00:00What a move in gold. Extending losses after its steepest sell-off in over a decade.
00:04The precious metals record run before yesterday sparking concern at a U.S. debasement trade.
00:09Jane Foley of Rabobank debunking that theory, writing debasement would imply a move away from the dollar
00:14and U.S. treasuries into assets such as gold. And there is very little evidence to back up these flows.
00:20Jane joins us now for more. Jane, welcome to the program.
00:23It's been a really curious year because the narrative around foreign exchange was born in one quarter
00:28and it was the first quarter of 2025. And I find it difficult to find evidence that the rest of the year
00:33really jives with that narrative at all. We had a big blast of dollar weakness. Jane, what's followed?
00:39Well, you're quite right. I mean, most of that dollar weakness is really down in the first five months of the year.
00:44And ever since, well, actually over the last month or two, I keep on finding myself saying,
00:49well, no, actually, the dollar isn't weak. It's been one of the better performers.
00:52In fact, I think it's a better performer right now in the month to date and perhaps over the one month for you, too.
00:57So actually, essentially, if we look at the dollar index, for instance, that's sort of gone nowhere since the beginning of July.
01:03And what are we looking at in euro dollar, you know, a currency at the dollar that is certainly well off its lows versus the euro.
01:10So we aren't looking at a weak dollar as we stand.
01:15But yes, the theme really was set at the start of the year by that huge bout of dollar weakness.
01:20So, Jane, let's talk about reality and the last few weeks and then we can get to the peculiar move yesterday,
01:25the wild swing we saw in gold. More recently, we have seen gold rip higher, started to go vertical the middle of August and never looked back.
01:32And alongside that, we did have dollar strength participate as well.
01:36So, Jane, what explains those moves? What's the relationship, if there is one, between the two?
01:41You know what? I mean, normally, of course, when you get a stronger dollar, then a profit taking sets in.
01:45And I think with respect to gold, yeah, there are good reasons, I think, for many portfolios to think about diversification this year.
01:52And I think that's still a valid theme. And I think gold can be held along those lines.
01:57But, you know, I do think there was lots of FOMO, you know, a phrase I've heard, you know, in your channel quite a lot over the last few weeks.
02:04And certainly, you know, at the start of this week, the Australian press were showing pictures of retail investors queuing around the block to get their hands on some gold.
02:12And I think for many institutional investors, you know, that was perhaps the last straw.
02:16So profit taking pushed in as well with the stronger dollar.
02:20I think as we go into next year, there's probably still a theme, a reason to diversify portfolios and maybe gold again is part of that.
02:28But I think it is going to struggle quite clearly to match those very recent highs in the very near future.
Be the first to comment