Originally published by Chamber of Merchants
Why is the U.S Dollar Rallying?
First of all: I read some headlines this morning that almost had me falling off my chair.
“Buy the dip in the U.S Dollar”
“U.S Dollar Rises as Interest Rates hikes loom”
Ridiculous.
So the Dollar has been rallying above 98c. But isn’t it odd how Gold hasn’t dip further?
Read this very carefully:
The U.S Dollar is rallying because the FOMC minutes were released which shows that the decision for rates “were close”.
Sad, so sad that no one is thinking. The media and markets are looking at FOMC meeting minutes from September.
Since that meeting we have had unemployment rise to 5%, we have had worsening economic numbers such as the Fed Labour Market Conditions and last night the JOLTS report showed that far fewer than expected jobs were being advertised.
So the U.S economy has worsened since September. If the economics weren’t good enough to raise rates previously, then let me tell you now: The case for a rate rise in November, or even in December are much, much lower now. I don’t care what the media is reporting. Looks at the numbers. Either, the analysts don’t understand the economics, or they are intentionally pushing the market to go long in the Dollar while smart money [banks etc] start exiting their positions in the U.S currency.
Gold refuses to Sink
As the Dollar rallies, why is the Gold price staying above $1250? It’s because the rally in the U.S Dollar is based on market euphoria. At the same time, I believe big & smart money is moving into Gold under the radar.
The case for a gold price rally is now even higher than it was previously.
The developed economies appear to be heading for stagflation.
That means, low growth, high unemployment, but a rising inflation rate. The only way the Fed can fight inflation is by raising interest rates. But how can they raise interest rates if the economy is slowing down and perhaps even contracting?
QE4. Money Printing to try jump start the indicators.
Folks, this is not a game. There are problems down the track and things may get ugly.
Once again, I am super bullish on gold and the U.S Dollar is going to tank because there will be no rate rise in November and even December is going to be brought into question. Good for Gold.
I’ll explain more in future posts.
Conclusion
My previous posts explained that we’re days away from the next bounce in Gold. I explained that the JOLTS report would probably cement the bounce in the Gold price. It’s all playing out. We get Jobless Claims, Retail Sales and PPI today and tomorrow.
If those numbers say what I think they’re going to say, the Dollar is about to plummet and Gold is about to rocket.
P.S the portfolio positions are looking better today than yesterday. That’s because of the AUD/USD exchange and money is trying to buy into what they believe is going to be a Dollar rally. Those entering gold and Silver now will be rewarded, not because of a AUD Dollar depreciation but because of a major shift in the U.S Dollar that is going to raise all commodity prices and rally the global commodities including Crude Oil, gold and silver.
A Merchant looks at the bigger picture and always compares now to the expectation of the future.
Read my previous post to get a clear understanding of the bigger picture.