The Declining Dollar Is Helping Gold

Mike Fuljenz
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Posted: Jun 07, 2017 12:01 AM
The Declining Dollar Is Helping Gold

Over the first weekend of June, gold surpassed $1,280 for the first time since April 21.  There is a great deal of gold buying due to terrorism in Europe, unrest in the Middle East, saber rattling in North Korea and increasing attacks on the Trump administration at home, which has reduced faith in the U.S. dollar. 

Gold’s recent bottom (at $1,050 on December 17, 2015) came near the end of a strong upward move by the U.S. dollar.  The opposite is true this year. The euro has risen from $1.05 to $1.13 in 2017.  Since the Dollar Index is heavily weighted (57%) in the euro, the Dollar Index has fallen 6% in 2017, accounting for about half of gold’s 11.3% rise so far in 2017.  The euro’s strength is in part due to the recovery of the European economies and the election of moderate candidates in the elections in Netherlands and France this year. The same is true of other global economies, which are now rising faster than the U.S. economy. 

Here is a sample of the dollar’s decline vs. America’s major trading partners in 2017 through June 5:

Gold Hits Another High

Gold hit another 5-week high last week after the Friday jobs report came in short of expectations.  The theory (flawed as it may be) is that a weak jobs report will give the Federal Reserve reason NOT to raise interest rates at their meeting next week (June 14).  In truth, the Fed will probably raise rates anyway, but the last few rate increases have triggered a gold rally, so it really doesn’t matter what the Fed does next week. Gold should continue to rise on its own merits as a crisis hedge and global currency hedge.

Hedge Funds Increase Long Positions in Gold

Last week, U.S. hedge funds increased their net long position in COMEX (futures market) gold for the second straight week.  According to the Commodity Futures Trading Commission (CFTC), money managers for hedge funds increased their long positions in gold futures by the most in nearly a decade in the week ending May 23. Then, in the week ending May 30, large speculators increased their bullish positions again.  Their net long positions totaled 167,090 contracts, a rise of 7.323 from the previous week.  Gold ETF buying also rose. As a result, gold has now posted four consecutive weekly gains. 

Phil Mickelson Uses a Valuable Silver Dollar as a Golf Ball Marker

Right before Phil Mickelson’s all-important 18th hole putt hit the side of the cup and lipped out last year at Pebble Beach, CBS told the moving story of how Phil’s grandfather, Al Santos, caddied Pebble Beach when it opened in 1919.  Young Santos dropped out of school in the fourth grade to caddy at age 11. He got up early to caddy 36 holes, earning just 35-cents per bag per 18 holes.  It was a great day when he got a silver dime for a tip. 

Al Santos kept a “lucky” 1900 silver dollar in his pocket. Although he often went hungry, he never spent that dollar. He said he rubbed the coin whenever he felt poor, gaining the comfort that he had money in his pocket. He died in early 2004, right before grandson Phil won the first of his four majors.  Throughout his long career, including 42 PGA victories, the 45-year-old Mickelson has carried his grandfather’s lucky 1900 Morgan Silver dollar as his marker.  It is currently worth about $30.

Mickelson said, “it’s a cool feeling to have the money that he cherished and also to see what we are now playing for in prize money, and how far the game of golf has come.  It’s a great reminder for me.”  Mickelson also said that his grandfather gave him an old Krugerrand that he keeps, along with some silver half-dollars, but “his silver dollar is the one I prefer to mark with,” especially at Pebble Beach.

If you would like to own a circulated or uncirculated Morgan Silver dollar as a golf marker, call our offices.  We can’t guarantee you will putt as well as Phil Mickelson but you’ll have a great conversation piece for your fellow golfers.  While you’re at it, inquire about owning a variety of American gold and silver coins. Don’t wait, silver and gold have been rising in 2017!