Gold is down $125 in three weeks, falling to $1,186.20. The metal has hit nine-month lows as the Dollar shoots to unprecedented highs - crushing the Japanese Yen, the Chinese Yuan, the U.K Pound, and the Mexican Peso due to speculation on Trump and the U.S Federal Reserve’s interest rate plans.
In Asia, the Dollar has its largest rally against the Yen since 1995 as the Japanese economy continues to struggle with deflation. In China, outstanding loans now total 40 percent of the entire national GDP. The overheated Chinese property market/debt bubble pose a significant threat to the global economy, and there doesn’t seem to be a way for the Chinese government to solve these problems without money printing.
Top Development: The Mighty Dollar
The meteoric rise of the Dollar is part of a longer-term trend going on since 2015. The Dollar hit its highest levels in a decade due to the market expecting the U.S Federal Reserve to raise interest rates before 2017 and the fragile situation in the global economy.
The Japanese economy is in deflation; the Eurozone is looking at negative rates; China in a property bubble; and the U.K is in Brexit, so the Dollar strength is not surprising. However, this situation will not last forever. Investors can expect a strong rebound in gold when the Dollar rally reverses.
