Gold Pushed Higher by Waning Dollar

Has the the dollar lost its mojo internationally? The waning influence of the dollar could be another catalyst for higher gold prices amid the already-existing confluence of factors.

“The dollar’s dominance of global trade and investment flows is facing a slew of new threats as more and more countries draft plans to boost the use of alternative currencies,” a Markets Insider article said. “For some time now, nations from China and Russia to India and Brazil have been pushing for settling more trade in non-dollar units – with projects ranging from the use of local currencies to a gold-backed stablecoin and a new BRICS reserve currency.”

It’s not just the aforementioned emerging markets, but also developed markets that are thinking twice about the dollar.

“Now, even Europe appears to be jumping on the anti-dollar bandwagon, with French president Emmanuel Macron recently warning against the continent’s dependence on the greenback,” the article added further. “With movements to undermine the dollar’s unipolar supremacy gathering momentum, it comes as no surprise that the buck’s status as a reserve currency eroded in 2022 at 10 times the pace seen in the past two decades, according to Eurizon SLJ Asset Management.”

This could give gold another catalyst for the long-term horizon. In the short term, the yellow metal has been benefitting from a safe haven scramble to precious metals amid fears of a recession as the U.S. Federal Reserve continues to try to tame inflation. That taming could come at the expense of slower economic growth.

Gold has also been pushing higher with doubt creeping into the financial system. The recent spate of bank rescues is also bringing jitters to investors as they look to safe haven assets.

Active ETF With Strong Gold Exposure

It’s one thing to add gold exposure while it’s rallying. It’s another to prevent over-concentration in the event that gold eventually falters. That said, getting active exposure to gold and other commodities adds a layer of risk mitigation.

Gold is the top holding in the Neuberger Berman Commodity Strategy ETF (NBCM), which could allow the fund to benefit if prices continue to push higher. In addition, the fund holds various other commodities for additional diversification, particularly for investors looking to broaden their portfolio exposure.

The fund has 28 commodity holdings, including gold. Corn, WTI crude, Brent crude, and gasoline round out the top five holdings (12% of the allocation goes to gold, as of May 8).

For more news, information, and analysis, visit the Commodities Channel.