The U.S. Dollar's Days Are Numbered, Gold To Shine - Analyst
“USD is starting to look like the weak-1970s Carter Dollar period when gold did soar,” Michael Howell of Cross Border Capital told Kitco News in an email Thursday.
To echo the low-dollar period during Jimmy Carter’s presidency, Howell and his team have dubbed today’s U.S. currency, the “Trump Dollar.”
And to them, there are many reasons to expect a weaker greenback these days.
“The US dollar is seeing structural weakness (a) because U.S. private sector cash flows are slowing after period of rapid growth; (b) because US$3 trillion of global excess and flight capital sought safe haven in Treasuries and USD over 2014-16 and this whopping amount now reversing out, and (c) gathering political uncertainties,” he explained.
Gold prices tend to move inversely to the greenback, and because Howell is calling for further weakness in the U.S. dollar, he sees $1,400 gold as “very likely” in the near term.
The yellow metal managed to hit 11-month highs this week on heightened geopolitical tensions between North Korea and Japan. However, prices have since cooled off slightly with December Comex gold futures last trading at $1,323.80 an ounce, up 0.74% on the day.
Not only does he expect weakness in the dollar, but he also sees the euro moving higher, which would mean higher gold prices.
“Gold will break out higher, but this is not only a weak US dollar story (which is good for gold) it is as much a strong Euro,” he said.
The analyst pointed out that some experts are calling for EUR/USD to hit 1.22 by year end. “We fear it could be as soon as this week,” he wrote in a report earlier in the week. The EUR/USD last stood at around $1.1884.
“Our main 2017 investment theme has centered on a weak U.S. dollar, a strong Euro, a ‘flattish’ Yen, rising commodities and buoyant EM [emerging markets] share prices, as domestic Central Banks are forced to monetise dollar weakness,” he said.
“Fundamentals are against the US unit but, on top, politics are not helping…The U.S. dollar has been a significant temporary beneficiary of favourable circumstances all of which appear to be unwinding.”