Loading ...The Dollar: Safe Haven Or Leaky Lifeboat?
[Ha Ha! Sprott…ever hopeful]
The “strong U.S. dollar” has been, of late, the most topical affliction for gold. Already sagging under the weight of hawkish Fed speak, receding financial liquidity, competition from crypto and disappointment from its failure to rise to new highs on the back of high inflation. The investment consensus appears to be one of highly convicted bearishness. Technical charts bear this out, with the metal breaking to a three-year low. The U.S. dollar lifeboat is no longer safe for occupancy.
The U.S. dollar lifeboat is no longer safe for occupancy. The wait for gold to be rediscovered as a safe haven is nearing an end.
The parabolic ascent of the U.S. dollar (USD) against all currencies and commodities, however, contains the seeds of its own demise. It is akin to the panicky overcrowding of a leaky lifeboat. The facade of USD strength foretells a comeuppance for all paper currencies: A steep devaluation relative to gold. As noted by economist Mohamed El-Erian, the “relentless appreciation of the dollar is terrible news for the global economy.” (Fortune, 9/26/2022). It is the latest and maybe final refuge of safety certain to disappoint clingers on as much as the late lamented “ultrasafe” refuge, U.S. government debt securities which are down 12.47% year-to-date through October 3, 2022.
What comes next? Could it be the rediscovery of gold, the one and only safe haven still relatively unscathed?
The kiss of death for the strong USD may well have been delivered by the Bloomberg Businessweek cover below. Overcrowded consensus trades are often top-ticked by magazine covers, a long-standing media tradition in keeping with Business Week’s “Death of Equities” cover in 1979.