King Dollar is Crushing World Currencies. What it Means for Exports and Gold.

If you were considering taking the family on a European vacation, now may be a good time, as the U.S. dollar and euro achieved parity this week for the first time in 20 years.

But as someone who was recently in Europe, I urge travelers to be aware that prices have skyrocketed everywhere, not just in the U.S. A five-star hotel in France or Italy that might have cost $350 a night before the pandemic can now cost as much as $1,600.

Much is being made about the USD/EUR exchange rate, but the truth is that King Dollar has made epic gains on a number of world currencies this year as the U.S. has embarked on an aggressive monetary tightening cycle to control inflation. Below you can see how much G-10 currencies have fallen in 2022 compared to the greenback.

Dollar continues to gain

A stronger dollar is favorable not only for Americans traveling abroad but also companies that pay to import goods from other countries—think big-box retailers such as Walmart, Target, Home Depot and Dollar Tree.

On the other hand, a soaring dollar can hurt U.S. exporters since it makes goods more expensive to foreign buyers, dampening demand. Between January and May of this year, the top U.S. exports by end-use included crude oil and petroleum products, mostly due to the massive increase in crude prices. Other top exports included pharmaceuticals, industrial machinery, semiconductors, automotive parts and accessories, fuel oil, automobiles, natural gas and plastic materials, according to Bureau of Economic Analysis (BEA) data. 

Largest U.S. Exports

Boeing Reports Best Month for Deliveries Since 2019

The single largest U.S. exporter in value terms is Boeing. The massive aerospace company, which recently moved its headquarters to Arlington, Virginia, faced a wave of order cancellations stemming from the tragic 2018/2019 crashes involving the 737 MAX, but orders look to be picking up again. As I shared with you earlier in the week, Boeing reported stellar delivery results for the second quarter, with 51 aircraft delivered in June alone. That’s the company’s best month since March 2019.

I will be curious to see if Boeing executives address the impact of the stronger dollar when the company reports second-quarter financial results later this month.

King Dollar Pushes Gold Deep into Oversold Territory

Among the biggest victims of King Dollar’s strength is gold, which, like most commodities, is priced in the greenback internationally. The yellow metal has long been valued as a safe haven during times of economic uncertainty and high inflation, which we’re certainly facing today. June’s consumer price index (CPI) came in at a scorching annual rate of 9.1%, the highest in over 40 years, but if we use the inflation methodology from 1980, the figure is closer to 17% or more.


Despite this, gold has steadily fallen since its 2022 high of $2,070 per ounce, set in early March. As of today, gold is off close to 7% for the year, and this week it briefly traded below $1,700 for the first time since March 2021. Based on the 14-day relative strength index (RSI), the metal looks incredibly oversold at around 23, the lowest it’s been since August 2018.

In addition, gold has signaled a “death cross,” which occurs when the 50-day moving average dips below the 200-day moving average.


Some investors and traders see this move as a bearish sign. I see it as a buying opportunity. If you believe that the dollar is overextended relative to other currencies, and that a reversal could happen in the coming weeks and months, now may be a good time to accumulate, especially if you think we’re in the midst of a recession.

Deepest Yield Inversion Since 2000

I’ve shared with you a couple of times that we may very well be in a recession already, based on the Atlanta Federal Reserve’s GDPNow real-time forecast. The latest forecast, as of Friday, is that the U.S. economy contracted 1.5% in the second quarter, following an annual decrease of 1.6% in the first quarter.

Even if that ends up not being the case, the bond market is telling us that a pullback may be imminent.

A yield inversion occurs when the shorter-term Treasury bond trades with a higher yield than the longer-term Treasury. Remember, bond yields go up when prices go down, so when yields invert, it suggests that investors find shorter government notes riskier to hold than longer-dated ones.

Inversions have been extraordinarily accurate at predicting recessions. Going back at least 40 years, every recession has been preceded by an inverted yield curve, using the two-year and 10-year Treasuries.

Not only is the yield curve inverted right now, but it’s inverted at the biggest point since the year 2000, soon before the dotcom bubble burst.

U.S. Yield Curve Inversion

So what does this mean? Past performance is no guarantee of future results, but we could be looking at a pullback, if not this year then the next. More specifically, stocks and other risk assets may not have found a bottom yet. From its all-time high in early January, the S&P 500 has fallen 20%, but historically it’s dropped as much as 35% on average when a bear market coincides with a recession.

