, Jim Rogers Blog: Gold and the US Dollar Are Directly Opposed to Each Other

Sunday, April 15, 2018

Gold and the US Dollar Are Directly Opposed to Each Other

Gold is seen as a hedge against inflation. With inflation rearing its head, gold bugs are turning bullish on the precious metal.

Gold futures, at the time of writing, were trading at US$1,331.20 per ounce, 6% higher than a year ago, when it was US$1,258.1 per ounce.

IQI Global chief economist Shan Saeed says the outlook for gold is buoyant. “I can foresee gold prices heading north in the range of US$1,300 to US$1,700 per ounce… US$1,365 per ounce is an important level and the next point to touch is US$1,425 per ounce moving forward,” he tells The Edge.

Saeed says this is the third bull run for gold in financial markets.

“The first bull run was from 1971 to 1980, when gold appreciated by 2,000% and the second was from 1998 to 2011, when it appreciated by 655%. We are now in the third bull run, which began in December 2015.”

Spot gold prices have risen 24% from US1,069.29 per ounce on Dec 1, 2015, to US$1,329.19 per ounce on Feb 20.

Gold’s inverse relationship with the US dollar is one that is hard to disregard, says OCBC Bank economist Barnabas Gan.

“The 30-day correlation between the said assets remain strong at -0.91 in early February, suggesting that gold’s climb has largely been attributed to the weaker greenback. While further dollar weakness into 2018 could still come to pass, gold’s trend with the dollar could potentially weaken as global economic conditions evolve into the year.

“In a nutshell, the rosy economic outlook, tame inflationary backdrop and potentially higher interest rates in both developed and Asian economies are persuasive factors to drag gold prices lower. As such, we keep our gold outlook unchanged at US$1,100/oz at year-end,” he says in a Feb 14 note.

- Source, The Edge Markets