US Dollar

Silver Succumbs To Selling Pressure; Gold Follows Reluctantly

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Gold and silver fell sharply on Wednesday last week, with both metals moving back towards their post-peak lows established in July.

Gold was priced at $4072 in early trading, down almost $90 oz; then rebounded to close slightly above $4100, down about $60 from yesterday’s close. The net loss was 1.14%.

Silver found little support and landed at $55.27 early in the day. The closing price for silver was $55.51, down $3.54, a whopping 6% from the day before.

Weakness in both gold and silver spread to mining stocks, and trading was influenced by a hot CPI print and rising fears of further Federal Reserve rate hikes.

The current gold price is $4117. The current silver price is $57.76.

BACK TO THE FIFTIES FOR SILVER 

After a brief respite that took silver back above $60 oz. for several weeks, the white metal has returned to the $50s with a vengeance. From last Monday’s (October 12th) intraday high at $61.57, the silver price fell more than 10%. Whatever encouragement might be inferred from gold’s reluctance to surrender to bearish forces seems lost on silver. (see Silver R&B – Can’t Do Sixty No More)

GOLD AND SILVER TAKE THEIR CUES FROM THE USD 

The U.S. dollar continued its upward march against fellow fiat currencies. Intraday, DXY (USD ETF) was up nearly 1% before backing down in later trading.

Currently, DXY is trading at 101.73. Its recent high was 102.96.

The U.S. dollar will continue to strengthen versus other currencies and could gain purchasing power as dollar prices for most assets (stocks, bonds, commodities, and real estate) will see huge declines soon.

Gold and silver have seen their peak prices for months to come. The U.S. dollar has more life left and will continue to strengthen. Correspondingly, declining gold and silver prices have not seen their lows yet.

1980, 2011, & 2026 

Gold and silver prices experienced blowoffs in 1980 and 2011. The blowoffs resulted in peak prices that lasted for years.

I believe that gold/silver at $5400/$120 in January 2026 were major price peaks. The trend for gold and silver prices is down and will remain so indefinitely.

The cumulative declines will exceed worst-case scenarios and last longer than most people can imagine. (also see Lower Gold Price, Stronger USD, Higher Interest Rates)

 

 

Lower Gold Price, Stronger USD, Higher Interest Rates

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Investors should expect three things for the remainder of this year (2026) and throughout next year (2027): 1) a lower gold price, 2) a stronger U.S. dollar, and 3) higher interest rates.

LOWER GOLD PRICE 

Gold at $5400 in January 2026 was a major price peak. The trend for the gold price is down and will remain so for an indefinite period of considerable length. Gold’s long-term, erratic rise in price since 1971 reflects the loss of U.S. dollar purchasing power over the past century. Gold’s price tops in 1980, 2011, and 2026 were the culmination of decade-long catch-up moves to bring its dollar price in alignment with the erosion of purchasing power that had taken place.

The 1980 peak price for gold gave way to a 70% decline that lasted twenty years, and the prior $850 peak price was not surpassed until twenty-eight years later, in January 1980.

The gold price peak in 2011 was followed by a 45% decline that lasted nearly five years. The 2011 peak at $1900 was not exceeded until nine years later, in August 2020.

The gold price peaked in January 2026 at $5400 oz. Five months later (June 2026), the price had dropped to about $4000 oz., where it found temporary support. After rising to $4650, the gold price fell back to $4112.

I expect gold to break $4000 on the downside, and it could go as low as $3000 by the end of this year or early next year.

STRONGER U.S. DOLLAR

The past four years (2022-26) show relative dollar strength/weakness at a higher level than at any other time in the past forty years. The price action for DXY between 90 and 100 lasted for seven years and provides substantial support.

The recent breakout above 100 for DXY (US Dollar Index) has taken it to as high as 101.8. After some brief consolidation below 100, DXY is now above 102 and is moving strongly to the upside.

