Dollar Up, Gold Up?

In order for the gold bull to be sustainable and break out to real all-time highs, it will have to do so alongside a higher dollar.

I've repeated this for nearly five years now.

Another phrase I've repeated that those around me are probably sick of hearing is, "the U.S. dollar is still the cleanest dirty shirt in the currency basket."

Dirty for sure, but the cleanest.

I've speculated for years that the Euro - in its current form - would be the first to fall.

Last week, the European Central Bank (ECB) announced that it will allow lenders it supervises to exclude certain exposures to the central bank from their leverage ratio until June 27, 2021.

The official justification was that "In this way, the institutions will have more room to incur debt since the ECB will not require more capital for it."

What that means is that the ECB will not take into account the liquidity (cash and deposits) banks hold at the central bank when calculating the leverage ratio (Capital/Assets).

Don't try that at home, everyday citizen.

This amidst the revelation (read with intended sarcasm) that banks around the world, led by Deutsche Bank, facilitated more than half of the $2.7 trillion of suspicious transactions that were flagged by the U.S. government over nearly two decades.

The records show that the five main global banks - JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank, and Bank of New York Mellon - have continued to engage in facilitating these transactions despite U.S. authorities having fined these financial institutions for previous similar dealings.

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And there's the problem with the entire system and the way it's designed.

When a bank "misbehaves" it doesn't have to worry about prison time because bankers are never prosecuted personally.

It's rigged. Execs can funnel trillions in dirty money, get backstopped by the central banks, pay themselves huge bonuses, and if they get caught the bank simply pays a fine that is paid for by shareholders.

Privatize the profits, let the suckers pay for the misconduct. Rinse, repeat.

Which is why the pullback in gold today is welcomed, healthy, and ultimately just noise.

Expect a prolonged period of heightened volatility, expect the market to keep throwing tantrums until sugar daddy Jerome Powell comes to the rescue with more "tools from the tool kit."

Tools he'll invent if need be.

Tools that every central bank and paper currency now depend on.

Tools that will eventually lead to every currency in the laundry basket going the way all fiat currencies go.

But not before a higher dollar, not before a reset of the current monetary system, and not before gold goes much, much higher.

To your wealth,

Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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