The dollar rules, but perhaps not for long

ProjectSyndicate/Jim O’Neill/7-11-2022

“Yet soaring above all the financial-market turmoil is the US dollar, which is now the strongest it has been in 20 years, having appreciated against many other currencies, including the euro. From a standard currency-valuation perspective, the dollar has reached the point at which many investors might seriously consider selling it. It is probably around 20% overvalued against most major currencies such as the euro and yen, and that simply does not happen very often.”

USAGOLD note: Given the level of short positions in gold based on its inverse relationship with the dollar, we could get considerable unwinding of dollar/gold trade if O’Neil is right. “I suspect that those who do decide to sell their dollar holdings today will be happy with that decision in a couple of years,” he concludes. O’Neill is the former chairman of Goldman Sachs Asset Management and a former United Kingdom treasury minister.