Wall Street's Dollar-centric thinking is a financial killer

With gold and silver pulling back from their all-time highs over the last few days, the naysayers on Wall Street — who totally missed the huge rally in both metals since Labor Day — have boldly declared the top is in.

They further claim the dollar “debasement trade” has ended — and the U.S. dollar is set to strengthen.

We believe this is wishful thinking by the “paper bugs” who always seem to find a new excuse to bash gold and silver — and ridicule those who buy it.

As we're now 25 years into a secular bull run that has seen precious metals outperform U.S. stock indexes, you'd think these Wall Street sharpies would have finally changed their tune.

But the mainstream financial industry in America has a dollar-centric frame of reference — and they generally compare the dollar to other fiat currencies. Versus those other currencies, sometimes the Federal Reserve note dollar strengthens, sometimes it weakens.

It's better to view gold versus fiat currencies as a whole. They are all being debased — just at varying rates.

Twenty years ago, the Dollar Index (DXY) was trading at 80; today it's around 99.

When using this “dollar” frame of reference, the dollar appears “stronger” than most of its fiat currency peers. But that's ridiculous.

In reality, the purchasing power of the dollar has dramatically declined over that same 20-year period. In 2005, gold was trading around $500, and DXY was roughly 80. Today, gold is $4,000+ while the DXY is 99.

That means gold is up over 8‑fold measured in those supposedly “stronger” dollars.

Put another way, the dollar has declined 88% versus gold over the last 20 years — talk about dollar debasement!

Folks are buying gold — including central bankers — to reduce exposure to fiat currencies.

But most investors in the Western world are still massively underexposed to real money and dangerously overexposed to paper money. This will change.

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