Macro Update: Dollar Weakness, Iran (Again), and Gold

January 28, 2026

The US Dollar is falling…  Is that bad?

After recent drama in Japan, the US dollar finally broke below its recent trading range.  It’s now trading at the weakest point since 2022.  See chart below.

When the dollar weakens, the “end of the world” types come out of the woodwork.   There is some element of that.  President Trump’s general “policy chaos” has antagonized every major world power.  So it makes sense that their countries would gravitate away from investing in the US.   That would generally weaken the status of the USD as the world’s reserve currency.  However, the size and depth of the US markets mean that other developed markets have little choice but to participate in US bond and capital markets. 

On top of this, US multinational companies generate increased profits, as their overseas sales are now “cheaper”.  And the foreign currency translates back into US dollars at higher rates.   President Trump in fact yesterday said that he thinks a weak dollar is “great”.   I mean, I see what he meant.  But historically, Presidents will advocate for a strong dollar, as a psychological fortress for the rest of the world’s markets.  And that is what is wobbling.

Treasury Secretary Bessent was interviewed this morning and said the US is currently not intervening in the yen market.   That’s caused a little increase in the dollar index this morning.

Gold and Silver

Compounding these fears are the ongoing rallies in gold and silver.  The “debasement trade” as some are calling it.  By debasement, they mean that the world has finally realized that currencies are not backstopped by gold bullion or any other hard asset.  Well, I don’t think that the world just NOW realized this.  So I put little stock in the theory that gold is rising because the financial system is breaking.

I think it’s more a combination of central bank reserve diversifying, investors increasing their macro hedges, and just general speculation (ie, “nothing attracts a crowd like a crowd”). 

As the general US policy chaos continues, I can imagine a scenario where gold continues rising.  However, I don’t think it’s because the US dollar based financial system is on the verge of collapse.

Iran and … nukes?

President Trump made an interesting post this morning about Iran.  He said the Lincoln aircraft carrier battle group is now in the region.  He said he hopes Iran will come to a deal soon on “NO NUCLEAR WEAPONS”.   Wait a minute.  I thought we were going to bomb Iran to save the protestors….?   Is this about nuclear weapons now again? 

If you remember back in June of last year, the US sent a fleet of stealth bombers to attack an underground nuclear weapons facility in Iran. 

There is less geopolitical “existential” risk from attacking Iran now.  This is because: (1) Russia is not in a position to defend them, (2) Iran had a minimal response to being attacked last time, and (3) the near destruction of Iran’s proxy armies in the middle east.  Soo… could we bomb them and no one might really care?  Sound weird to say but maybe.  In cold war, world war III scenarios often started with conflict over Iran.  But now, it barely merits a headline.