The U.S. dollar’s performance has been mixed against a number of currencies in the first half of the year. The greenback gained broad support in July from the Fed's monthly Beige Book that showed the U.S. economy is expanding at a moderate pace but the question on every investor’s lips is, “when will the Fed raise interest rates?”
The reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low. If you price bonds too highly, few investors want to buy them without the unconditional support of the central bank as a ready buyer.
Hedge funds increased positions on a gold rally by the most in three weeks as central banks signaled no end to economic stimulus, driving prices higher just as analysts and traders turned the most bearish in three years.
Hedge funds and other speculators added to bullish gold bets as the metal slumped into a bear market and Goldman Sachs Group Inc. warned the retreat is accelerating after the longest rally in nine decades.
A Chinese proverb, which could certainly be applied to the examination of monetary policy, advises: “if you want to know what the water is like, don’t ask the fish.” I take this advice to heart, as it fit my approach to life—step back and look at the big picture from outside a system to gain an understanding of how it works.