The US dollar and gold/Used cars/Company comments/'Silent Defaults'

Quietly it seems the US dollar continues to weaken and it is not just versus the euro and yen heavy DXY. The Indonesian rupiah and the Thai baht are at the highest since early January. The Korean won is at the highest since March. The Singapore dollar is at the highest since January 2023. Some of the help to these currencies has been the yen rally but certainly some is the shrinking interest rate differentials. 

The US dollar is also weakening dramatically against gold as gold is a currency. We remain bullish and long, along with silver. What's amazing is that the western investor has completely missed the rally, broadly speaking, as measured by the 23 million ounces of gold taken out of all the gold ETFs over the past few years and that process started just as the Fed was hiking rates in March 2022 and in search of interest bearing bonds instead. At some point, that western investor will be back and will kick start the next leg higher in gold. 

The US dollar is still trading pretty well though against the commodity currencies such as the Canadian and Aussie dollars along with the Brazilian real but all are off their recent lows. 

Since the DXY lows in mid 2021, the dollar rally has really been just an interest rate differential play, nothing more. In June 2021, the dollar started a huge rally when Jay Powell at that Fed press conference said they are finally beginning to talk about tapering QE. The DXY topped in late September 2022 just as the Fed was ending its pace of 75 bps of rate increases. One has to wonder though at when that point is reached where the US dollar more reflects worries about US debts and deficits rather than just what the Fed will do. I don't know the answer but am always on the look out. 

Regardless of the factors, if the US dollar weakness persists, import prices will become a more important economic indicator to watch as the US economy still has a large trade deficit, totaling about $800b over the 12 months into June, with the three recent months each over $70b.