The dollar sank 11.7% over the last twelve months, and gold climbed 10%.
The dollar is measured against a basket of non-redeemable paper currencies, the euro (57.6%), the yen (13.6%), pound sterling (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%) and the Swiss franc (3.6%).
Only a few decades ago currencies were measured against gold. For people to see how well their domestic currency was doing, all they had to do was to look at the price of gold. That is still true today, but is not generally recognized by the public. When the dollar is in trouble, gold rises. When the dollar is strong, gold prices decline.
Nowadays, the public is bombarded with financial channels that measure paper currencies against other paper currencies. No currency is redeemable in gold by any government. If you want to swap your paper dollars for gold, you have to call a bullion dealer, such as CMI Gold & Silver Inc.
The price of gold is up because the dollar is down as the primary reason for buying gold is because the dollar is in trouble. (Most other currencies are in trouble as well, but it’s not obvious because central banks can manipulate their currencies’ prices so easily.)
Baked into current US law is spending that will cause the federal debt to climb from $20 trillion to $32 trillion by 2027, and that’s before allowing for other spending Trump has promised, such as increased military spending, disaster relief, and funds for the border wall.
Make no mistake, investors will see the problems with the US’s out of control spending and the rising debt long before politicians take any remedial action. By the time they act, the severity of the dollar’s problems will already be reflected in much higher gold and silver prices. The last twelve months’ price action in the dollar and the metals reflects that.