• 92 days Could Crypto Overtake Traditional Investment?
  • 97 days Americans Still Quitting Jobs At Record Pace
  • 99 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 102 days Is The Dollar Too Strong?
  • 103 days Big Tech Disappoints Investors on Earnings Calls
  • 103 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 105 days China Is Quietly Trying To Distance Itself From Russia
  • 105 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 109 days Crypto Investors Won Big In 2021
  • 110 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 110 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 113 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 113 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 116 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 117 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 117 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 119 days Are NFTs About To Take Over Gaming?
  • 120 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 123 days What’s Causing Inflation In The United States?
  • 124 days Intel Joins Russian Exodus as Chip Shortage Digs In
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Texas Hedge Report

Texas Hedge Report

Texas Hedge Report

Todd Stein & Steven McIntyre are internationally known analysts and editors of The Texas Hedge Report, a market newsletter that highlights under and overvalued securities…

Contact Author

  1. Home
  2. Markets
  3. Other

What's Going on with Gold and the Dollar?

An e-mail we just received from a subscriber:

"Hi guys, I know this message may be the sign of the bottom, but I cannot take these markets anymore. I am getting these terrible stress headaches watching my gold & silver stocks and I am selling out my positions tomorrow morning."

Another e-mail from a non-subscriber:

"Why do the gold stocks keep declining? Do you think the government is behind it?"

It seems that blood is in the streets in the land of gold and silver mining equities. Additionally, the US Dollar has roared back ferociously ever since being featured on the cover of Newsweek. So what's going on?

We were at a second hand bookstore the other week and purchased a copy of Martin Mayer's The Fate of the Dollar which was published in 1981. The book, written during the height of the Dollar crisis, offers a detailed history of US Dollar policy in the twentieth century. Where it gets interesting however, is in the play by play account of the gold bull market during the 1970s and how it affected the public's perception of money. During the rocky 1970s, there were many times when the Dollar would mount vicious bear market rallies in the face of worsening fundamentals. Most of the time according to Mayer's book, these rallies were artificially created by central banks of various countries. So if you believe that humans tend to behave the same way throughout history, then it only makes sense that the current Dollar rally (in the face of record trade deficits) has been influenced by central banks.

There are many reasons why it is in everyone's interest to keep the Dollar from declining in a straight line. The Europeans are only weeks away from voting on an EU constitution. Sensing populist resistance to any further loss of sovereignty, perhaps the Eurocrats in Brussels do not want to rock the boat with a stronger Euro. After all, a stronger Euro means less exports and higher unemployment which could result in clashes between European federalists and anti-federalists. Tying monetary policy with electoral politics is well documented in Mayer's book, so don't think history couldn't repeat. After all, why do you think incumbents hoping for reelection beg for low interest rates?

At times like these, we think it makes sense to step back and look at the big picture. The fact is that the Chinese are months (perhaps weeks) away from revaluing the Yuan which would have the effect of unloading a bunch of dollars into the open market. Also, don't ignore the trade deficit numbers - they will matter at some point - no country has ever consumed its way to prosperity. Finally, guys with the great track records (ever heard of Warren Buffett?) continue to move out of the Dollar. It might be a good time to pick up a few gold coins and mining shares.

Back to homepage

Leave a comment

Leave a comment