WHAT DO ALL-TIME HIGH GOLD PRICES AND FALLING AMERICAN DOLLARS MEAN FOR YOU?

The local Star-Advertiser today carried an article that headlined:

Gold hits record $5,311 as dollar falls ahead of Fed decision

First of all, the Federal Reserve today held interest rates steady for the first time since July. 

• Fed Chair Jerome Powell (will stay on as governor until the end of 2028) said that economic activity and business fixed investment have been expanding at a solid pace, while consumer spending has been resilient.  
• However, even though the housing market continues to show weakness, it has begun to show signs of recent life.  
• Mortgage rates have been at a three-year low.
• Yet, 6% for 30-year fixed is not exactly low.
• 15-year fixed is around 5%, also not so good.
• On the other hand, it was 7% last year.
• A good low interest rate for a 30-year fixed mortgage is anything below 4%.
• In January 2021, a record low of 2.65% was reached.
• This rate hovered between 3% and 4% in the 2010s.
• However, and this surprising to me, the historical average since 1971 is 7.71%.

About gold, I remember when it was $35/ounce.  Then in 1971, President Richard Nixon ended the gold standard, converting  dollar to a flat currency.

As you might know, the first time gold hit $5000/ounce was only a few days ago on Sunday.  So I asked Google AI what do these recent all-time highs for gold ($5,343/ounce, up 4.35% just today) mean for the economy?

Record all-time high gold prices, which are currently over $5,300 per ounce as of January 28, 2026, primarily signal a loss of investor trust in traditional government assets and are seen as a warning sign for potential economic instability and rising inflation. 

I asked Google AI why gold keeps breaking all-time high records, and if this dangerous for our future economy.

Gold is breaking all-time high records due to increased demand for safe-haven assets driven by geopolitical tensions, expectations of lower U.S. interest rates, a weakening dollar, and strong central bank purchasing. While high gold prices can be a warning sign of economic fragility, they do not necessarily mean a dangerous future for the economy, but rather indicate current investor uncertainty. The current price of gold is around $5,314 per ounce as of January 28, 2026. 

Also asked GAI what happens when the American dollar gets weaker?

A weaker American dollar makes U.S. exports cheaper and more competitive globally, boosting multinational corporate earnings and domestic manufacturing

. Conversely, it increases the cost of imported goods, fueling inflation for consumers, and makes foreign travel more expensive for Americans. 

Key Effects of a Weaker Dollar:

• Boost to Exporters: American goods become cheaper for foreign buyers, potentially driving higher demand.
• Increased Inflation: Imported products (electronics, oil, consumer goods) become more expensive, increasing the cost of living in the U.S..
• Impact on Travel: Foreign vacations and imports become more expensive, reducing the purchasing power of U.S. residents abroad.
• Improved Competitiveness: U.S. companies facing foreign competition may gain an advantage as imported goods become less attractive due to higher prices.
• Financial & Investment Impact:
  • Equities: Multinational companies with large foreign revenue streams often see higher earnings.
  • Commodities: Often, a weaker dollar leads to higher prices for commodities.
  • Gold: Often viewed as a, hedge, with a track record of preserving value when currencies weaken.
• Policy & Global Role: The Federal Reserve might raise interest rates to combat inflation, which can slow economic growth. It may also lead to a reduction in demand for the U.S. dollar, impacting its standing as the primary global reserve currency. 

While a weaker dollar provides a boost to specific sectors like manufacturing and exporting, it generally increases costs for the average U.S. consumer. 

I just returned from Japan, and found the exchange rate as great.  Here is the Yen vs $ comparison.

Pretty much the best it has been in 50 years.  Well, taking a closer look just for the month of January.

The exchange rate was close to 160 Yen to the Dollar on January 13, and dropped to 152.3 on January 27.  But this was up to 154 today.  I would gather that Japan must be having it worse than the USA in regards to the the Yen/$ exchange rate.

So now, with respect to the price of gold, you can, on the one hand, be wary of our future economy, while on the other, anticipate some inflation.  About the weakening dollar, foreign goods will cost more, and foreign travel will be negatively impacted, but depending on which country you visit.

Note that the Chinese Renminbi vs U.S. Dollar rate history reflects a general similarity with Japan.

For completeness, here is how the U.S. Dollar has changed with the Euro.

• Eight years ago, it was close to 1.6 Euros  to the $.  Travel to Europe was expensive.
• Dropped to 0.97 to the $ in October of 2022.  Travel was cheap to Europe.
• Today, back up to 1.19 Euro to the $, so travel is getting expensive again.

Tomorrow, I'll post on the Milano-Cortina Winter  Olympics, which has opening ceremonies in 10 days.  Also, what it could cost if you go.

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