What Is Gold Telling Us?

While the trade-weighted dollar has only just begun to breakdown…

Gold has been signaling something very different in the ‘currency’ markets for a few years now, and its recently accelerated dramatically…

So what is that message?

FFTT’s Luke Gromen  laid out in a few short tweets his take on what is being priced in (by some assets)…

1/ Let’s pretend the currency system is a human body.

The US says it wants to de-couple from China; 20 yrs ago, we could’ve de-coupled & it would’ve been like amputating a finger or a hand.

2/ Even 10-15 years ago, perhaps “de-coupling from China” would’ve been like amputating an arm, or a leg from our currency system.

However, after 20+ years of $200-400B surpluses (USD exports), & China’s (generally) savvy reinvesting of those USD exports…

3/ “De-coupling from China” is no longer amputating an arm or a leg off the currency system; it is like cutting out some critical organ like heart, the lungs, or the liver out of the currency system…

4/ Yes, we can do it, & it’s probably the right thing to do, but the cold, hard math of the situation is that “US de-coupling from China” means the currency system as we have known it for 50+ yrs will die on the table, shortly after the critical organs are removed,

UNLESS…

5/ Some entity or entities can provide the financial equivalent of a blood transfusion, or kidney dialysis, etc. to the currency system that will be left dying on the table without it.

Guess what that is? Yup, you guessed it…

[youtube https://www.youtube.com/watch?v=Ikje8bxl5NI]

6/ This is a take on gold as we have been looking at it for our clients at FFTT for some time.