There are no better fiat alternatives to the U.S. dollar. That is because all governments inflate and destroy their own currencies.

Regarding BRICS, I said the following…

“Without convertibility, any new currency, even one issued with the pretense of being backed by gold, is just another empty promise and another substitute for real money, i.e., gold. 

Do you trust the governments of Russia and China, or any quasi-government authority, to institute and maintain any proposed new currency (gold-backed or not) that would supposedly be a better alternative to the U.S. dollar?

As bad as the dollar is, you won’t get a better alternative from BRICS or any of its countries. (see Throwing Gold BRICS At Broken Windows)

CBDCs are digital fiat currencies. With the move to eliminate cash, the U.S. dollar is pretty much a digital currency anyway.

The U.S. dollar will continue to strengthen versus other currencies and could gain in purchasing power as dollar prices for most assets (stocks, bonds, commodities, and real estate) are likely to suffer huge declines soon.

HIGHER INTEREST RATES

The Federal Reserve pursued a policy of lower interest rates that lasted forty years. Then, in an about-face that slammed the bond market and rate-sensitive investors, it told everyone that “spiked punch” would be more expensive for quite some time.

The Fed first announced a shift in emphasis regarding price stability and interest rate policy in March 2022…

“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate” (FOMC, March 16, 2022)

The financial press coined the exact phrase “higher for longer” shortly thereafter, and former Chair Powell himself confirmed the meaning and accuracy of its use at the September 2023 Federal Open Market Committee (FOMC) meeting, emphasizing that borrowing costs would remain elevated for much longer than investors initially hoped…

“Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” (J. Powell, Jackson Hole, Wyoming, August 2022)

In an interview a couple of years ago, former Fed Chair Powell said…

“I think instinctively – I can’t prove this; we’re going to learn about this empirically – but it seems to me that the neutral rate is probably higher than it was during the intra-crisis period. And so, rates will be higher.“

No matter the extent of collateral damage thus far, the potential for further harm to financial markets and the economy is likely, as interest rates could rise much higher. This is true regardless of Federal Reserve intentions. Here’s why…

The Fed’s action caused a misallocation of resources and inefficient use of capital, thereby distorting the markets.

Rates were forced to lower levels that were not economically efficient. The rates were held at those levels for too long. A cleansing of sorts has to occur before the economy can build momentum that reflects lasting, real growth.

That next wave higher for interest rates could be triggered by a collapse in the credit markets. The credit collapse could push the world economy into a severe economic depression. (see The Looming Threat of Credit Collapse and Deflation)

SUMMARY AND CONCLUSION 

Gold and dollar-denominated assets will soon see huge price drops. The inflationary wave that carried them to such extremes is in danger of breaking.

The likelihood of much higher interest rates and lower bond prices is high and rising.

The U.S. dollar will continue to strengthen on both a relative and absolute basis, defying the naysayers for now. (Also see Bonds Break Badly; Bad News For Investors)

Weaker USD – Or Stronger?

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The U.S. dollar receives its fair share of attention in the financial press.  The “impending collapse” of the dollar and similar inflamed phrases dominate the headlines. Other recent mentions include “plunging U.S. dollar” and “U.S. dollar breakdown.” The concern – and alarm – seem well-deserved.

Since January the U.S. dollar has declined by 12%. At least, that is how the dollar’s decline is described by financial writers and others. There is a context for that statement, though, which needs to be clarified and understood.

Statements that reference percentage declines of the U.S. dollar usually refer to relative weakness (or strength) of the U.S. dollar compared to other currencies. The U.S. dollar index, DXY, measures the “value” of the U.S. dollar versus a basket of other currencies on foreign exchange markets. The fluctuating price for DXY is a “live” measure of the U.S. dollar’s exchange rates with various other currencies (Euro, Japanese yen, Swiss franc, British pound, Swedish krona, & Canadian dollar).

