US Dollar

U.S. Dollar Best Of The Worst; Gold Best Of The Best

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Among the major fiat currencies in the world today, the U.S. dollar is “the best of the worst.” What that means is that there are no better alternatives.

BRICS – QUESTIONABLE MOTIVES

That is especially true when one considers all of the nonsense and suppositions stemming from statements made by member nation representatives of BRICS. Both Russia and China are foremost in their efforts to talk the dollar into disrespect and disrepute. Their motives, however, have nothing to do with providing a better alternative.

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Gold Price, Inflation, Dollar Collapse, & BRICS

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GOLD PRICE, INFLATION, DOLLAR COLLAPSE

Expectations for gold to move higher in price are often tied to worsening inflation and a possible collapse in the U.S. dollar.

That sounds logical and there is historical precedent to support such expectations; but, some clarification is necessary first.

DEFINITION OF INFLATION 

Inflation is the debasement of money by governments and central banks. The inflation is intentional and all governments inflate and destroy their own currencies.

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Not About Gold – All About The Dollar

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IT’S NOT ABOUT GOLD

There is a lot of talk centering on the US dollar and its “ultimate end as the world’s reserve currency”.

There is also additional talk about what this means with respect to the price of gold, but that is just talk.

The price of gold tells us nothing about gold. The only thing a continually rising gold price tells us is that the US dollar continues to lose purchasing power. (see What’s Next For Gold Is Always About The US Dollar)

IT’S ALL ABOUT THE DOLLAR

As for replacing the US dollar as the world’s reserve currency, is there a better alternative? Below is a chart (source) of DXY (US Dollar Index)…

                                                                     DXY (U.S. Dollar Index)

There is information in the chart above that might change our perception of the current status of the US dollar; namely, the US Dollar Index is at the same level today as it was thirty-five years ago, in 1987. 

Also, the US Dollar Index risen forty percent from its low point in 2008.

Now, lets look at the how the US Dollar Index has fared over the past ten years…

                                                              DXY (U.S. Dollar Index) 10-Year

In the above chart we can see that the US dollar has risen twenty-five percent since mid-2014 and, looking at both charts, appears to have established progressively higher levels of support at 70, 80, and 90.

US DOLLAR, CHINESE YUAN & GOLD

Now, let’s look at one of the currencies not in the US dollar index. The Chinese Yuan has been mentioned both singly and, along with other currencies, as an alternative to the US dollar. See the chart (source) below…

                                             Dollar Yuan Exchange Rate (10-Year)

As China’s role in international trade has grown, so, too, has the attention paid to its currency.

The past couple of years have seen the Yuan strengthen vs. the US dollar but it probably isn’t a viable alternative to the US dollar.

The Yuan has also been suggested as an alternative to the dollar for international pricing of gold. That, too, is unlikely to happen.

Whether it does or doesn’t, though, is irrelevant as far as any expected changes in gold. (see Gold And US Dollar/CNY)

CONCLUSION 

The US dollar is the world’s reserve currency.  That isn’t likely to change soon – unless there is a calamitous implosion of the dollar. A calamitous implosion implies outright rejection and repudiation.

That could happen, of course.  The problem is that there isn’t another currency that could likely take the place of the US dollar. By the time any potential calamity becomes a reality, any possible candidates would likely be in worse shape.

Other alternatives have been suggested, such as cryptocurrencies, but those are not currencies or money. They are processes for the private transfer of money. The privacy feature will not be a factor for very long, either, as governments and regulators continue to speak and act with the intention of exerting control over the processes.

All currencies are substitutes for real money, i.e. gold.  And because all governments inflate and destroy their own currencies, the possibility of gold reasserting itself as the international medium of exchange continues to increase.

Even so,  a lot of worse stuff has to happen before we get to that point.  Governments around the world have too much at stake to capitulate when it comes to ceasing to issue ‘funny money’.  (also see Gold And US Dollar Hegemony)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

What’s Next For Gold Is Always About The US Dollar

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Since the origin of the Federal Reserve in 1913 the US dollar has lost ninety-nine percent of its purchasing power.

Not coincidentally, but in direct reflection of the dollar’s loss in purchasing power, the price of gold has multiplied one hundred fold from $20.67 oz to $2060 oz as of August 2020.

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Gold And US Dollar Hegemony

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GOLD AND US DOLLAR HEGEMONY

The US dollar is the world’s reserve currency. That isn’t likely to change anytime soon.

All currencies are substitutes for real money, i.e. gold.  And because all governments inflate and destroy their own currencies, any potential alternatives to the US dollar are as bad or worse.

That doesn’t stop the dollar bashing, of course. In a general long-term sense, the condemnation is well-deserved. After all, the US dollar, under the care and watch keeping of the Federal Reserve Bank of the United States, has lost more than ninety-eight percent of its purchasing power.

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Gold – Bullish Or Bearish?

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GOLD – BULLISH OR BEARISH?

What does it mean to say that one is “bullish” on gold? Or “bearish”? Or, more simply, what is a bull or a bear?

“A bull is an investor who thinks the market, a specific security or an industry is poised to rise. Investors who adopt a bull approach purchase securities under the assumption that they can sell them later at a higher price. Bulls are optimistic investors who are attempting to profit from the upward movement of stocks, with certain strategies suited to that theory. …James Chen, Investopedia

According to the definition, then, being bullish on gold is an indication that an investor can optimistically purchase gold and expect to sell it later at a higher price for a profit. 

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Cash Is King Right Now, Not Gold

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CASH IS KING FOR NOW

Amidst the fallout of stock markets crashing worldwide, gold (silver, too) and oil imploding, and the scare of coronavirus, the dollar itself stands tall. That is not what some were expecting. Nevertheless, unrealistic expectations abound today, so let’s see what we can learn from this.

When investors sell en masse, they generally turn to cash as a resting place for their money. Cash for most people today still means US dollars. This implies an increase in demand for US dollars.  Gold investors and their advisors seem to have been expecting just the opposite.

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A Lesson About Gold – How Bullish Can It Be?

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A Lesson About Gold

Apparently, there is no limit. This seems especially true right now with all of the “obvious” signs and indicators staring you in the face. It is almost blasphemous to speak cautiously. Better to let your imagination run wild and join in the revelry.

I can’t do that. I don’t choose to be dumped into the same cauldron of boiling fantasy with other analysts and advisors, who tout and promote based on the latest headlines. There has to be more to it. I think there is.

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For Gold, The Fed’s Decision Didn’t Matter

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THE FED’S DECISION

Pretty much everyone got it wrong.  Yes, they got the rate cut they were expecting; but as far as the price of gold is concerned, the Fed’s decision didn’t matter. The reason for this is that the focus on the Fed’s decision was misplaced.

It was a case of simple logic. But the logic was based on a faulty premise and led to unrealistic expectations.

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Gold’s Breakout And The US Dollar

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GOLD’S BREAKOUT

If you are bullish on gold prices right now, you are running with the crowd. That is perfectly fine, unless the crowd is running in the wrong direction. Or, maybe the race hasn’t started yet.

With all of the talk about fundamentals for gold, it would be nice if someone could set their emotions aside and look at some facts that might bring some clarity to the subject.

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