We’ve published versions of this chart in the past. It shows the inverse correlation between gold and the dollar index, but given the changing psychology in the forex markets we thought it a good time to repost it. The future for gold in this context depends entirely upon how the central banks, and in turn the markets, perceive the future of the dollar. Much of the strength of the dollar since November has been based upon a perception that the Trump administration would be good for business. With the problems in Congress and the growing frustration on Wall Street (as manifested by Jamie Dimon’s remarks* late last week), that perception seems to be fading into the distance.
Once momentum shifts away from the dollar, all the huge bullish dollar algo trades and derivatives’ plays could be subject to reversal. Thus, the references we see of late to the potential for explosive changes in financial markets including stocks, bonds, gold and silver. The flow of hot money will determine those changes.
* “It’s almost an embarrassment be an American citizen traveling around the world and listening to the stupid shit we have to deal with in this country and at one point we have to get our act together. We won’t do what were supposed to for the average American.” –– Jamie Dimon