its 15 years later than you thought?

That's why it helps to trade. Because a trader doesn't get married to any trade - no matter how sure they are that they will 'eventually' be right.

< Previous articleHome pageNext article >
<- Go Back