USD's Surge & Druckenmiller Gold Dump

When hedge fund legend Stanley Druckenmiller revealed last week he sold all of his gold holdings because all the reasons for which he bought gold last year had ended, not many took notice. Today, the US dollar index hit a fresh 11-month high at 100.26, posting its 7th straight daily gain, the longest winning streak since May 2012. Unlike in spring 2012 when USD strength benefited from safe-haven buying during another chapter in the Eurozone debt crisis, the current USD strength rests on the notion that higher US fiscal spending under Trump would be positive for GDP growth, inflation and the US currency. Whether the govt will finance those spending by issuing more debt or cutting taxes (or a combination of both) is a worry for next quarter. What about commodities? Out of the 36 tradable commodities, only 3 are up on the month (copper, palladium and cotton), highlighting the prospects of increased infrastructure spending on select commodities.

This raises 2 dual questions: i) To what extent will gold and silver be dragged by USD strength; ii) Will the rise in growth prospects and uptick in inflation support the two metals? Two questions requiring different time frames for their answers to turn clearer. For traders, the gold view has grown increasingly divided. Today, we posted a new charts note on our existing silver trade, 3 days after we posted an extensive video on the yellow metal.  Is this a sign of opportunity or uncertainty?