Seeking Alpha/Clif Droke8-16-2020
“Gold’s bull market is being driven by currency considerations right now, and the recent bounce in the U.S. dollar accounts for gold’s latest pullback. Here we’ll discuss the factors behind the dollar’s recent strength and gold’s decline. I’ll also make the case that while the ‘correction’ for gold was needed, the metal will eventually resume its climb as prevailing political and fundamental factors favor continued dollar weakness ahead.
In my previous gold commentary, I argued that currency weakness, not fear, was the primary impetus behind gold’s rising trend since March. My reason for stating this was simple: investors are clearly becoming more risk tolerant, as evidenced by the continued climb of equity prices. At the same time, other traditional areas of safety (such as utility stocks) are stuck in neutral while U.S. Treasuries (another traditional safe haven) have lately experienced a sharp price decline. The combined evidence suggests a lack of panic-level fear among participants, which was prevalent earlier this year.”
USAGOLD note: The latest from Clif Droke. He hasn’t written about gold for a while. Of course, we hasten to point out that the risk-tolerant psychology he identifies could be undermined just as quickly and unexpectedly as it was established.
