Below is an interesting chart reflecting the life of various currencies since 1400. The current wisdom seems to be that the dollar is doomed. I think in reality this is true, BUT, the majority of world trade is still carried out in USD, even though it is changing rapidly. The financial systems are mostly USD orientated.
The US has the largest and most diverse economy in the world, although the strength of the Chinese economy appears to rival the US economy in many respects. The Renminbi is however not traded worldwide yet, but does have an established international bond market which is growing and presents real competition to the USD.
The US dollar is widely used in international trade and is the most commonly used currency for commodity trading. This gives the US dollar a unique advantage and makes it more resilient to economic changes in other countries but this is changing as new trade agreements are entered into.
The US has a stable political system, with a strong rule of law and independent judiciary. This makes the US dollar a safe haven currency for investors during times of political and economic uncertainty.
This was certainly the case until a few years ago, it appears that the corruption and manipulation of the system for personal and political purposes is being exposed daily. This does not bode well for the dollar.
Many central banks around the world hold US dollars as a reserve currency, which gives the US dollar a stable demand. These central banks hold US dollars to help stabilize their own currencies and to have a liquid asset that can be easily traded on international markets.
The major holders of US treasuries have been retiring their holdings or trading them for real assets. The BRIC’s nations are gathering more and more countries to join their system outside of the dollar system. Once they have completed their main drive they will control the trade of over 60% of the world.
The US is one of the most powerful countries in the world militarily, and this gives the US dollar a unique advantage. The US dollar is used to finance the US military, and the military is often used to secure US interests abroad, which helps to maintain the US dollar’s position as the dominant currency in the world.
The use of military force by the USA around the world is a large part of the reason for the push back against the dollar. The use of the SWIFT system as a weapon also contributes to the push back against the dollar. China, Russia and North Korea have nuclear and hypersonic weapons, difficult if not impossible to intercept, The gap closes.
For the immediate present, the structures in place to trade with dollars will hold the dollar as the main trading platform. The dollar, however, is under severe threat by countries that have suffered at the hands of the USA. This may also be why a worldwide CBDC is under consideration, so that total control may be enforced over the movement of the currency of every country. Will implementation of a worldwide CBDC be successful? I have my doubts.
A table reflecting the life of various currencies since 1400.
Gold and Silver
Gold and silver have behaved erratically this week, falling from their highs to much lower figures, then recovering to mid levels. With the major banks still holding large short positions they will want lower prices to cover their shorts.
Will they take losses on their short positions and make it up on longs?
I wish I knew. All I can do is follow the signals on our system.
Gold and Silver Stocks
Below is a monthly chart comparing gold stocks to physical gold over the previous twenty years. During the previous fifty years gold stocks underperformed physical gold by 92%. Over the past twenty years the stocks have underperformed by 74%.
There have been periods where money could be made on the stocks beginning with a blue vertical line and ending with a red vertical line. (In the chart below)
The indicators are lining up now for a preference to hold stocks, but have not triggered as of yet. I anticipate that should prices continue to escalate this will happen this month.
Look at the Gold and Silver charts
|Gold Price today||$2,007.00||$2,041.00|
|Silver Price today||$25.20||$25.80|
|Gold: Silver ratio today||79.25:1||79.03:1|
|Gold Miners Bullish Percent Index||75.86||62.07|
|Dow: Gold Ratio|
(BahaUS 33,728.00/Gold price $2,007.00)
|Current USA inflation rate (Dept. of Statistics)||5.0%||6.0%|
Gold’s low of the week was $1,970.00 and the high was $2,015.00, now trading at around $2,005.00.
- The monthly chart for Gold is a hold and looking stronger.
- The weekly chart is a hold and looking overbought.
- The daily chart is a sell.
The low for Silver this week was $24.64 and the high $25.62, trading around $25.35 at present.
It looks like it has a good run ahead of it. $30.35 was the previous high in 2021.
- Silver on the monthly chart gave a sell last month and has reversed to a buy.
- The weekly chart is a buy, still in its trading range, looking overbought.
- The daily chart is a sell. It is back inside the long term trading range.
Our partner has stock of both gold, silver and Goldbacks in our vaults available in Panama. Please contact us for more information.
On the Stockcharts.com charts, the blue vertical lines are our proprietary system buy signals and the red vertical lines are system sell signals – for information purposes only.
This is my interpretation of the market and is not to be taken as financial advice. Before making any buy or sell decisions I recommend that you consult with your professional financial advisor.