CHARTS

Below is a chart (source)of DXY for the past year…

Looking at the chart, the 12% decline in DXY since January is alarmingly steep. Additionally significant is the breakdown below its previous lows from last September.

Now, let’s look at another chart of DXY. This one covers the past forty years…

The severity of the current decline seems lessened and is contained within the scope of a broader, long-term increase in DXY dating back to 2008.

OBSERVATIONS AND QUESTIONS

The overwheming negativity surrounding the U.S. dollar needs to be considered in broader context if the U.S. dollar index is the primary point of reference for such statements. It ususally is, hence…

The past three years (2022-25) show relative dollar strength/weakness at a higher level (100-110) than at any other time in the past forty years. The price action between 90 and 100 lasted for seven years and provides possible substantial support. If downside action for the U.S. dollar versus other currencies continues, the DXY index could drop to 90 and still find strong technical support.

Will the current weakness in U.S. dollar exchange rates, which is reflected in a declining DXY, continue unabated? Or, is the current weakness part of a consolidation phase for a U.S. dollar which has been strengthening versus its peers (other currencies) for almost two decades?

CAVEATS AND CONCLUSION 

The U.S. dollar index (DXY) tells us only how the U.S. dollar is currently faring when compared to the basket of other currencies in the index.

The U.S. dollar (as do all fiat currencies) continues to lose purchasing power. The loss of purchasing power results from inflation of the supply of money and credit by the Federal Reserve.

The U.S. dollar is forever growing ‘weaker’ due to its loss of purchasing power. That is true even if traders buy dollars on foreign exchange markets; and even if the dollar index (DXY) rallies strongly.

That being said, there are periods when the dollar regains some of its lost favor. Sometimes dollar ‘favor’ turns to dollar ‘fever’. We could be on the verge of an upside dollar surprise. (also see Interest Rates Could Go Much Higher)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

 

U.S. Dollar Best Of The Worst; Gold Best Of The Best

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Among the major fiat currencies in the world today, the U.S. dollar is “the best of the worst.” What that means is that there are no better alternatives.

BRICS – QUESTIONABLE MOTIVES

That is especially true when one considers all of the nonsense and suppositions stemming from statements made by member nation representatives of BRICS. Both Russia and China are foremost in their efforts to talk the dollar into disrespect and disrepute. Their motives, however, have nothing to do with providing a better alternative.

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Gold Price, Inflation, Dollar Collapse, & BRICS

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GOLD PRICE, INFLATION, DOLLAR COLLAPSE

Expectations for gold to move higher in price are often tied to worsening inflation and a possible collapse in the U.S. dollar.

That sounds logical and there is historical precedent to support such expectations; but, some clarification is necessary first.

DEFINITION OF INFLATION 

Inflation is the debasement of money by governments and central banks. The inflation is intentional and all governments inflate and destroy their own currencies.

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Not About Gold – All About The Dollar

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IT’S NOT ABOUT GOLD

There is a lot of talk centering on the US dollar and its “ultimate end as the world’s reserve currency”.

There is also additional talk about what this means with respect to the price of gold, but that is just talk.

The price of gold tells us nothing about gold. The only thing a continually rising gold price tells us is that the US dollar continues to lose purchasing power. (see What’s Next For Gold Is Always About The US Dollar)

IT’S ALL ABOUT THE DOLLAR

As for replacing the US dollar as the world’s reserve currency, is there a better alternative? Below is a chart (source) of DXY (US Dollar Index)…

                                                                     DXY (U.S. Dollar Index)

There is information in the chart above that might change our perception of the current status of the US dollar; namely, the US Dollar Index is at the same level today as it was thirty-five years ago, in 1987. 

Also, the US Dollar Index risen forty percent from its low point in 2008.

Now, lets look at the how the US Dollar Index has fared over the past ten years…

                                                              DXY (U.S. Dollar Index) 10-Year

In the above chart we can see that the US dollar has risen twenty-five percent since mid-2014 and, looking at both charts, appears to have established progressively higher levels of support at 70, 80, and 90.

