In a continued trend, the U.S. Dollar Index continues to fall amidst political pressure. Not only does the geopolitical pressure affect the dollar, but the perceived safe haven of years prior doesn’t hold any longer. In past decades, a move in the U.S. dollar of 12 points would have taken several years to develop. In the age of information traveling to one’s fingertips in a matter of seconds, these moves now happen in mere months, if not seconds. Investors used to hold dollars in times of turmoil, and they still do, but that is declining rapidly.
Precious metals are trending upwards, a trend not seen in many years. Gold recently broke the $1,300 mark and moved through that mark with relative ease. This can be attributed to geopolitical risk, a low dollar price, the overbought stock market, and a bond bubble not seen in the history of the world. But what may be happening in gold is that the physical market is taking liquidity from the paper market. Various sources show that Goldman Sachs may be joining China and a few other banks and going long on gold. This may be the result of them not being able to squeeze out the longs anymore. The dips are becoming shallower. Only time will tell as the favorable gold conditions continue. Large sovereigns are buying and gaming the wash and rinse cycle as Indian wholesale demand is increasing during this holiday season.
Not only are all of these factors bullish for gold, but one that may have slipped the minds of many is the fact that the CEO of the CME Group mentioned on Fox Business that the inflation-adjusted price of gold should be $2,000 to $3,000 an ounce. On top of that, with all the risks described above, he said gold should be $5,000 an ounce. It’s pretty interesting to note that someone of his stature would not normally discuss this on live TV. One option could be that he knows that the manipulation is going to stop at some point and it’s just sending a subtle warning. Additionally, Treasury Secretary Mnuchin unexpectedly visited Fort Knox, only the third Treasury Secretary to do so. He said that the gold was safe, which seems pretty laughable, as well as the way he presented it. It’s laughable to think that any of us would really take his word without any proof. Did he really go through and actually look at all the serial numbers on all the bars? There does seem to be a trend in events around the gold market, and an inevitable cash market reset seems to be on the horizon. Recently, China has announced a crude oil contract that’s convertible to gold. This is a major development because the demand for dollars will decrease, as oil is priced in dollars. The Saudis will now introduce yuan into their economy, as Saudi Arabia is the number one exporter of oil to China. The dollar’s days are dwindling, and alternative assets (like commodities) will enjoy an uptrend in the years to follow.