The US Dollar went to higher highs yesterday and is up again this morning as the market continues to acquiesce to the Quad 4 outlook coming our way.
We have the disinflationary impulse underway as well, coming through as a function of the underlying trend and then amplified further by any derivative, flow through impact of the coronavirus.
There is a disinflationary impulse from the demand channel and from a strengthening reserve currency in the dollar.
Gold continues to work as well in the face of a strong dollar.
Take a look at this chart. Gold continues to work because you have Quad 4 haven flows, falling real rates, and further expectations for central bank easing both domestically and globally. That's why Gold continues to work. You can see the relationship between Gold and Real Yields.
Expect these current trends to persist until virus risk resolves, central bank liquidity accelerates further and/or the Fed is forced to catch down to Eurodollar futures and speculative positioning in the short-end - where both are now more discretely pricing in further easing.
Until then, we expect Gold and the U.S. Dollar will continue to work.