Monday, January 15, 2018

Higher gold prices and a declining dollar the continuing forecast for all of 2018

Well respected economist, author, and financial analyst Nomi Prins provided her forecast and outlook for 2018 in several sectors of the domestic and international economies.  And when it comes to her expectations for where gold prices will be going this year, Prins points to the dollar and its current direction for the answer.

Gold price chart
30 day Dollar index chart
The dollar index that tracks the dollar against other major currencies (including the Euro and the Pound sterling) hit 14-year lows in 2017. As the index dropped accelerated, it exhibited a counter-historical diversion from the behavior of the US stock market. That pattern looks set to continue in 2018, despite any minor US rate increases that did not serve to bolster the dollar against other major country currencies last year. 
It’s also counter-intuitive for the currency coupled with rising rates to underperform the one with easier policy. Yet, that’s what happened between the US dollar and the Euro in 2017. The Euro’s surge will carry on given that its strength better reflects surrounding economic reality, than the dollar does for the US, where the stock market has far outpaced economic factors like wages and job force participation levels. 
Similarly, gold and silver will rise against the US dollar, as bitcoin enthusiasts and gold bugs converge. Nations like China, India and Russia continued to stockpile gold in their quest to diversify against the dollar last year. China’s Gold Bar Demand rose by more than 40%. The more gold these nations buy, the more the dollar could decline relative to their currencies, especially if they sell US treasuries, or reduce purchases, to buy gold.  Even my old firm, Goldman Sachs noted the bitcoin boom hasn’t dampened gold demand. – Daily Recknoning


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