Do with that information as you wish, but I believe it’s wise and prudent to have exposure to gold at this time, between 5% and 10% of your portfolio.

Have you seen the Seeking Alpha article on GROW yet? Click here to read “U.S. Global Investors: 53% Margin of Safety Implied”!

Index Summary

  • The major market indices finished down this week. The Dow Jones Industrial Average lost 0.16%. The S&P 500 Stock Index fell 0.93%, while the Nasdaq Composite fell 1.57%. The Russell 2000 small capitalization index lost 1.41% this week.
  • The Hang Seng Composite lost 6.51% this week; while Taiwan was down 20.13% and the KOSPI fell 21.72%.
  • The 10-year Treasury bond yield fell 15 basis points to 2.93%.


Energy & Natural Resources


  • The best performing commodity for the week was Natural Gas, up 18.11%. Pump prices for regular gasoline have fallen for 22 days in a row, the longest losing streak since April 2020, according to auto club AAA.
  • According to the Energy Information Administration (EIA), U.S. refineries operated at 94.5% of operable capacity at the beginning of July (92.2% a year prior), while U.S. Gulf Coast refineries were at 97.9% utilization, their highest level in over three years.
  • New UBS?Evidence Lab data and recent company comments point to further project delays at key refining projects, likely to keep the global refining market tight over the next few months. UBS now anticipates the 650kb/d Dangote refinery in Nigeria and the 230kb/d Duqm refinery in Oman to start up in the first quarter of 2023 and the second quarter of 2023, respectively. The group continues to see 2.7Mb/d of new capacity between May 2022 and mid-2023, although this is now more back-end loaded.


  • The worst performing commodity for the week was UK Gas, down -20.16%. Total oil consumption was down 5% year-over-year, with gasoline down 6% and jet fuel up 31% year-over-year, respectively. On a four-week average basis, total demand was down 4% year-over-year.
  • Iron ore was down 8.6% last week, reversing the prior week’s gains and falling to $114.3 per ton. Iron ore is now down 22.4% over the past month and down 4% on the year. Iron ore retreated this week as fundamentals turned weaker with falling steel prices and low margins.
  • Coal prices were down again this week with FOB Australia coal down 10.9% and CFR China coal faring a bit better only down 2.1% week-on-week. The FOB Australia coal price is now down 31.1% in the past four weeks and down 20.2% year-to-date. Met coal prices were down this week with material readily available and buyers resisting purchases under the expectation that prices could fall further.


  • According to JPMorgan, in over 300 investor meetings since April the bank has met only a handful of long-term “structural buyers” overweight energy equities. In addition, the bank has noticed a strong investor bias toward short-term trading Russia risk premium and “renting” the space for cyclical preference and inflation hedging. This may help explain the more than 25% correction seen across energy equities as the market continues to focus on the risk of recession while failing to discount an adverse second order supply impact (i.e., supply capacity diminishes faster than demand). JPMorgan reiterated its long-term $80/bbl. Brent outlook and remains overweight global energy equities as the sector prices in closer to $60/bbl. long term.
  • As per CNBC, India’s government is considering scrapping its 15% export duties on iron and steel products which was applied on May 21. The initial measure was intended to reduce steel prices and increase availability in the local market; removal might be actioned over the coming days, according to the article. The government has not commented.
  • According to CLSA, India has seen a massive crash in the refining spreads of diesel over the last two weeks, with gasoline and aviation fuel coinciding with a cool-off in crude prices from their respective peaks seen in June. This questions the need for the continuation of the windfall tax imposed about two weeks back. Post windfall tax, the realized spread on diesel and gasoline has fallen to near loss-making levels while the realization on aviation fuel and crude have also gone below 15-year averages.


  • According to Morgan Stanley, steel equities have performed poorly during recessions, and spot margins continue to soften; however, shares have already de-rated substantially. Price lags are likely to support second quarter profits but expect a meaningful slowdown from next quarter onwards.
  • According to UBS, there will be a time to buy copper again, but not yet. The electrification theme (e.g., EVs), while a more long-term material demand driver, has limited impact today. EVs account for less than 3%?of global copper demand, while current auto production pressure will likely limit near-term growth from EVs. Importantly, China’s construction and appliances sectors, which account for over 25% of global demand, have been weak. Arguably, the risk-reward looks significantly more attractive following the recent price correction, but cost support doesn’t materialize until $3.00 per pound versus $3.40 per pound spot. In addition, the near-term new project pipeline is strong. 
  • According to JPMorgan, steel prices in the U.S. have continued to fall from their peak with steel prices now around $889 per ton versus $1,780 per ton at the end of September. Prices could continue to move slightly lower over the next several months.