US DOLLAR, CHINESE YUAN & GOLD

Now, let’s look at one of the currencies not in the US dollar index. The Chinese Yuan has been mentioned both singly and, along with other currencies, as an alternative to the US dollar. See the chart (source) below…

                                             Dollar Yuan Exchange Rate (10-Year)

As China’s role in international trade has grown, so, too, has the attention paid to its currency.

The past couple of years have seen the Yuan strengthen vs. the US dollar but it probably isn’t a viable alternative to the US dollar.

The Yuan has also been suggested as an alternative to the dollar for international pricing of gold. That, too, is unlikely to happen.

Whether it does or doesn’t, though, is irrelevant as far as any expected changes in gold. (see Gold And US Dollar/CNY)

CONCLUSION 

The US dollar is the world’s reserve currency.  That isn’t likely to change soon – unless there is a calamitous implosion of the dollar. A calamitous implosion implies outright rejection and repudiation.

That could happen, of course.  The problem is that there isn’t another currency that could likely take the place of the US dollar. By the time any potential calamity becomes a reality, any possible candidates would likely be in worse shape.

Other alternatives have been suggested, such as cryptocurrencies, but those are not currencies or money. They are processes for the private transfer of money. The privacy feature will not be a factor for very long, either, as governments and regulators continue to speak and act with the intention of exerting control over the processes.

All currencies are substitutes for real money, i.e. gold.  And because all governments inflate and destroy their own currencies, the possibility of gold reasserting itself as the international medium of exchange continues to increase.

Even so,  a lot of worse stuff has to happen before we get to that point.  Governments around the world have too much at stake to capitulate when it comes to ceasing to issue ‘funny money’.  (also see Gold And US Dollar Hegemony)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

What’s Next For Gold Is Always About The US Dollar

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Since the origin of the Federal Reserve in 1913 the US dollar has lost ninety-nine percent of its purchasing power.

Not coincidentally, but in direct reflection of the dollar’s loss in purchasing power, the price of gold has multiplied one hundred fold from $20.67 oz to $2060 oz as of August 2020.

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Gold And US Dollar Hegemony

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GOLD AND US DOLLAR HEGEMONY

The US dollar is the world’s reserve currency. That isn’t likely to change anytime soon.

All currencies are substitutes for real money, i.e. gold.  And because all governments inflate and destroy their own currencies, any potential alternatives to the US dollar are as bad or worse.

That doesn’t stop the dollar bashing, of course. In a general long-term sense, the condemnation is well-deserved. After all, the US dollar, under the care and watch keeping of the Federal Reserve Bank of the United States, has lost more than ninety-eight percent of its purchasing power.

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Gold – Bullish Or Bearish?

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GOLD – BULLISH OR BEARISH?

What does it mean to say that one is “bullish” on gold? Or “bearish”? Or, more simply, what is a bull or a bear?

“A bull is an investor who thinks the market, a specific security or an industry is poised to rise. Investors who adopt a bull approach purchase securities under the assumption that they can sell them later at a higher price. Bulls are optimistic investors who are attempting to profit from the upward movement of stocks, with certain strategies suited to that theory. …James Chen, Investopedia

According to the definition, then, being bullish on gold is an indication that an investor can optimistically purchase gold and expect to sell it later at a higher price for a profit. 

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Cash Is King Right Now, Not Gold

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CASH IS KING FOR NOW

Amidst the fallout of stock markets crashing worldwide, gold (silver, too) and oil imploding, and the scare of coronavirus, the dollar itself stands tall. That is not what some were expecting. Nevertheless, unrealistic expectations abound today, so let’s see what we can learn from this.

When investors sell en masse, they generally turn to cash as a resting place for their money. Cash for most people today still means US dollars. This implies an increase in demand for US dollars.  Gold investors and their advisors seem to have been expecting just the opposite.

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