3.10 - what asset is pushing dollar away?
Dollar is stepping away and the new asset is earning the trust of international investors and traders.
Gold has been performing extremely good in the last several weeks. And even though the prices for the precious metal usually depend on greenback’s performance against the basket of six major currencies it seems that lately the bond between the metal and the currency is not nearly as strong as it used to be. Right now, with dollar’s uneven performance on the table gold has been enjoining some bullish momentum for the first time in months. The price for the metal is around 5-weeks-high point.
Performance like that wasn’t seen by the markets since April which is pretty odd with the greenback not really going sown at the moment. On the contrary. Last week we saw a rally that was caused by interest rate hikes and gold barely moved, even though all of the market rules were pointing to the fall of the metal’s prices.
Gold has been gaining for several days in a row now and we are just curious why that is? yesterday’s jump in the price for metal comes from the political-oriented outlook of traders on the market. Italy has turned a lot of eyes to itself and euro, and dollar was simply left to drift, like it has been happening for a long time now.
Well, political turbulence in the world as it is tends to attract traders’ attention to assets which otherwise have limited amount of traders who prefer to stick with a certain assets trading no matter what as they learn all of the pattern for the assets of their choosing. But now gold just like other metals are experiencing a peculiar change – they are becoming safe haven for those who seek trading with no sudden shakes, thus getting some extra support needed for the stable prices.
With popular indices and currencies dancing around dollar and anticipating a trade war that may or may not happen as well as oil, the price for which has skyrocketed after the OPEC meeting that took place a week and a half ago, gold is becoming more and more popular with traders. as we already pointed out, gold usually loses price when stocks and dollar go up as the stronger dollar simply makes other assets, tied to them more expensive for traders, who do not have greenback as their national currency.
But this time the price for gold is going up despite a pretty strong greenback. This time the demand for gold as a stable asset if taking all of the cards and changes the rules of the game.
Will the changes last long? It seems so. It is a natural process for the markets in the situation, similar to the present one – traders are looking for something softer are concrete. And in this case even oil lost to gold. And the longer the situation goes on, the more strength is going to be gained by metal and the longer it is going to take to bring the metal-currency balance back.
So many things have been happening in the world. Sometimes it is hard to keep track on the changes, experienced by political scene as well as the market all around the world. It is especially hard to do when the statements of officials change and when there seems to be no common answer to the certain problems. Listening to all the sides of a certain conflict doesn’t help as everyone has different outlooks on the situation.
But there is one thing that is certain – the most popular asset and currency out there lives through one of the worst times in the modern trading history. Dollar experiences shakes as we haven’t seen for a long time already. Pre-crisis state that we are finding ourselves into right now cannot but scare and worry us as traders. Especially given that we are still dealing with the fallout of 2008 economic crisis. But the real question now is whether we are living during the demise if the greenback as a valuable and valid trading asset or are we just witnessing a bad time for the currency?
If the first suggestion is really true, then we are to look for the other assets and really fast too, as there will be no trading and financial shelter for those who decided to stock with dollar. Of course, the process is not going to be rapid and quick. It is going to take years before dollar is really forgotten. All that it takes for that to happen Is simply for United States to go on with the ruining policies they are implementing right now.
Plus, there are a lot of countries that are ready to stand up to the United States by forming new trade alliances and signing new trade agreements all without the Untidy States. Although pretty risky, there are no other ways to be safe in the current situation, but to unite against the international economic bully.
Fixing the situatio0n if fairly easy at the moment – all it takes it to bring back the trust of traders to the greenback. And that can only be done with sane behavior of Trump towards the format trade partners.
So, are we going to witness greenbacks being pushed away by more reliable asset like euro, for example? It is possible. and in case that happens it is possible that we witness the most horrible financial crisis in the recent history. But that is only a hypothesis. We hope that the truth is going be much more different from it.
- by Anna K.