Gold briefly fell below $4000 for the first time since November.
The peak of the rally came just after the US launched a coup in Venezuela but the real breakdown came after the Iran war and Turkey’s decision to sell $120 billion in reserves to shield its currency.
The latest back-breaker was the surprisingly hawkish debut from Fed Chairman Kevin Warsh, which has led to a broad US dollar rally.
Looking at the chart, it’s not pretty but there is some support at the late October low of $3885.
Silver is in an even-worse spot as it drops 5.5% today to $58/oz. It’s down by more than 50% from the January peak of $121.60.
It’s going to be tough for precious metals to turn it around when the US dollar is climbing every day. EUR/USD is down 57 pips to 1.1327 today and the US dollar is the top-performing G10 currency.
Money has been flooding into US markets and chasing AI. Today’s current account balance shows that US financial assets are in high demand and Americans aren’t looking abroad. Foreigners pushed $803.7 billion into US liabilities while US residents put $527.3 billion into foreign assets.
America still has a huge trade deficit but the dollars America spends abroad come home as demand for Treasuries, equities, corporate paper, and direct investment. Trump has been able to leverage trade access for more US inbound investment and that’s coming via data centers, chip fabs and auto plants.
The flip side of it is that a higher US dollar will make US exports even more uncompetitive and that should be a self-balancing system, but only in the long term.
In terms of gold, US adventurism and wars are a big tailwind but I don’t think that will really unfold until things calm down and the dollar turns.
This article was written by Adam Button at investinglive.com.
