The US dollar strengthening and inflation: gold grows stubbornly in the gaps

"The dollar is our currency, but it is your trouble." This is the famous saying of John Connley, the US Minister of Finance that stopped gold and the US dollar when the United States stopped gold and the US dollar. At that time, the problems encountered by many countries at that time were that they could not use the dollar in their hands to change from the United States to gold at the fixed price of $ 35 against 1 ounce. Because at that time, as the dollar continued to weaken, more US dollars were needed in the market, and all countries wanted to replace the dollar accumulated in their hands with gold to protect assets.

Text | China Gold News special commentator Kong Linglong

This article is an original article of China Gold Network. The content is for reference only, and does not constitute operating suggestions or investment guidelines.

Now the problem of the US dollar has come to the gold market again, but the opposite of more than half a century ago is that recently the US dollar has become more and more strong, bringing new problems to gold -the recent gold price has reached below 1900 USD/ounce. Talking about the increase in the tension since the beginning of the year.

Gold is targeted by the US dollar. Usually, the two parties present a negative relationship. The stronger the US dollar, the lower the price of gold, and vice versa. But this does not simply mean that the weakening of the US dollar is good for gold, and the stronger dollar is worse for gold. The two are more similar to a "blond girl effect" (economics in the economics: not biased towards a certain extreme, just right), and it requires a not high or low dollar to maintain the healthy operation of the market. The current US dollar has touched a 20 -year high, and some of them stem from concerns about the Fed's high inflation ability, triggering risk aversion and boosting the attraction of risk aversion in the US dollar. Gold also has the function of hedging, but the size of the gold market is far from the US dollar market, so it has exerted the latter's shadow market function to a certain extent.

Facing the continuous strengthening of the US dollar, the Federal Reserve is also required to adjust the power and use magic to fight magic. The Federal Reserve's May interest rate conference decided to raise interest rate hikes 50 basis points and announced that it would officially start to shrink the table in June. This interest rate hike is the largest action since 2000. The market is generally expected that the Federal Reserve will have at least 3 interest rate hikes this year, and the expected interest rate will increase to 3.5%to 4%. If this rhythm, at the end of the year, the United States will have a spread of spreads between the United States and other major economies in China. At that time, there may be a global "US dollar shortage", and high -quality assets like gold will be favored.

The reason why the Fed's choice of "pumping water" brings new problems to the world is due to concerns about rising domestic inflation. The strengthening of the US dollar may be a momentary fluctuation, but the inflation has been much longer, and the scope of spread is even greater. Although the current US dollar is currently at the 20 -year high, the United States is experiencing the highest inflation in 40 years at the same time. In March of this year, the US Consumer Price Index (CPI) increased the highest level since December 1981, higher than 7.9%in February. Price has been rising, and the inflation rate has exceeded 6%for six consecutive months, which is much higher than the average target of 2%of the Federal Reserve.

Faced with the aggressive inflation, the Federal Reserve Chairman Powell said that the stable price is the cornerstone of the economy. He said that with the impact of interest rates, the Fed's inflation resistance will have some pain, but the worse result will continue to accelerate the price. rise.

The Federal Reserve President Powell initially predicted that inflation would be "temporary", but from the current judgment of his judgment, or at least the gold market is more believed that inflation will continue. Compared with the short -term impact of the US dollar on the price of gold, the inflation prospects have a longer effect on gold. For example, driven by inflation in the market, investors who have planned planning have been seeking protection. As a result, the recent global Gold ETF has handed over a good transcript -this year has achieved a net inflow for 4 consecutive months, and investors have risen high. The risk -free demand is continuing.

Facing the prospects of high inflation, gold can provide an asset barrier, but even the most abundant party, that is, gold producers are considering doing more. In addition to the establishment of gold inventory, manufacturers are also accumulating more production materials to control future production costs. For example, Barrick, the world's second largest gold miner, has increased the inventory of cyanide, explosives and other important raw materials. The inventory of these key consumables has increased from 3 months to 5 months to protect its cost The foundation is not affected by rising price. Faced with the continuous rise in energy, labor and raw materials, Barik Gold has raised the inflation guidance in 2022 from 5%to 8%, and the company's production costs increased by 20%in the first quarter.

Of course, ordinary investors cannot store dangerous controlling items such as cyanide and explosives, but they can store finished gold gold produced by these production materials. To solve the high "US dollar problem", whether the current method of "using magic against magic" is effective, and if it is not careful, it may become "correct errors with errors." Gold can still grow stubbornly in the gaps where the US dollar strengthening and inflation.

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