Dollar Strength or dollar weakness for 2020 and beyond
The dollar by logic should drop as the Fed is pumping out insane amounts of money, but let’s not forget that the Fed has forced almost every other nation to take the same route. Now another argument that one could make is that the US debt is just too high. Well, that argument could have been made decades ago. Once upon a time, the deficit was less than a billion dollars.
Around 1901 the total debt was 4.1 billion dollars, hence in comparison, today’s debt is already insane. It all comes down to perspective. We now live in an era where the masses are asleep; in fact, they are in a deep coma. Hence, as we have stated before, they are unlikely to notice anything until the debt touches the 100 trillion mark.
The US dollar is trading in a wide channel formation. Notice that when Greenspan increased the money supply, instead of the dollar losing its value, it surged, so there goes the hard money argument. The most illogical analysis would be to suggest that the dollar is building a base to rise to new highs: that would be utterly preposterous. And, that is why this outlook is more likely to come to pass than the one that states the dollar is destined to crash.
In the intermediate time frames, the dollar is likely to continue consolidating. Currencies such as the Oz dollar and loonie should outperform the USD, but if one factors the gains one can lock in the US markets, the profits might not amount to anything unless you are investing in equally strong stocks in Canada or Australia
Expect Dollar Strength, not Weakness
Having said that we expect the dollar to bottom out and trend higher after the current consolidation is over. A monthly close above 105.00 will pave the way for the dollar to test the 116.70 to 118 ranges with a very strong possibility of trading to or past 120.00. Everyone forgets the impact AI, and AI-related technologies will have on earnings going forward, and the US dominates this sector. Let’s not forget the Medical industry, especially the biotech sector, where AI is going to be used to create a host of new life extension therapies. All in all, the dollar is toast story that’s been broadcasted for over five decades, is getting old. Sadly the odds of the gold bugs having their day in the Sun are quite slim.
For them a day in the Sun means Gold surging past 5K and at this point, we can’t see Gold trading past 2.5K and this is an extreme target. Precious metals, when examined from a long-term perspective, will continue to trend upwards, hence allocating a portion of one’s cash to bullion is fine, but betting the house on this sector is an indication that one might require shock therapy.
Other Stories of Interest
The Future Of AI (July 1)
The Angry Mob & The New Polarised World (June 16)
Social Unrest And The US Dollar (June 15)
Paradoxes: The Scorpion And The Frog (May 14)
Getting Even With China (May 6)
Google Stock Price Projections For 2020 (April 28)