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He Loves a Weak Dollar, He Loves a Week Dollar Not

Commentaries & Views

Traders and investors that follow gold and the US dollar were participants in a virtual roller coaster ride this week as conflicting versions of the current administration’s policy on the US dollar surfaced.

Statements made by Stephen Mnuchin the Treasury Secretary on Wednesday sent gold prices sharply higher, and the US dollar index sharply lower. The dollar index lost roughly 1% in value, and gold gained over $22 per ounce on that day alone immediately following a comment made by Treasury Secretary when he said “a weak dollar is good for trade”.

This was followed by comments made by President Trump in an interview with CNBC on Thursday in which he said that he wanted to see a stronger US dollar. The president was quoted as saying “The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar”. He also mentioned that Treasury Secretary’s comment were taken out of context.

The comments made by the president during the interview were in conflict with earlier statements, and more so were the opposite of the perceived monetary policy of this current administration.

In April of last year, the president said that the currency (dollar) was “getting too strong” in an interview with the Wall Street Journal. That caused the dollar index to drop by a half percent in under 15 minutes.

The president comments in his interview yesterday sent gold prices plunging and the US dollar index higher. These polar opposite statements have confused investors and analysts as to the actual desired policy of this current administration.

In an interview in MarketWatch Michael Kosares, of USAGOLD said “The Trump administration offered “two different versions of the [dollar] policy simultaneously and the market will be in a guessing game as to which one is the actual policy. But “given the dollar’s performance over the past year or so, it looks like a weaker dollar is the market reality, at least for now,”

Even with the president’s comments on Thursday about a strong dollar, the upside bounce of the dollar index which short-lived lasting only a day. In today’s trading the dollar index lost – 0.30 %, and spot gold gained about two dollars on the day.

More so on a weekly basis gold gained value and the US dollar index continued its steep decline. It seems that it is more likely that both the US dollar and gold will continue on their current trajectory next week, with gold gaining value, and the US dollar continuing to trade lower.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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