Sunday , 14 April 2024

Get Positioned! Gold Has Entered Into A New Phase Of This Bull Market

On July 9 the US dollar index (DXY) slipped under 100 for the first time since April 3, 2022, with cooling US inflation data released on July 12 maintaining the trend of a weaker greenback against a basket of other trade partner currencies.

So says Richard Mills in a recent article going on to say in edited ([ ]) and abridged (…) excerpts:

“As of July 14, the dollar was down nearly 13% from last year’s two-decade high and was its lowest level in 15 months. According to Reuters, the softer-than-expected inflation print supports views that the Federal Reserve is nearing the end of its interest rate-hiking cycle.

Source: MarketWatch

At time of writing, on July 18, gold prices hit their highest level in six weeks as weakness in the USD and Treasury yields helped keep prices of precious metals and commodities elevated.

Gold has risen $22 over the last three days. Source: Kitco

A long-time currency analyst cited by MarketWatch said Tuesday that the dollar’s slide over the past eight months means that all of its gains in the wake of the coronavirus pandemic could soon be lost.

A weak US dollar has many implications, including strong upside  potential in long-term bonds, currencies, American companies selling goods and services abroad, and commodities especially gold….

A weak dollar usually means stronger commodities prices. Because the USD is the reserve currency and most commodities are traded in dollars, the value of the dollar is of crucial importance in determining the value of the commodity in question. Take the case of a low dollar. When the dollar drops it takes less of another currency to buy dollars needed to purchase the commodity, so the demand for that commodity will increase, leading to a price increase. The inverse happens when the dollar strengthens…

Gold

The direction of a weakening dollar is clear, with the Federal Reserve last month pausing its tightening cycle after a series of interest rate hikes. If the Fed cuts rates in 2024, it will weigh on both US Treasury yields and the greenback — both positives for gold. In fact, gold and silver prices have both seen impressive jumps this year, with gold coming within cents of an all-time high, and silver also flirting with price levels last seen a decade ago but the precious metals rally, according to some, has only just begun… [Read: 89 Analysts Now Forecast Gold Going To $3,000 & Beyond! and Silver Forecasts: These 26 Analysts See $32/ozt. (on Average) By Year End!.

 

Gold and silver spot prices year to date. Source: Kitco

In a recent interview, Adam Rozencwajg of Goehring & Rozencwajg (G&R), the Wall Street commodities investment firm, said “We think that gold has entered into a new phase of this bull market.”

Rozencwajg says the new bull market phase began in the third and fourth quarters of 2022, “and it really revolves around central banks’ behavior as much as anything else. I think it’s going to propel gold much much higher in this leg of the bull market.”…

Conclusion

Current and future weakness in the dollar — the result of much better inflation readings and the subsequent expectation of the Fed putting an end to its interest rate-hiking cycle, potentially even lowering rates — bodes well for…gold and other commodities that tend to gain value on a lower dollar, and of course, other currencies that are suddenly attractive compared to the mighty buck…”