Blockchain and Digital Currencies


  • Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Neoteric NTRC, rising 1278%.
  • Bitcoin settled into a holding pattern on Wednesday ahead of U.S. inflation figures that could inject fresh volatility. The largest cryptocurrency held at about $19,500 in Asian trading, little changed on the day but nursing a drop of 11% since the end of last week. Global markets were also becalmed as investors took a deep collective breath in the countdown to the inflation data writes Bloomberg.
  • French crypto lending protocol Morpho raised $18 million from investors including Andreessen Horowitz, defying the gloom surrounding the sector after companies like Celsius Network froze withdrawals. Around 100 backers invested in the decentralized autonomous organization called Morpho, including Variant, Coinbase Ventures and Spark Capital. The investors received a newly issued token tied to the project named MORPHO writes Bloomberg.


  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was NoblessCoin down 97.87%.
  • Nearly all industrial scale Bitcoin miners in Texas have shut off their machines as the companies brace for a heat wave that is expected to push the state’s power grid near its breaking point. Miners such as Riot Blockchain, Argo Blockchain and Core Scientific are working with the Electric Reliability Council of Texas (ERCOT) to shut down their mining machines when the state faces energy shortages, writes Bloomberg. 
  • Stablecoins must “urgently” be brought under increased regulatory oversight before they can become a risk to financial stability, according to the European Central Bank (ECB). The institution said that with some stablecoins already playing critical roles in providing crypto markets with liquidity, there could be significant spillover should a large stablecoin fail, writes Bloomberg.


  • Major League Baseball (MLB) All-Star and New York Yankees Pitcher Nestor Cortes, aka “Nasty” Nestor, announced on Tuesday that he will be releasing his exclusive non-fungible token (NFT) collection on the Reserve Foundations RBX Network protocol with a portion of his personal proceeds to benefit Sloan Kettering Memorial Hospital and Miami Children’s Hospital on Sunday evening July 17th, writes Bloomberg. 
  • Ethereum rose 11% on Thursday after the inflation data came out above expectations and the highest in 40 years. The market is believing they are well behind the curve and taming inflation will be harder than expected.
  • Polygon’s MATIC token jumped after Walt Disney Co. chose it for a business-development accelerator program. MATIC was 1.3% higher Friday morning in Asia after surging 21% on Thursday in the wake of Disney’s announcement that polygon was one of six companies selected, writes Bloomberg. 


  • The founders of bankrupt crypto hedge fund Three Arrows Capital haven’t been cooperating in the firm’s liquidation process and their whereabouts were unknow as of Friday according to court papers. Representatives tapped to liquidate Three Arrows by a British Virgin Islands judge had “not yet received any meaningful cooperation” from Kyle Davies and Zhu Su, lawyers said in U.S. bankruptcy court filings. Advisory firm Teneo is attempting to round up and preserve the assets of the hedge fund according to an article written by Bloomberg.
  • Cryptocurrency lender Celsius Networks filed for Chapter 11 bankruptcy, the latest casualty of a $2 trillion crash that has wiped out some of the industry’s biggest names and exposed hundreds of thousands of individual investors to steep losses. Celsius, which has more than 100,000 creditors said took the step to stabilize its business and work out a restructuring for all stakeholders, writes Bloomberg.
  • OpenSea, the world’s largest marketplace for NFTs, is cutting about 20% of its staff, the latest in a series of layoffs that’s rocked the crypto industry as digital-asset prices continue to plummet. CEO Devin Finzer announced the job cuts in a tweet on Thursday, and warned of a prolonged downturn amid the collapse in crypto prices and broader economic stability writes Bloomberg.

Gold Market

This week gold futures closed at $1704.90, down $37.40 per ounce, or 2.15%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 5.79%. The S&P/TSX Venture Index came in off 5.03%. The U.S. Trade-Weighted Dollar rose 91%.

