Wealthy Investors Bet Against the Dollar – And That’s Gold Rally Fuel

Hedge funds and wealthy investors are betting against the U.S. dollar for the first time in over two years. The fading dollar, after four months of a downtrend, could catalyze a newfound gold rally. Analysts have attributed the weakening dollar as the primary catalyst for the precious metal’s upward momentum.

Concerns about inflation, global economic uncertainty, and fiat currencies’ declining value led to the demand for gold. According to data from the Commodity Futures Trading Commission (CFTC), long positions on the dollar from leveraged funds declined to negative 7,881 contracts.

The main driver of the deteriorating sentiment around the dollar in recent weeks has been the euro’s strong performance. On August 11, the number of net long positions on the euro achieved the highest level on record, the CFTC said. Nicolas Vernon, a senior fellow at the Peterson Institute for International Economics, said:

The confluence of the rising euro and declining U.S. economy is placing additional pressure on the dollar. In the short to medium term, it is likely to benefit gold. If the dollar continuously declines, the inverse correlation between the dollar and gold raises the chances of a prolonged rally.

In early August, the price of gold fell by nearly 10% alongside stocks and other alternative stores of value. The unexpected delay of the stimulus deal in the U.S. caused global markets to drop temporarily. Since then, gold has rebounded from $1,862 to $1,950, by 4.7% within merely four days.

The sentiment around the safe-haven is noticeably improving, with Buffett building a gold position, which he previously criticized. The worsening global economy and the declining value of reserve currencies caused the tune around gold to change. A favorable macro backdrop and aggressive fiscal policies could stimulate gold throughout 2020.

Wealthy Investors Bet Against the Dollar – And That’s Gold Rally Fuel, CCN, Aug 17