The worrying signs come as the US dollar falls to its lowest since January and gold prices surge as traders seek to liquidate the US currency ahead of a half-percentage point cut by the US Federal Reserve this week.
Put simply, this means that investors view the dollar as an inflationary currency and that it will be worse off after the rate cut. The Bloomberg U.S. currency index fell 0.3% on Monday, while the yen strengthened, rising to its highest since July 2023. It is noted that the Fed will cut the interest rate by 25 or 50 basis points, with the second option being more likely.
At the same time, the price of gold has recorded a 25% increase since the beginning of the year. Over the same period, the S&P 500 stock returned +17%. Over the past 3 years, investing in gold has returned 44%, while investing in the S&P 500 has returned only 26%.
The US interest rate cut is expected to occur due to lower inflation, But investors don't seem to believe it, and gold is at historic highs as markets price in concerns about geopolitical risks, the possibility of nuclear war and a recession in 2024.
The dollar is steadily declining while global debt has risen to unprecedented levels, and everyone is turning to gold, which is seen as a safe haven in a time of great economic and geopolitical uncertainty.
Essentially, the signals being sent by markets indicate that they view global debt as unmanageable and previously strong currencies as “bubbles.” It appears that sanctions against Russia started working, though not in the way the authors expected…
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