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Not Everybody in the Mainstream Is Bullish on the Dollar; Some Analysts Like Gold

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The price of gold hit six-month lows in recent days, primarily driven down by a surging dollar. Peter Schiff has been saying investors shouldn’t get too caught up in greenback hoopla. This is likely an upside correction in a dollar bear market. As it turns out, Peter is not alone in this assessment. At least a few mainstream analysts agree, and they see gold rallying by the end of the year, according to Bloomberg.

Currency strategist Luc Luyet of Pictet Wealth Management told Bloomberg he sees gold climbing to $1,320 per ounce by the end of the year. He agrees with Peter that the dollar peaked more than a year ago, and he also said the escalating trade war will eventually have a negative impact on the economy.

We continue to believe that the dollar has peaked in January 2017, and therefore, the recent strength is some sort of a temporary rebound and we expect further declines down the road. Even though it’s not our scenario, if we see higher trade tension, that could at some point be positive for gold.”

Some investors believe the trade war will be good for the dollar. In a podcast last week, Peter made a strong case showing why they’re wrong. The idea is tariffs will shrink the trade deficit, leading to a shortage of dollars. US trading partners get dollars by trading products to the US.

But the problem is they’ve already got a glut of dollars. It’s not like they don’t have a bunch of dollars from exporting products to the United States for decades. Dollars are piling up around the world.”

Peter also offered a couple of reasons tariffs will likely stifle consumption in the US economy  – not good news for an economy primarily based on consumption.

In the first place, a tariff is a tax that consumers ultimately pay. That means less spending power. Second, if the trade deficit is shrinking, that means America is not importing as much stuff from China and other countries. But it’s not like America is making all of the things imported from China. If Americans aren’t buying as much stuff from the Chinese, it will ultimately mean Americans are buying less stuff. That means a drop in US GDP.

So, what’s going to happen if the economy slows down and unemployment picks up? Well, the Fed is going to slow down on its hikes. It’s either going to hike more slowly, or call off the hikes completely, or start cutting, depending on how much the economy decelerates.”

And where will people turn? Gold.

The Bloomberg report quoted other mainstream analysts who are bullish on gold. Standard Chartered Plc, precious metals specialist Suki Cooper sees gold testing five-year highs by the end of the year. Cooper implied prices could rise toward $1,400. Bart Melek, global head of commodity strategy at TD Securities in Toronto is also bullish on gold and bearish on the dollar. He recently said he expects the yellow metal to start to rebound in the final quarter of 2018.

The Bloomberg article also mentioned surging gold jewelry demand in India and China as positive for the yellow metal, saying it would support gold or at least limit its downside in the near-term.

If these analysts are correct, then now is a great time to buy gold. After all, smart shoppers buy during a sale. You don’t wait for the price of toilet paper to go up to stock your closet. You do it when a sale is on. The recent drop in the price of gold may well be gold on sale.

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