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The reason: Many investors view the greenback as the best "safe haven" in the current situation – not the gold coin of the crisis. Especially in case the dispute over higher tariffs should continue to increase.
"The dollar has become the main target for investors looking for a safe haven," said Ole Hansen, head of commodities strategy at Saxo Bank in Copenhagen. "Geopolitical risk is on the rise, bonds and stocks are falling and gold continues to fall." Jane Foley, Rabobank's director of currency strategy, said: "The mere liquidity of the dollar means for some investors that she is always a safe haven.
A look at the graphs illustrates this evolution: four months after the US president shocked the stock markets with his vision of higher tariffs on imports to America, the US dollar has already sharply increased relative to the euro for example, more than six percent.
The US dollar index, which compares the ratio to six major currencies (euro, yen, pound sterling, Canadian dollar, franc and Swedish krona), also increased by more than 5.5% over the course of the year. this period
On Friday, US President Donald Trump imposed tariffs on imports from China worth $ 34 billion. The volume is expected to be increased by an additional $ 16 billion in August, perhaps even later to $ 200 billion. China reacted quickly by announcing that she was forced to retaliate.
A Rare Opportunity for Investors
The prospect that import tariffs will reduce the current account deficit of the largest economy by the time the Federal Reserve raises interest rates has created a rare opportunity. Andreas Steno Larsen, Global Currency Strategist at Nordea Bank in Copenhagen, explains why: The dollar can be used both as a safe haven and for carry trades
In carry trades, investors usually borrow in a safer currency with low interest rates to finance their riskier investments in other, higher yielding currencies. But in this case, the security of the US dollar also offers high interest rates: the yield on 10-year US government bonds is above 3%.
All this leaves its mark on other asset classes: MSCI All-Country-World The index has suffered its first quarterly decline since 2015 and emerging market equities saw their first decline in six quarters.
And as the US bond market, the world's most liquid bond market, offers such high returns, assets like gold are less attractive because they offer neither interest nor interest. dividends. The yellow precious metal had the worst performance in a first half of five years in 2018.
The firmer dollar also seems to be driving down the price of gold. According to an analysis of the Bloomberg economic service, about half of the fluctuation in the price of gold since January can be explained by movements of the greenback. The impact of the currency was obviously stronger than the decline in physical demand in India, the decline in expectations of industrial demand and the decline in investment flows in exchange-traded funds (ETFs).
"We have recently seen a very close relationship between gold and the dollar," confirms Carsten Menke, commodities strategist at Bank Julius Baer in Zurich. "It is very difficult to make money by trading gold when the dollar goes up."
Use of Bloomberg material
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