Dollar Stabilization Takes Shine Off Gold

Dollar Strength & Uncertainty - The strong dollar bet earlier in the year was based on U S policy uncertainty and reserve managers rotating out of the dollar [1] - Political and policy uncertainty in Europe (e g, France) and Japan are contributing to a strong dollar narrative [2] - The dollar's previous appreciation over 13 years reached unsustainable levels, making a return to February/March levels unlikely [4] Yen Weakness & Market Impact - A weaker yen benefits the operating margins of Japanese multinational stocks, particularly those selling high-value industrial products [5] - Recent yen weakness, driven by political turmoil, has correlated with a strong stock market performance in Japan [6] - The yen's weakness is perceived more as a reaction to central bank policy speculation than a reflection of fundamental economic weakness in Japan [6] Federal Reserve & Interest Rate Policy - The Federal Reserve has sufficient third-party and internal data to make informed decisions, even during a government shutdown [8][9] - Current interest rate policy in the U S is not considered overly restrictive, given the stock market highs, gold prices, and corporate bond spreads [10] - A Federal Reserve rate cut would likely be reluctant, considering the financial market performance [11] - The September rate cut was viewed as an "insurance cut," not necessarily signaling a prolonged series of rate cuts [12][13]