Gold Up Up Up Surges To One~Year High on Financial Uncertainty
In markets, there are always monsters in the dark—some real, some stitched together by imagination and fear. Right now, many currency traders appear to have been spooked by the spectre of the Federal Reserve losing its independence, haunted by talk of political meddling and looming economic weakness due to White House polices. These ghosts of institutional decay and “threadbare” doom narratives have crept into probability matrices across trading desks, pulling even seasoned hands off their compass bearings. Yet, in the middle of this haunted house, the dollar still stands upright—scarred, yes, but hardly broken.
The greenback’s performance in recent months has been an uncomfortable reminder for dollar bears that the fundamentals underpinning reserve currency status do not surrender easily. Even after the worst six-month start in half a century—torched by Trump’s sweeping tariffs and equity selloffs—the dollar has clawed back its footing. A Bloomberg dollar gauge is up 1.5% in the second half of the year, and recent jobless claims underscored the resilience beneath the surface. Far from a jobs market unravelling, the currency has found strength precisely when its obituary was being drafted.
Tariffs, paradoxically, act like ballast under the dollar’s keel. By artificially improving the terms of trade for the U.S., levies compress the true cost of American goods abroad, distorting valuations. Adjust for this distortion, and the euro-dollar pair is trading closer to 1.30 rather than the 1.1660 handle that glows on our screens. (according to Barclays currency strategists, including Themistoklis Fiotakis and Lefteris Farmakis.)