I’ve just been reading Rambus’ Weekend Report linked on the sidebar – this is actually from 27 January 2019 but fits the last week of 21 June 2019 perfectly:

Weekend Report-FED Folds…Gold Bull Ignites

Loved the chart of gold from 1970-1980. Someone please explain how one could have realized that the massive flag in 1980-81 was bearish and not a bullish pennant.

This article is more relevant reading it now than it was back in January. In fact when I first read it, I didn’t even notice the date. I though it was from this week.

Now the Fed has REALLY folded – but Rambus was on to them back then, five months ago. That’s important for us readers and occasional small time contributors that some people really look ahead and also give the historical context.

  1. I have a curious thought now. If money flows out of the US dollar, where will it go?
  2.  We don’t have bond market vigilantes this time as in  the 1970s but do we have gold vigilantes instead?

As regards question (1) I would like to note:

In the 1970s dollar bear market there were the relatively strong European currenices like the Deutschemark to absorb some flows from the USD. gold meanwhile went and peaked at $850.

In the early 2000s dollar bear (2001-2008) there was the Euro, being hailed as a new potential reserve currency with all the bullishness surrounding it and the Euro soared to $1.60 by 2008. Gold peaked at $1030.

Then after the financial crisis of 2008, the Euro was starting to be toasted. By 2011, as the dollar had another weak spell on the US debt ceiling self inflicted mini crisis, the Euro was no longer in my view a realistic alternative. The Greek crisis was emerging. Old US $20 gold pieces were going for good premiums in Europe. This means that in truth there was no large scale currency to take flows out of the US dollar zone and this has remained true until today. Gold hit $1920 on that dollar mini bear and then the dollar embarked up on its latest bull market until 2017. The dollar low in 2011 was a higher low than in 2008 so that was a massive non confirmation with gold that made a high 90% above its 2008 high and so marked the end of the gold bull market.

March 2008: USDX @ 71.33 gold $1033.90
Sept  2011: USDX @ 72.70 gold $1923.70
The difference between these two occasions is the shadow financial crisis and the ceasing of the Euro as a potential reserve currency alternative. Gold nearly doubled its previous high.
So what happens now? None of the currencies that form the denominator of the US Dollar insdex USDX are credible: Euro, Yen Pound, Aussie dollar and Swedish Krone. Interestingly, gold has already made new all time highs in the two smallest of those the AUD and SEK. As of this week gold in GBP is not very far away.
The potential for gold this time might be huge, no fiat alternative to the dollar, the USD zone just barely starting a new rate cutting and QE cycle, the stock market and real estate bubbles at peaks all over the world, especially the US. Stock market speculators have seen double gains from owning US stocks in recent years, market moving up and the US dollar moving up. What happens to that foreign money if the stocks and the USD both take a downturn?