A Foothold for Gold

Posted by Market Anthropologyropology

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Gold continues to trade out of its post rate hike low – akin to the taper low in December 2014. Our view has been while they both represent similar mark
et reactions, the broader reflection that’s played out in the currency markets over the past two years – presents a significant catalyst for gold going forward. Specifically, we expect a much weaker US dollar this year. 
 

Unlike gold’s Q1 2014 rally that coincided as the US dollar was basing and exhausted as the dollar broke out; gold has been stepping higher since the December rate hike with what we perceive as precarious underlying support for the US currency – that remains stretched at a relative performance extreme. From a longer-term perspective, the inverse correlation between gold and the US dollar index has been strengthening over the past two years, with precious metals leading the downside move in commodities as the US dollar rallied appreciably.