Global View March 2016: Will A Lack of Borrowers End The US Dollar Boom?

Time to buy Gold?

A strong performance from gold bullion so far in 2016 hints that fundamentals may be finally turning against the US dollar. In fact, January saw the largest drop for three years in US private sector cash flow growth, and latest capital flow data appear to show a low in gross activity in late-2015. On top, some rebound in World Central Bank liquidity injections (i.e. QE) later in 2016 still seems likely in our view, given the weakness of wholesale market funding and the plain fact that, over the past year, both China’s PBoC and the US Fed have been unhelpfully tightening liquidity. Gold and (later) commodities are already our conviction investments for 2016. Moreover, flow data for the Aussie and Canadian dollars have coincidently turned positive. If our projections prove correct, expect a US$2,000/oz. gold price by mid-2017.