Date Event Survey Actual– Prior
Jul-5 Durable Goods Orders 0.7% 0.8% 0.7%
Jul-7 Initial Jobless Claims 230k 235k 231k
Jul-8 Change in Nonfarm Payrolls 265k 372k 384k
Jul-12 Germany ZEW Survey Expectations -40.0 -53.8 -28.0
Jul-12 Germany ZEW Survey Current Situation -34.5 -45.8 -27.6
Jul-13 Germany CPI YoY 7.6% 7.6% 7.6%
Jul-13 CPI YoY 8.8% 9.1% 8.6%
Jul-14 PPI Final Demand YoY 10.4% 1.1% 10.8%
Jul-14 Initial Jobless Claims 235k 244k 235k
Jul-14 China Retail Sales YoY 0.4% 3.1% -6.7%


  • The best performing precious metal for the week was Lithium, flat on the week 0.0%. Following the C$50 million of equity financing, K92 Mining has further strengthened its balance sheet in preparation for the Phase 3 expansion due to be fully underway within the next 12 months. Phase 3 will increase throughput to 1.2 million tons per year (currently expanding to 500,000 tons per year), enabling the company to take advantage of the growing, high-grade resource and increase production and cash flow per share.
  • Yamana Gold recently reported its second quarter operating results. Second quarter production for 2022 came in at 261,000 ounces (up 7% versus consensus), at an estimated AISC of greater than $1,090 per ounce (up 1% versus consensus of $1,078 per ounce).
  • Gold Fields announced that it intends to increase its dividend payout policy to 30%-45% of normalized earnings, from 25%-35% currently, upon the completion of the Yamana transaction. For 2023, the company intends to target its dividend at the high end of the range (i.e., 45%).


  • The worst performing precious metal for the week was, down 8.17%. Exchange-traded funds (ETFs) cut 342,688 troy ounces of gold from their holdings in the last trading session, bringing this year’s net purchases to 5.52 million ounces, according to data compiled by Bloomberg. This was the biggest one-day decrease since March 18, 2021, and the sixth straight day of declines (the longest losing streak since May 18). The sales were equivalent to $595.9 million at yesterday’s spot price. Total gold held by ETFs rose 5.6% this year to 103.4 million ounces, the lowest level since March 11.
  • New Gold reported a significant operating miss in the second quarter and announced material negative guidance revisions. The production challenges and revised guidance has been attributed to excessive rainfall at Rainy River, which has also necessitated a re-sequencing of the 2022 mine plan, along with early closure of the recovery level zone at New Afton.
Gold Signals a Death Cross
  • K92 Mining reported second quarter 2022 production results from its Kainantu Mine in Papua New Guinea of 26,100 ounces of gold. This is 20% below consensus due to a lower gold grade.


  • Gold Fields’ management highlighted that the previously announced $40 million of annual pre-tax synergies is based on reducing corporate overhead as well as procurement savings. This does not include potential operational synergies which could “significantly” exceed $40 million per year, though they are not quantified at this stage.
  • Royal Gold has entered into an agreement with Great Bear Royalties (GBR) to acquire GBR for cash of about C$199.5 million. GBR’s sole material asset is a 2% NSR royalty that covers the entire Great Bear Project in Canada operated by Kinross.
  • Gatos Silver announced higher-than-expected grade and production, even accounting for shutdowns. While still too early to read into 2023 grade/production (or beyond), near-term execution and FCF generation buys management time to deliver a more comprehensive long-term plan.


  • According to RBC, regarding cost guidance industry-wide, consensus would be to expect changes, but investor feedback pointed to a combination of the following: 1) a strong U.S. dollar that could boost the revenue lines as a partial positive offset, given all commodities are priced in the dollar while costs are paid in a mix of USD/local currencies, and 2) many gold companies often wait until the third quarter to change guidance in any case. 
  • Argonaut Gold made multiple announcements at the end of June highlighted by the reaffirmation of the previously released C$920 million estimated cost to completion (“EAC”) for Magino. In addition, the company announced a new debt facility and equity funding package to finance the remainder of the build. Argonaut has made an application to the TSX for a “financial hardship” exemption for shareholder approval of the equity financing and expects that the TSX will commence a standard de-listing review because of the application.
  • Triple Flag Precious Metals’ second quarter production of 19,500 ounces was 9% below RBC’s estimate. The company noted that production was partially impacted by deliveries that were dispatched but not yet included in sales. Annual guidance has been revised down 3% to 88-92,000 ounces, from 90-95,000 ounces, and is in line with RBC’s estimate of 90,000 ounces.
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Author: Frank Holmes