Daily Brief – USD and US Assets

USD and US Assets

Surely one and the same, so if you own assets you are by definition long USD? Not necessarily. It’s looking like that foreigners are still storing their wealth or buying assets denominated in USD. So cash, bonds or equities primarily. However, this year as we know USD has depreciated by 13%. Surely that is bad news for those holders of US assets? Again not necessarily. It transpires that much of that  fall in USD has been caused by holders of US assets entering into currency hedges which have the same effect as selling USD. For example, Deutsche Bank has come up with a figure of USD 7 trillion of new US assets in the past 3 months of which 80% have been currency hedged. And in case you are wondering that compares to 20% of new US assets being currency hedged at the beginning of 2025.

EUR/USD 1.1571.

Gold v Silver

Put the current USD 4005 price of gold to one side for a moment and ask the question as we did: should one buy Gold or Silver now? Gold as a store of value trumps Silver. Silver is both a precious metal but is also used in industry in the manufacture of solar panels, medical equipment, electronics and EVs so does well when economies are strong. Gold is more easily stored, traded, and transported. What about relative pricing/ the historic average is for Gold to be valued at a ratio of 60:1 to Silver. That ratio is currently 88. So there is an argument depending on the objectives of one’s investment portfolio to buy Silver rather than Gold at present. The most sensible answer is that a well balanced portfolio will have holdings of both Gold and Silver.

GBP/USD 1.3168.

US Government Shutdown

Another record broken by the POTUS Administration: the US Government shut down is now the longest ever at 38 days. On Friday night, there were some faint signs that the two sides were contemplating finding a resolution over the weekend when the word went out that weekend work was required. The latest manifestation of the shutdown was on Friday, when the 40 busiest airports experienced 850 flight cancellations and 2000 delays due to air traffic controllers not being paid. We are now in the territory of that shut down affecting the US economy which if not resolved soon, must weigh on the USD in coming weeks.

EUR/JPY 177.24.

Lithium Batteries

If you wonder why the question is increasingly asked at airport check-ins as to whether one is carrying/packing a power bank or lithium battery charger for one’s laptop, look no further than what happened at Melbourne Intl Airport last week in the Qantas Business Lounge. An overheated power bank burst into flames burning the male owner’s legs and causing smoke, flames and all round chaos before he was bundled into a shower that was fortunately near at hand. A strong case for choosing a meal and a nap over pounding the keys of one’s PC while in flight.

EUR/GBP 0.8788.

Welcome to the Pleasuredome

That of course was Frankie Goes to Hollywood’s smash hit album and song of the same name released this day in 1984 which caught the zeitgeist of the day and which to their credit has remained a stalwart of the dance floor in ensuing decades.

The world is my oyster…
Ha ha ha ha ha…

The animals are winding me up
The jungle call
The jungle call

Who-ha who-ha who-ha who-ha

In Xanadu did Kubla Khan
A pleasuredome erect

Moving on keep moving on-yeah
Moving at one million miles an hour
Using my power
I sell it by the hour
I have it so I market it
You really can afford it-yeah
Really can afford it

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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