News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
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US Bans American Banks from Purchasing Russian Sovereign Debt
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Gold Market Wire

News, analysis and commentary for gold traders and investors

FX Watch

US Dollar Makes Next Move Higher

July 13, 2021 - (Gold Market Wire) - The US Dollar continues to work its way higher, much to the consternation of the Goldbugs, who insist it must collapse for the metals to move. Recent days have been a case in point and are a buttress to our central thesis here at GMW that the US Dollar and Gold can actually rise together. Today's action is some added proof, albeit more in the fx side than the Metals side.

Gold continues to hover just above $1800 an ounce while Silver seems tied to the $26.00 level. But the real story is in the US Dollar which is having a red-letter day against the Euro.

Euro under pressure, again.

There is no rocket science about our more recent calls for a stronger US Dollar. The simple failure to regain and better 1.2350 looked like an ominous sign at the time, and the early June downdraft confirmed our outlook. A deteriorating international situation can do little but help the Dollar as well. Right now, we've just had a major escalation over Ukraine, with the Russians swiftly flashing enormous military credentials on the border. Alongside that we have a China that is rapidly becoming apoplectic with rage over the Taiwan issue. The post-WWII diplomatic history of Taiwan has always envisioned that it would eventual revert to China, that is why full diplomatic and UN status has never been granted. Although there is a lot of posturing going on, it remains difficult to see the US countering China over Taiwan, although one could envision the domestic political efficacy of such a move from within the United States. The next question, which seems to be adding to the confused reasoning of Goldbugs, is, "Does Dollar strength portend an extension of Washington's 'super=power' status?" Probably not. But where else can institutional money flow? Certainly not the Ruble. And the Reminbi doesn't inspire much confidence either. So the world is stuck with the Dollar - like it or not, as the case may be. And it is this reason, why it can move higher along with Gold.

"Inverse monetary proxy" of the US Dollar? Not always.

If we take the time to look back long-term. Something few seem capable of... the picture of the Euro vs. the USD is simply abysmal.

technically pathetic. (monthly chart)

Honestly, these pundits talking "death of the US Dollar" must never look at a chart. Death of the existing global monetary system? Absolutely. But that path isn't going to be carved out through a weaker Dollar. We are approaching 15-years of this 'death of the Dollar' mantra...and still they won't relent. That only makes us even more bullish. (and if that wasn't enough - we are approaching the 100-day moving average - which is looking like a real line of defense, ready to fall.)

If people are honest with themselves (something they rarely are) - they will see that the Euro space is so politically divisive' so fundamentally flawed, it makes the United States look coherent. There are so many facets to this problem it has already filled volumes, but the simple cultural fact of a multi-lingual, highly variant economy, with a very long history of conflict and strife should have made everyone suspect of the EU project decades ago.

Yes, hope springs eternal. But history dictates outcomes. The Euro looks terrible.

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