Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
The US dollar looks set for a multi-year bear cycle because a multipolar world needs fewer dollars. Reserve managers are diversifying, trade settles in more currencies and central banks accumulate gold instead. Against an equally weighted basket, the dollar's half-century sequence of lower secular highs is topping again on its 7-to-10-year cycle. Every major commodity bull of the past century ran alongside a falling dollar, which could also bring a second inflation wave. x.comÂ
The US dollar's breakout looks likely to fail because positioning is extremely crowded. Non-commercial traders hold $39.7 billion in net bullish dollar positions, the largest since 2015. At every prior visit to this extreme, the marginal buyer was already invested and the trend exhausted rather than accelerated. Failed breakouts from crowded positioning tend to reverse fast, and $40 billion of trapped longs is fuel for the move nobody is positioned for. x.comÂ
The dollar's longer-term prospects are very negative: 2008 showed the dollar-based system was built on quicksand, and 2026 showed the US has lost its leadership of the Western-oriented world. Both are very positive for gold. First, though, the dollar might rise on a flight to liquidity. x.com x.com x.comÂ
The dollar's reserve role is eroding because, for the first time in twelve OMFIF surveys, more central banks plan to cut dollar holdings than add them. The 90 institutions, managing $10 trillion, cite political risk rather than a stronger rival. They are heading to gold, which 82% already hold and a net 30% plan to add, and to euros, yuan, pounds and kroner. The dollar is still 57% of global reserves, down from a 70% peak. x.comÂ
The US dollar looks more bullish than bearish because it is priced against other currencies that are hit harder by oil. Most countries' bond yields are rising, not just America's, and the US has the world's most dominant economy, which AI is accelerating relative to others. Still, trading currencies makes little sense when stocks are rising 25%+ a year. x.comÂ
The dollar cycle has likely peaked because the Fed's next move is going to be a cut. Supply-shock demand destruction is doing the Fed's job and a strong dollar is doing the rest, so rates should fall, the dollar weaken, and duration assets, commodities and emerging markets reprice. A soon-ish end to the war should work against this view, but even if it drags on much longer, the rates curve has priced it in through the end of 2026. x.comÂ
The dollar, the first and last purely fiat reserve currency, is visibly failing after a 55-year unbacked experiment, with debt spiraling and yields at multi-decade highs. Earlier reserve currencies were anchored, the British pound to gold and the dollar itself until 1971. The world is choosing exits: central banks in China, India and across Asia are buying gold at a record pace, and the West will choose bitcoin. Over 20 years, both should absorb enormous monetary premium as fiat winds down. … Show more
The US dollar is becoming a black hole for global liquidity, driven by Fed Chair Kevin Warsh's hawkish stance and a wave of AI-driven capital flowing back into US tech. Net long dollar positions have surged to $29.4 billion. BofA cut its EUR/USD target to 1.15 from 1.20 and now expects three more hikes this year, while Man Group sees another 5% dollar upside by year-end. This is an AI-monopoly story as much as a rate story, with capital leaving stagnant overseas markets to fund US computing. … Show more
Rising Treasury yields make non-yielding gold less attractive, setting up one major selloff before the next big rally. Oil above $100 adds inflation and rate pressure; higher yields could lift the dollar, while gold ETF outflows and forced selling in a liquidity crisis add risk. The Benner Cycle flags 2026 as a potential selling period. The long-term bull market is not necessarily over: central banks are still buying and long-term demand remains strong. Gold is not worth chasing at these levels. … Show more
The US dollar is overvalued and weakening as Asian surplus countries stop recycling their surpluses into dollar reserves, an external drain. Without that recycling, both yields and the currency are in price discovery. Ken Rogoff concluded that Asia not recycling would mean a lower dollar against Asian surplus currencies and higher nominal rates, both now happening. Per @DrDavidKass, Ed Yardeni blames the global bond rout on the yen-carry unwind; the explanations are not mutually exclusive. x.com … Show more
The US dollar is the key long against other currencies in a secular disinflationary era, with demographic decline worsened by years of QE and overly cheap money. More currencies should hit record lows against the dollar, with non-dollar bond markets breaking and financial assets repricing toward demographic decline. Japan is entering a demographic-collapse regime where the BoJ has no power left. Dollar/yen just hit a 40-year peak of 162.68, per FinancialJuice. x.comÂ
Gold and other hard assets such as platinum, silver and copper are worth owning because the end game very likely sends the dollar, pound and euro much lower. Structural flows, fiscal pressure and an inflationary impulse are all working against Treasury Secretary Bessent, and markets may force him to act; he has the ammunition to blunt-force his preferred outcome but has made that much harder. x.comÂ
