Hold On To Your Hats – $USD Looks Ready to Drop

In December 2021, TEC posted “Hold the Gold – it’s all about the $USD” . Sure enough, from the end of 2021 throughout 2022, Uncle Buck saw huge inflows, mostly from Europe. The reason was simple enough – the special operation conducted by Russia in Ukraine. Suspicions that the US has been interfering in Ukrainian politics to the detriment of Russian security were confirmed by noted economist Jeffrey Sachs in a European interview  (also here), and also by the BBC back in 2014. I also made the startling discovery that notable Neo-Conservative Victoria Nuland is of Jewish-Russian heritage. (grandparents). Nuland is married to the son of a Trotskyist – Robert Kagan. Her involvement in Ukraine is well documented. This mix of official US policy and personal ties/vendettas linked to the Ukraine disaster is really mind boggling. Of course you won’t hear this from legacy media. My go-to for informed understanding of the politics and events in Ukraine remains Moon of Alabama, reportedly written by a former US Army officer. Now I make no apologies if the above paragraph is contentious in reader’s minds, for it is necessary to introduce my reasoning for a failing US dollar below.

USD - EUR chart

Changed Perceptions of US Standing on the World Stage

While Western voters are illustrating the for and against dichotomy (carefully nurtured by both political parties this past 20 years) that is former President Donald Trump’s criminal indictment, Asian businesses and notables were reportedly shocked at the state of American politics. That a standing US President would seek to stitch up his political rival is a throwback to the decades of Asian authoritarian rule that some countries (like Myanmar) have failed to overcome. Many other countries in Asia have made that transition to some semblance of democratic rule. The timeline from the FBI raid on Mar-a-Lago to Trump’s arrest is Aug 22 – June 23. What has also become more transparent to institutional investors (the smart money) and governments is the failure of American support for Ukraine. This is the 3rd Army equipped for Ukraine against the Russians – the 1st being Ukraine’s own military apparatus, followed by delivery of former Soviet stockpiles in Eastern Europe. The 3rd Army is being destroyed as rapidly as the other two armies, with no positive outcomes in sight. American involvement in Ukraine is the Syrian-Iraq-Iran-Afghanistan debacle magnified tenfold, with the administration failing to learn their lesson.

Bye Bye Uncle Buck?

Thus it was my surprise to check in with the $USD charts to find a rapidly weakening support for Uncle Buck. I’ve illustrated ascending triangles before in demonstrating how the upside break in gold prices in $AUD are readable on a chart. Below is a comparison of triangles. Ignore the time frames, although the longer the time frame the better the setup will work. I started investing in collectable pre-decimal coins in 2018/2019 on the basis of that chart below left.

Point being, my initial thoughts that the $USD would have a 2nd and likely even higher run in prices are now drifting towards the possibility that Uncle Buck is finished. When I say finished, it means that the risk/reward matrix for BIG investors holding $USD is now shifting and the selling of $USD may be underway as investors seek “return of their capital” instead of a “return on their capital”. Greed vs Fear has ever been the investor balance.

ascending and descending triangles

If – IF – Uncle Buck is Weakening, Watch out Gold Buyers!

It’s very easy to see the tests of support for gold in $USD in 2021 and 2022. The big dollar run as capital fled Europe, accelerating in 2022 as Russia sent in the tanks is clearly over. The peak in that $USD buying late 2022 led to a quick retest of the 2021 price support in gold, initially falling below support levels to trap sellers, before rapidly recovering. It subsequently returned to the American market all time high (unadjusted for inflation) in about 6 months. While the $USD gold price is only about 7% off the all time highs, a loss of 90 cents in the $USD is likely to stimulate new buying in the American precious metals market. As readers of this blog and FB posts are well informed, TEC has been (im)patiently waiting for the American market to take off in a new bull trend to increase gold prices around the world.

gold in USD vs USD-EUR

Time Frame for New All Time Highs?

Given the rapid swings in prices illustrated on the above chart and the increasing sense of discord in global markets, I wouldn’t put it past global investors to panic out of Uncle Buck and panic into other assets like real estate (already in a huge bubble), commodity shares, stock market indexes, productive agricultural land, collectables and PHYSICAL precious metals. If you want to read about how bad the state of NY/London markets for physical delivery in silver have become, I recommend you read this article and follow the blog as well.

TEC’s thesis made the choice (decided years ago) in assets very simple – buy authenticated and recognisable coins from Australia’s pre-decimal monetary founding. Question for readers – What’s your risk appetite? Will you buy in anticipation or wait until prices have run higher? Click on the link below to look at TEC’s range of near UNC and UNC authenticated sovereigns. 

PCGS graded sovereigns