Despite skyrocketing inflation, the strong dollar supports gold prices.

Click Here: After you read it, Daily Routine with WikiFx　

Gold Gets Into The Action

The global commodities shock is increasing, and the 2/10 treasury yield curve – the differential between 2-year and 10-year treasury yields – became negative in early April. These have historically signaled a declining economy or recession. Early April saw gold and the dollar rise as traditional safe havens. On April 18, gold tested $2,000 an ounce with an intraday high of $1,998. On April 21, US Federal Reserve Chair Jerome Powell gave a strong message at an International Monetary Fund (IMF) session, indicating that more aggressive interest rate hikes are needed, presumably to battle inflation. On April 25, news of China's increasing COVID outbreak threatened to reduce demand for basic materials, causing gold to fall. Selling gold was misguided, as gold's drivers are distinct from other commodities. The volatility and falls in the Chinese stock and real estate markets have fueled investment demand for gold.

Dollar-Down

History texts teach us about inflation, the Cold War, and WWII. Ours was a world that would never allow such worldwide chaos or wickedness to occur again. Venezuela, Syria, and Myanmar could never happen in the West. Now we see that civilization isn't as evolved as we thought. The worst of human cycles is currently repeating, with war and nuclear threats. Gold is once again serving as a financial safe haven and wealth repository. Given the recent events, many gold supporters ask why the gold price isn't higher.

A secular bull market began in December 2015, when gold hit a low of roughly $1,050 an ounce. Gold's recent performance hasn't matched the 1970s and 2000s secular bull markets. In the present bull market, the pandemic has exacerbated some macroeconomic and geopolitical risks. One notable distinction may explain gold's poor performance thus far in this bull market. It was in a secular bear market from 1970 to 2000. From 1971 to 1978, the DXY plummeted 46%, and from 2002 to 2008, it fell 41%. The DXY has risen 5.2 percent since December 2015, and is currently testing a twenty-year high. While gold and the dollar often rise together in times of financial duress, their regular trend is downward. We think the strong dollar has slowed gold's current bull market ascent.

China and Europe seem to be leading the world into recession, while the Fed is raising rates. This is good news for the dollar for now. Gold has a lot of fans. The strong dollar is causing financial stress abroad, inflation appears to be out of control, and geopolitical and economic worries should keep driving gold. We expect gold prices will rise, but not to the levels seen in previous secular bull cycles.

Click Here: After you read it, Daily Routine with WikiFx