4 min readU.S. President Trump’s comments that he was not concerned about a drop in the US dollar led to a huge single-day decline. Trump’s statement adds to speculation about the basement trade, prompting the sell-off in the US dollar, whilst pushing gold and silver to record highs. However, Bitcoin lags behind gold as it continues to struggle below 90K despite a supportive backdrop.
USD falls to a 4-year low
The US dollar index, which measures the greenback against a basket of major peers, fell 1.3% on Tuesday, dropping to a level last seen in 2022. The bearish pressure came as Trump said the weak dollar was great for business. A weaker dollar supports Trump’s efforts to attract more business from global economies, making US exports more competitive. Investors are questioning whether the US is starting a devaluation strategy to support US exporters in a similar vein to the Chinese government’s devaluation of the yuan.
A weak dollar is often seen as a positive for US-denominated commodities such as gold and silver, making them cheaper for buyers with foreign currencies. The debasement trade also drives demand for hard assets. Gold rallied to fresh record highs above $5300 in the European session, while Silver soared to $116 per ounce.
A weaker dollar is also considered positive for US firms, helping the S&P 500 reach a fresh record high of 7000. Yet Bitcoin is failing to capitalise to the same extent as US equities or precious metals, and continues to trade below the key 90,000 level, highlighting the divergence, particularly with precious metals. This divergence is even more stark over a longer time frame. Gold trades up 90% across the past year compared to a 17% drop in BTC. According to Glassnode, Bitcoin’s correlation with Gold is -0.051, highlighting Gold as the safe-haven of choice while BTC remains range-bound and suffers an identity crisis.
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