As I'm writing this post, I am looking at a graph of the U.S. Dollar Index at TradingView.com going all the way back to 1967. It shows very chaotic dollar movements while at the same time, shows exactly where key historical events occurred, such as the 'Nixon Shock' on August 15, 1971, when President Nixon decoupled the dollar from gold backing to become a full fiat currency. On March 31 of the same year, the dollar weighted at 120.19 and by September 1973, it had dropped to 95.06 for a full 25 point drop.
What followed was the Saudi oil embargo and runaway inflation for the rest of the 1970s, eventually forcing former FED chair Paul Volcker to jack interest rates to 19% by 1980. In January of the same year, silver and gold hit record highs of $50 and above $800 respectively. Less than one month prior on December 31, 1979 the dollar index hit a low of 86.16.
The U.S.D. index hit bottom on April 30, 1980 at 85.93 as recession hit and inflation finally began to cool. What happened immediately following this bottom was a meteoric rise that lasted just under 5 years. On January 31, 1985 the dollar peaked at a mind boggling 160.41 which I believe is a record which remains unbroken. Almost as quickly as it went up, the dollar index came down and hard in just under 3 years. It hit 85.42 on November 30th, 1987. That's a 75 point climb and 75 point drop in less than 8 years.
The early 90s was tough on the dollar as it stayed below 95 points through most of the decade. There was the Asian financial crisis, for which the Japanese were never able to fully recover from as well as the collapse of the Mexican Peso. Long Term Capitol comes to mind as well Orange County going bust.
The chart also shows the dollar's reaction to the Y2K bug and 9/11 which occurred a year apart from each other. The dollar began to rise in the late 90s as fears of the Y2K bug would shut down the world (it never happened). On November 30th, 1998, the dollar weighted at 94.17 and by December 31, 2001, peaked at 120.28 and from there, steadily dropped, bringing us to March 2, 2008 when the USD hit a low of 71.741, which is the lowest point seen on the graph going back to 1967 and the onset of the Great Financial Crisis.
The USD would finally begin to recover in the summer of 2015, rising from 80 points to an average 98 points until the Covid-19 crisis hit in 2020, forcing the dollar back down to 89.937 by November of the same year. 2021 was a quiet year since we were all forcibly looked into our homes but as soon Canada's beloved truckers kicked those mandates where it hurts the most and we were 'set free', we of course went out to spend that money we saved up from the previous year, driving inflation up. Most notably, it appeared as record high gas prices and double digit increases in food prices.
Those high gasoline prices sent the dollar index up for one last hurrah, peaking at 114.188 on September 26, 2022. By the end of November, the dollar began tumbling yet again, all the way down to 101 on January 31, 2023. While the dollar recovered slightly during the months of February and March of this year, peaking at 105.657 on March 7, the CPI print released on Wednesday sent the dollar tumbling more than a full point within minutes.
While the USD is still posting a gain of 1.45% for the past 12 months, it is ominously showing a full 10% drop just in the last 6 months. As we head into a long, long overdue recession, I fully expect the dollar to continue losing value. The month of March brought us the collapse of a couple regional banks in the U.S.A. as well as one of the most important banks in Europe, Credit Suisse. I can see the smoke in the distance from other other banks that are in trouble. TD Bank in Canada is now the most shorted bank in the world. As a Canadian, I can tell you that TD is one of 'The Big Four' in Canada. If this bank goes, Canada will be in a full blown financial crisis.
From what I can see, the average weight of the USD going back to 1967 is between 88 to 90 points. There have been times when it's gone much higher and times when it went way below. Because of the headwinds coming our way from the BRICS nations and their new upcoming joint currency along with the Saudis now trading oil directly in exchange for Russian Rubles and Chinese Yuan instead of the dollar, along with a NATO war with Russia we can't afford, I can only come to the conclusion that the USD will drop much further, at least another 10%, bringing it back closer to its historical average. Keep a close eye on the U.S. dollar going foward. Things should get really interesting as we head into summer.
There is also the real possibility it could go way lower than the average such as what we saw in Spring, 2008 when the dollar index fell below 72 points. If we do go there, expect precious metals, silver and gold in particular, to go parabolic. We've already started seeing it. Silver has climbed more that 25% since its March 10 low of just $20 to $25.94 and crossing the $26 mark overnight while gold, which almost hit $2,050 overnight, is holding strong at $2020.
Did I mention that gold just has its best quarterly close ever? On March 31, gold closed at $1,980. I'm going to put my foot in my mouth and bet that gold will have its best quarterly close ever, come June 31st. It will likely have its best quarterly close come September 30th, beating the previous two quarter results.
Consider investing in precious metals, before it becomes unaffordium and unobtainium. If you're just one second too late, it's all over!
Peace and love to everyone.
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Stagecoach silver bar (Pan-American Silver). Main dealers are either sold out or have wait times. When you buy from me, the only wait time is 'while in transit'. I usually ship within 24 hours (except weekends and holidays), in a discreet white envelope.
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