Well now, for more on the unfolding trade war, the selloff in commodities and gold, and much more, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome in Greg Weldon, CEO and president of Weldon Financial. Greg has over three decades of market research and trading experience, specializing in the metals and commodity markets, and his close connection with the metals led him to author a book back in 2006, titled Gold Trading Boot Camp, where he accurately predicted the implosion of the U.S. credit market and urged people to buy gold when it was only $550 an ounce.

He's a regular presenter at financial conferences throughout the country, and is a highly sought-after guest on many financial shows. And it's always great to have him on the Money Metals Podcast. Greg, good to talk to you again. Welcome back.

Greg Weldon: Thanks, Mike. My pleasure.

Mike Gleason: Well, Greg, we've been keeping a close eye on the dollar, as I know you have been as well. For metals investors, the rally in the dollar is providing some serious headwinds. When we last spoke in early May, the rally had begun. You weren't surprised, and thought it might run up to the vicinity of 96 on the DXY Index, and that's looking like a very good call. We're just a bit over 95 currently. But you thought the rally could fizzle out, and the dollar could be back on the slide somewhere in the second half of the year. So, what are your thoughts currently? Has anything changed your outlook for the greenback, Greg?

Greg Weldon: Yeah. I think the odds of the dollar continuing higher have expanded here, and I think it's a function of the Fed. I think we got information in the last week or so that is, frankly, pertinent, because if you kind of trace back to what we were talking about in May, we started to see signs of stagflation. We started to see signs of stress in the second derivatives of where the growth had been. A place like Germany, an export juggernaut. When you start to see some issues in places like the Czech Republic, Hungary, Poland, they provide semi-finished goods to Germany that finishes them and exports them. So, we had already kind of seen some cracks in the global macro dynamic globally.

And the question then was, "well, if inflation's going higher, will the Fed follow inflation even at the risk of potentially bringing the hammer down on the backend on the consumer who is extremely leveraged here, unprecedented borrowing.” Same thing as 2006 and 2007. You're borrowing against unrealized paper profits. In that case it was mortgages, in your home, the value, all right?

In this cases it's the stock market. Like the case in 2006 and '07, home prices will never go down, right? Well, we learned that's not true. And then the case here it seems like stock prices will never go down, right? Passive investment, just pile in, and you'll be rich, and here's the American dream in a nutshell, no problem. Well, we can call into question that, of course, and if the stock market declines and consumers are on the hook, you're going to be facing a very similar situation where the consumer's kind of upside down.

Having said all of that, the question really puts the focus on the Fed, and what the Fed just told us in their monetary report, which is the basis for which Chairman Powell is using as his testimony here on Capitol Hill, The Humphrey-Hawkins semiannual report to Congress. The Fed was very specific. I was really surprised at the language in this report. It's 71 pages. I went to every single page. It took me six hours yesterday doing this, but it was really worth it because the Fed say in this report, not only do we want to get to a level where we're at the neutral rate, the kind of natural rate, the neutral rate of Fed policy which we've been saying all along. They want to get to neutral, which is somewhere between two and two and a half based on where inflation is.

Well, the Fed just told us, "We don't want to just get to neutral, we want to get a slight bit above neutral, i.e. we actually want to get tight here." All right? And if inflation's moving higher and the Fed wants to get tight, meaning above the rate of inflation, they're behind the curve and they're going to have to move more quickly and this was kind of the tone of this monetary report.

And the sense was, they're admitting, "Hey! Inflation is now above our target for the first time, that doesn't mean we're slowing down.” So this is bothering commodity markets because it's lifting the dollar. The Fed is presumably going to be tighter, it's going to chase inflation, doesn't care about what the back end economic dynamic might be and that you throw in the trade dynamic, which is having a huge impact, i.e. look at the declining commodities. Look at the decline in China. Look at the decline in Canada in terms of some of the economic numbers, let alone the markets. Look at the pressure on emerging market currencies.

The other thing the Fed said in this report was the external risk is primarily seen in Argentina, Turkey, China, and emerging Asia. We run spreadsheets here where I have my own proprietary algorithms that I wrote back in the 1980's. I'm a math geek by heart, by history and we have algorithms that we use to track the ETF's out there, all of them. Well, I ran a full scan yesterday and the top 25 trends right now in the ETF world, including international ETFs, commodity ETFs, fixed income ETFs, all the sector ETFs in the U.S., 25 top trends, 24 were bearish and it was spread out among metals, commodities, China, and emerging Asia. All the things the Fed just cited as their risk factors.

So, my question then becomes, again, does the Fed pay attention? Is the Fed doing their normal puppeteering here where they're trying to be vocally tighter so they can use words to kind of ease some without actually having to totally shift policy and start cutting rates? I don't know, but I think right now, whereas maybe we might think that the dollar would soften when the Fed rhetoric softened, that's not happening because the Fed rhetoric is not softening. In fact, it's getting harder and this is becoming a problem. You see it in emerging markets, you see it in commodities, and you certainly see it in gold and silver.

You can read or listen to the entire podcast here.