Against the backdrop of rising US dollar rates, it is indeed puzzling that gold continues to strengthen. It stands to reason that the US dollar is strong, and the price of commodities such as gold should be downward. This economic logic has been maintained for many years, but since 2022, gold's strength has been unstoppable, and the reasons for this are worth pondering.
Gold's surge is a squeeze on the dollar's strength
The fact that the two varieties, which are usually inversely correlated, are now on the same path means that the dollar's strong position has been challenged, and the dollar has no global status in the past, repeating the old economic logic.
The strength of gold and the sale of U.S. bonds by China, Japan, Britain and other countries complement each other, and they are both contrarian shows that continue to weaken the strong position of the dollar.
The actual effect of the dollar began to be continuously discounted on many issues such as the slow growth of US economic data and the abundance of economic problems, which may be seen from the sharp rise in gold.
Not only that, the announcement of the return to the gold standard in many states in the United States, as well as the demand for the repatriation of gold deposited in the United States, and the practice of increasing gold holdings in the market, all mean that the US economy cannot give the dollar enough strength to suppress gold and other trends.
This also shows that the risk of imbalance in the Fed's monetary policy and dollar hegemony is increasing rapidly.
The mystery of Japanese looseness
With the introduction of Abenomics, the yen has continued to maintain external depreciation, and the way of easing internally, through massive capital injection, to maintain a model of low inflation and loose monetary policy, and to maintain the normal operation of the domestic economy.
The general understanding is that under the guidance of Abenomics, Japan's sky-high capital has no place to go, except for the sharp rise in the Nikkei index in recent years, there is a possibility that the capital is idling, but after a closer examination, we can think through the perspective of Japan's increase in U.S. bonds.
After enterprises and individuals obtain funds in their home countries, they will cash the yen in their hands into U.S. dollars because of the exchange rate difference and interest rate differential between Japan and the United States, and carry out arbitrage operations on exchange rate difference and interest rate differential.
Especially since the United States has been doing so since 2008, 2012, 2016, 2020 and other rounds of quantitative easing, Japan has continued to keep interest rates downward at home, and the way of quantitative easing has been cooperative, all of which have been used to profit from the United States.
From 2020 as an example, the additional issuance of the yen was synchronized with the quantitative easing of the US dollar, until after the US dollar raised interest rates, Abe was assassinated, and Japan changed from easing to tightening, it is enough to see that Japan has benefited from the United States according to the original model.
This also explains the relationship between Japan and the United States in terms of economic and monetary policy, as well as the hegemony of the dollar in the world, which also has to be divided.
However, we can also see in the above chart that Japan's reduction of holdings in the interest rate hike cycle and the sale of government bonds are enough to show that the United States is in its own difficulties and does not allow Japan's sky-high funds to continue to rely on the dollar system to make profits, so with the death of Japan's main leaders and the major adjustment of the cabinet, Japan's loose monetary policy for more than ten years has finally ended.
Persistence from China
Compared with the shrinking turtle of the United States in globalization, China is unremittingly promoting globalization.
Readers who continue to follow this author know that after World War II, the United States led four rounds of globalization.
In the path of globalization, the United States has maintained its deficit, shifted from an industrial country to a consumer country, and used the exchange rate difference, the hegemony of the dollar, and enjoyed subsidies from globalization.
When the third round of globalization cannot be harvested, then we will adopt a trade war and decoupling between the United States and China in an attempt to force our side to sign an alliance under the city.
However, under our reasonable, advantageous and restrained counterattack, the United States has completely gone bankrupt by harvesting and acting in its own clever way.
It is difficult for the United States and is unwilling to assume the international order's treacherous and slippery practices. Of course, we dismiss it, after all, the US style is to suck blood, not win-win, and will eventually lead to the decline of dollar hegemony.
Cut five cities today, cut ten cities tomorrow, and then sleep peacefully. Looking at the four realms, and the Qin soldiers are at the top. However, the land of the 17 princes is limited, and the desire of the tyrannical Qin is insatiable, and the devotion is complicated, and the invasion is more urgent. Therefore, without a fight, the victory or defeat of the strong or weak has been decided. As for subversion, it makes sense. The ancients said: "To do things with the land, it is still necessary to fight the fire with a salary, and the salary is not exhausted, and the fire is not extinguished." That's right.
Su Xun "Theory of the Six Kingdoms"
We are committed to promoting globalization, on the one hand, our industrial system can achieve better and better services, products, and on the other hand, it is also due to our willingness to establish peaceful and reciprocal economic relations with the international community.
At the same time, with the continuous expansion of foreign trade, it will also help our RMB to go overseas internationally. At present, the depreciation of the dollar may be weak, but with the hegemony of the dollar in the rise of gold, its own economy is fragile and many other inconveniences, the foundation is constantly being cut.
Sailing against the current, if you don't advance, you will retreat.
In the context of gold's heavy blow to the hegemony of the dollar and the same trend as the dollar, the dollar will face even greater pressure if it wants to reverse monetary policy.
The gold trend, which could not be suppressed in the strong stage, is relaxed again, and it is even more impossible to suppress it.
In fact, the US CPI has exploded since 2022. And the resurgence in 2024, falling into a long-term imported inflation pattern, all indicate that the influence of U.S. monetary policy on commodity prices is declining, otherwise, how can it repeatedly make the main domestic economic data worse?
This also indicates that the sharp rise in gold also shows that the influence of US monetary policy and its explanatory power have been seriously weakened.
Gold rises, the dollar declines
It can be seen that the US dollar dominates global trade, finance, and the international market is seriously challenged, and the ecological niche of gold is strongly highlighted.
The vulnerability of the dollar is not only an international manifestation, but also a manifestation of the ecological imbalance of the domestic economy.
It has already been translated
As shown in the figure above, since World War II, especially since 1990, most of the benefits of globalization in the United States have gone into the pockets of the top 1% of families in the United States. All of them have deprived their nationals of the opportunity and right to use the dollar.
As a result, most of the money is in the hands of the rich and powerful in the United States, and the currency of a few people, can that be money? It certainly not.
It is no wonder that several states in the United States have demanded the return of the gold standard and the use of gold to replace the dollar.
Gold is still a general equivalent, and the dollar is a piece of credit waste paper.
The weakening of the hegemony of the dollar is the continuation of the domestic recession abroad. After all, everything is determined by internal causes.
Attempts to restore credit
With Yellen's opening of the road in April, she reaffirmed China-US relations, rejecting the original attitude of China-US decoupling, and setting a new tone for subsequent high-level talks.
In order to maintain the strength of the dollar hegemony, the United States will inevitably make an exchange, but this will also invisibly weaken the dollar hegemony, but compared with the dollar hegemony, 34.5 trillion national bonds, government shutdowns and other internal factors, the United States is more worthy of the United States to deal with.
It depends on whether the United States is sincere or not!
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