Bloomberg News - Trading a Currency War: Stay Clear, Buy Gold, Deutsche Bank Says

July 16, 2019

Article by Katherine Greifeld in Bloomberg News

Should U.S. foreign-exchange policy spur a global currency conflict, Deutsche Bank sees gold as the ultimate victor.

The possibility of U.S. FX intervention has created some buzz among Wall Street analysts after President Donald Trump took aim at China and Europe this month, saying they’re playing a “big currency manipulation game.” A U.S. attempt to weaken the dollar -- a step it hasn’t taken since 2000 -- could prompt other nations to combat the intervention, sparking a “true currency war” probably involving the yuan and euro, according to Deutsche Bank strategist Alan Ruskin.

“With a currency war most likely to be fought on USD/CNY and EUR/USD terrain, one approach would be to steer clear of the direct conflict,” Ruskin wrote in a note Monday. “By far the most direct and simple way to trade the complexities of a currency war is by going long gold.”

Gold has climbed 10% this year amid deepening U.S.-China trade tensions and climbing wagers on a Federal Reserve rate cut. The metal touched a six-year high last month, and hedge funds are close to their most bullish levels since 2017.

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