I’ve written a lot about how the US dollar is the fulcrum of the global financial system.
Commodities are priced in dollars. Global trade is done in dollars. And the majority of international funding is in USD.
The dollar is important. Dollar trends impact markets and assets around the world in various ways. Hence why the dollar is the fulcrum.
But if the dollar is the fulcrum then gold is the foundation on which that fulcrum sits
I should make clear, I’m no gold bug and have no special affinity for the yellow metal.
But when it comes to analyzing assets and markets we run into a measurement problem. That measurement problem is due to the fact that things that are priced in US dollars, or any currency, fluctuate according to the price of the currency in addition to the good’s underlying supply and demand fundamentals (ie, the price of oil is impacted by the relative price of a US dollar).
This post was published at FinancialSense on 11/22/2017.