With the Dollar Now in a Bear Market, Gold & Gold Shares Should Do Well

Michael Oliver (www.OliverMSA.com) has “focused on this situation for a few quarters now, not so much because it’s an optimal ‘tradable’ situation, but because if the major money units—the Dollar and the Euro especially—moved off dead center, then major wave effects would be generated. The Dollar Index has now moved decisively, as has the Euro (see the 360 MSA Weekend report).”

“We had pegged the 99 level back in late 2016 as one that the Dollar Index needed to hold above this year. It has not. It tried repeatedly in the early part of the year to hold that level, with tippy-toe dance steps and fake-outs, but finally it closed a month credibly below. The trap door under the hangman’s noose opened.

“MSA’s view now is down Dollar and down big. “Annual momentum!” timescale, down big. But ‘big’ for the Dollar and the Euro does not compare to the percentage wave repercussions that are likely in other markets affected by this shift. So while we pound the table on this fiat currency (the Dollar) as being weaker than the other fiat currencies (measuring paper against paper), that does not translate into a recommendation to be short the Dollar. There are other ways this situation can be applied to far greater benefit. In particular, we think that a rollover in the Dollar will be wind at the back of a commodity uprising, already underway. Already underway without Dollar weakness last year, and now consider how a food price upturn (which we also expect) might be enhanced by a weak Dollar. And what a global headline that would make for the consumers of the world. And to the central bankers who made it so. There are also other likely wave effects, such as a weaker U.S. government debt market due to Dollar weakness, and that in turn might roll into the REIT sector, which we’ve argued is linked to T-Bond price movement, and massively ripe for sudden ‘discounting.’ We are not issuing this report to tag each and every linkage, but simply to state that the Dollar Index breakage has occurred. Rallies will come, but they will go. The next likely stopping place will be around 88 on the Dollar Index (it’s currently in the 96s). It’s a price-based support level, and therefore probably temporary. But alas, this major asset category, the largest foreign exchange units (Dollar and Euro), have finally come unhinged from their somnambulant action of the past two years. It’s over!