For years we’ve been hearing about the US$ collapse. There are blogs and books specifically devoted to this theory, and that’s all it is – a theory. Sort of like the theory of a stock market bubble and crash which I have vehemently disagreed with since 2009. And, of course, there have been fortunes made by the scam artists scaring so many decent hard-working folks into buying their product to “protect” themselves from these mythical crashes. It’s disgusting. Since getting bullish on the $ many years ago, people have given me every concocted notion about why the $ will crash and I listened and politely (hopefully) disagreed. It doesn’t mean there will be a perpetual bull market in the $. Its’ days are numbered, but like everything in markets, it’s about timing. The bull market is still on, but a pause is close. This is the basic $ chart I’ve been using for a while. Since “breaking out” (I don’t approach markets this way) above around 100.5, my belief is the 102+ area would be the first bigger resistance area. A spike in this area would likely be a short term top. A strong $ will keep a lid on gold advances, but that lid will loosen next year. It’s the main reason why for years my mantra has been to have patience with gold. It’s when the real banking troubles start to broaden (likely next year), when the $ and gold will rally together. We’ve seen glimpses of it over the last few years, but the confidence level in central bankers (CBs) was still sky high. That is changing, and it’s being reflected in the government bond markets (which are actually getting short term bullish now). The CBs days of total omniscience are also ending, which will cause a multitude of problems for their decades old ability to extend and pretend.
But what we need to continue watching is the performance of gold in foreign currencies relative to the US$, which has been my view for a few years. It’s the US$ which has been a detriment to a major push higher. But this relationship is not written in stone. Way too many believe it is true, however just a bit of research can show how that relationship can breakdown for significant periods of time. So I would recommend pulling up some charts of gold in foreign currencies and keep watch on them and here is a good place.
Addendum:
So this following exchange with someone is the problem, and why too many folks have gotten off focus about what a market is actually all about. I’ve been hearing this same type of argument for years. These are good people, but I’ve not been able to dissuade them from having a different approach to markets. And this is as the $ is at almost 15 year highs. I’ll keep trying:
Q: Scott, Please explain in next weeks blog how the Dollar can be losing purchasing power and yet soaring at the same time without the use of MAJIC ?
A: a)- Currencies are all relative to each other. b)- markets move based upon supply and demand period. There is tremendous demand for US$s.
Q:Currencies are not relative to each other they are manipulated by the Central Banks for appearances to the gullible citizenry ! Question about the answer to B. You failed to account for the Dollar supply issue in your answer , has the Dollar supply gone up or down during this Dollar rally ?
A;Has the $ gone up in price or not. All markets are manipulated, no argument there. I’m in this business to make money though. You’re not accounting for the total global supply of $s. You’re only looking at it from a US centric point of view.
Q:No, That was indeed my question has the total global supply of $s gone up or down as the purchasing power went down ? ‘I’m in this business to make money though’, no again you’re in the business of collecting Electronic Federal Reserve debt notes that masquerade as money !
A:Actually, the profits I have made on my long US$ position over the last several years has increased my own personal purchasing power. Do you understand the difference between markets and theories? I don’t care about the US$ collapse theories. You will get your wish one day, but be careful what you wish for.
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