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The dollar went nearly parabolic after the election, along with the
Dow and the S&P 500. The move was not supported by fundamental
factors in any respect. Rather, it was momentum-chasing game fueled by
the empty promise of “hope.” While “hope” is a valid emotion for those
who believe in life after death, “hope” in the absence of valid
fundamental factors can quickly turn into fear – the fear of losing
Bank of America released a survey of Wall Street “professionals” in
which the respondents stated that the “long U.S. dollar” trade is by far
the most overcrowded trade. The dollar index has already retreated
about 3.5% since the first of the year. If the index breaks below 100,
the current exodus from the long dollar trade could quickly turn into a
stamped toward the exit.
On the flip-side of this is gold, which has rallied nearly 6% since
late December, and silver, which has rallied 7.8% since its end of
December low. The fundamental factors driving gold vs. the dollar would
be the continued surge in U.S. Treasury debt issuance; which has doubled
in size over the last eight years, contracting economic activity
notwithstanding the plethora of fake economic reports; a rapidly
expanding Government spending deficit; and a rapidly expanding trade
The quick-fix band-aid for Trump will be to implement a policy that
attempts to push the dollar lower. He tweeted as much earlier today. The
spike-up in gold is being attributed to that tweet.
But not so fast, fake news adherents. 50% of gold’s move occurred on
Monday, while the U.S. was closed in observance of MLK’s birthday and
well before the Trump tweet. Mining stocks in Canada moved up sharply
This tells us that there are other factors behind the move in gold besides the expectation that the dollar is going to sell-off.
One of the Fed Governors, Lael Brainard, gave a speech today in which
she somewhat back-pedaled from the Fed threat of four rate hikes during
2017. We knew this was coming. Gold will begin to anticipate an
“easing” of the Fed’s stance on monetary policy, likely to occur at the
next meeting, especially in light of the December’s retail sales /
consumer spending disaster.
As the dollar falls below the 100 level on the dollar index, hedge
fund algos will shift from buying dollars and selling paper gold to
dumping dollars and piling back into paper gold. But that’s just for
starters. The Modi cash removal initiative has failed to put the brakes
on Indian gold imports and China and Russia continue to inhale vast
quantities of physical gold. This will help infuse “substance” into the
hedge fund-driven paper gold/silver trade.
On today’s episode of the Shadow of Truth, we chat about the factors
that will drive gold, silver and the mining stocks higher this year,
possibly in a move that will be bigger and longer than the move in 2016:
Rory Hall, Editor-in-Chief of The Daily Coin, has written over 700 articles and produced more than 200 videos about the precious metals market, economic and monetary policies as well as geopolitical events since 1987. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver and Silver Doctors, SGTReport, just to name a few. Rory has contributed daily to SGTReport since 2012. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente and Peter Schiff, to name but a few. Visit The Daily Coin website and The Daily Coin YouTube channels to enjoy original and some of the best economic, precious metals, geopolitical and preparedness news from around the world.
The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
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