What does gold, silver and cryptocurrencies have to do with the US dollar? They are all a flight from the greenback. A hedge against the falling dollar.
At the beginning of the year the dollar was trading at 93.6 on the currency markets. This morning it’s at 86.4. It is no coincidence that bitcoin was trading at $1,000 in early January and this morning — despite its recent $1,000 pullback — is at $2,780. Gold was $1,178 an ounce at the start of 2017, this morning is $1,262, but has posted recent highs over the $1,300 an ounce mark, despite the paper ETF market whipsawing prices.
These movements along with a flattening of the US bond yields are all anti-dollar moves.
Some will point to the Fed raising rates as the impetus for the moves, however that is the opposite move in the current environment. Raising rates should bring more confidence — no matter how misplaced that confidence may be — not the other way around.
According to the CFTC, short bets on the dollar by traders is the highest since early 2013, with hedge funds piling into 279,100 futures contract favoring the euro and Aussie dollar.
So these moves need to looked at far more closely than equities setting all-time highs, since the dollar weakness is a tool used by the Fed secretly to spur the inflation they so desperately need.