The Dollar Cycle and Precious Metals
A structural framework for the DXY — and why the current move looks like the early innings of a multi-year top.
The US dollar cycle is one of the two or three most important macro variables for gold. This note lays out our structural framework — and why the current setup increasingly resembles the early innings of a multi-year top.
The three drivers
1. Rate differentials
2. Growth differentials
3. Reserve manager behaviour
All three are turning less dollar-supportive simultaneously — a rare alignment.
The Japan factor
The Bank of Japan's slow normalization is arguably the single most under-priced variable in G10 FX. Every basis point of Japanese rate normalization narrows the carry that has anchored the dollar for two years.
Macro editor focused on inflation, real yields, and global central bank policy.
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