The stronger dollar has likely been a major factor in gold’s lack of upside follow-through in recent months. The currency hit its highest level of the year last week but is seeing a mild pullback today in early action. The greenback’s strength is not really all that surprising – it has benefitted from concerns over global growth and interest rate differentials.
The Dollar Is Near a Top…
The dollar may be at or near a top, however, and could soon see a significant price reversal. Some analysts recently suggested that concerns over global growth have been overblown and that the flight-to-safety dollar trade has likely run its course. This argument makes a great deal of sense, as recent data from both the U.S. and China may point to an economic rebound. Not only has recent data been far more encouraging, but the central banks of both nations appear ready and willing to step in with additional stimulus if the economy flounders.
Ongoing U.S./China trade negotiations also appear to be bearing fruit. Although no date has yet been set for President Trump and Chinese leader Xi Jinping to sit down and formalize an agreement, recent reports have suggested that only the details are being worked out at this point. A long-term agreement would also likely impact risk aversion and fuel buying in stocks and risk assets.
The euro could stand to benefit substantially from a trade deal and easing global trade tensions. This factor, along with calmer seas in the European political front could send the region’s currency sharply higher, also weakening the dollar in the process.
It’s no secret that the dollar is in a long-term downtrend. Recent upside will likely prove to be nothing more than a bear market rally.
Gold Best-Suited for a Weak-Dollar Scenario
As the dollar weakens, purchasing power is eroded. Dollar-denominated asset classes may stand to gain ground as the weaker dollar makes them more attractive to foreign buyers. Both of these factors would seem to suggest that adding a significant allocation in an asset class that can potentially benefit from both issues makes sense. There may be no asset class better suited for a weak-dollar scenario than gold. This asset class not only has tremendous upside price potential but may also provide a key hedge against rising inflation.
Adding this key asset class to your portfolio has never been easier and arguably never more important. Simply pick up the phone and speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about how it may potentially thrive as the dollar weakens. Our associates are here to answer any questions you may have and can even show you how easy it is to build a significant allocation using an IRA account.
Don’t wait for the next major downturn in the dollar to erode your purchasing power and net returns. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: 401k gold, advantage gold, alternative assets, buy gold, diversify, dollar, dollar weakness, invest in gold, overvalued dollar