Trump Trashes the Buck!
Last week our Tweeter-in-Chief took a break from bashing the Federal Reserve and demanding lower interest rates to set his sights on another target: The U.S. dollar.
In a Thursday tweet, President Trump took aim at Europe, complaining that policy makers there were artificially pushing down the value of the Euro against the dollar.
Trump also took a swipe at cryptocurrencies, but his recent fondness for bashing the buck is what is really worth watching.
For years the U.S. government, and Presidents from both parties have promoted a strong dollar policy. But all that is changing with Trump in the White House.
Last year, Treasury Secretary Steve Mnuchin suggested softening the strong-dollar policy, which surprised financial markets.
And Bloomberg reported last week, Trump asked White House staff to search for ways to weaken the buck.
What’s Trump’s Beef With the USD?
Trump has long complained about the strong dollar, or rather the weakness of other currencies, which puts the U.S. at a price disadvantage in trade.
And he has ample precedent to go on if he decides to intervene to weaken the buck.
In the 1970’s and ’80’s U.S. currency intervention happened frequently, as you can see above.
An intervention typically happens when a central bank buys or sells its own currency to boost or lower its exchange rate with other currencies.
In this case, the U.S. Treasury, working with the Federal Reserve, might sell dollars while adding to its foreign exchange reserves.
This would mostly be euros and Japanese yen. This would result in pressuring the dollar lower against those two currencies.
The Way to Profit of a Weak Dollar
Such a move (as mentioned above) would inflame already simmering trade tensions with our trading partners, especially Europe and China.
But it would also provide yet another big boost for gold!
As I recently pointed out in another recent Wealth Watch story, gold has been in a sideways range for the past several weeks, taking a breather after gaining almost 20% from last year’s low.
But gold could soon be off to the races again with the potential to rally beyond $2,000 an ounce and new, all-time highs.
Bottom line: If Trump follows through on his threats to sink the dollar, gold will make its next upside move even quicker.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch