by Axel G. Merk, Gold Seek:
The greenback isn’t what it used to be. At least for now, when there’s a “flight” to U.S. Treasuries; historically a sign of “safe haven” demand; the U.S. dollar has not only not benefited but has increasingly been on the losing end. Is this a temporary sign of special circumstances or has the dollar lost its safe haven appeal? There may be profound implications for investor’s portfolios seeking downside protection.
Let’s get right to the point. A sour mood in the markets, often referred to as a “risk-off environment,” may be associated with:
~ Falling stock prices;
~ Rising volatility;
~ Rising U.S. Treasuries; and/or
~ A rising U.S. dollar.
What we tend to forget is that the next crisis is likely to be “different” even as some warnings signs may be the same. As such, many myths have developed that in practice are at best oversimplifications; at worst, may lead investors to be incorrectly positioned for the next crisis. Today, we zoom in on the relationship between the U.S. dollar and U.S. Treasuries. The chart below shows a 1-year rolling correlation between the U.S. dollar index1 and 10-year Treasury Notes:
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