The fundamental drivers for Gold and the US Dollar are similar and that is antal fekete bitcoin miner they typically trend together. Gold and the same drives the greenback though with respect to differentials between the other competing currencies.
When real rates are rising or strong in the US that is bearish for Gold and bullish for the US Dollar. Gold’s breakout from its giant 5-year base pattern has had to wait for the dollar rally to run its course, which it now appears to have done, and this being the case, gold is now free to break out into a major bull market that looks set to dwarf all prior ones. There is a quiet revolution taking place in the monetary vacuum that’s developing on the back of the erosion of the dollar’s hegemony. It is perhaps too early to call what’s happening to the dollar the beginning of its demise as the world’s reserve currency, but there is certainly a move away from it in Asia.
With Donald Trump close to re-instituting economic sanctions on Iran, it’s worth remembering that gold served as a tool for skirting the the last round of Iranian sanctions. If a blockade were to be re-imposed on Iran, might this role be resuscitated? The set of sanctions that the U. Iran back in 2010 can be best thought of as a monetary blockade. Iran engage in sanctioned activities would be fined. Iranian payments or lose their accounts. The main objective behind the sea route plied by Spanish galleons was to establish trade with China.
These European vessels became known as China Ships. They transported silver from the Americas to exchange for goods in Asia, mostly commodities of Chinese origin. It can be argued that when Spain instituted a common currency in the form of the Real de a Ocho, also known as Pieces of Eight, or the Spanish dollar, globalisation’s first chapter had been written. The acceptance of the dollar coins for commercial transactions throughout Asia, the Americas and much of Europe, resulted in a cultural exchange between nations, as well as the relatively free movement of people and goods between the three continent. Global assets have gone up 26 fold during this period. So whilst global assets have gone up 26x since 1980, gold has just managed to go up 2x. 35 in 1971 so it had already benefitted from a substantial rise by 1980.
Despite the insistence of some, precious metals have not been in a bull market. After a big pop at the start of 2016, the sector has trended lower. Sure, Gold has traded up towards a major breakout but Silver and the gold stocks have trended lower. When the US Dollar corrected significantly, the stock market outperformed precious metals. The beauty, value and heft of a gold coin in your hand is a real pleasure, and it holds real value.