Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2022

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Gold prices tested support at $1,900 per ounce before rallying to close the week at $1,929.30 per ounce.

Last week, Saudi Arabia began talks with Beijing about selling oil to China in yuan. This could be a big blow to the U.S. dollar, and weakness in the dollar usually translates into strength for gold.

Why are these talks such a threat to the dollar? In 1945, Saudi Arabia agreed to sell oil only in U.S. dollars. In return, the U.S. guaranteed the security of the oil-producing kingdom. This arrangement, combined with the stability and strength of the U.S. economy, helped enshrine the dollar as the world’s reserve currency. It has allowed the United States to print currency and drive up its debt in ways other countries could not.

But last week's talks between Saudi Arabia and China, coming amid fallout from the Russian invasion of Ukraine, represent a major shift in the status quo.

The talks were preceded by other ominous signs. The Wall Street Journal reported that the Saudis had refused to take President Biden’s calls and had invited China’s President Xi to visit.

This real threat to the U.S. dollar may be made worse if Washington signs a deal with Iran, Saudi Arabia’s rival.

Rick Andrews is president of Avant Capital Management.



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