Archive for the ‘Value’ tag

The Demise Of The Dollar Is Greatly Exaggerated

The value of gold and silver has been on a downward slide all week. Actually, silver has been losing value at a pace not seen in the last 10 years. And while the value of gold and silver have been on the decline, the value of the dollar has been increasing. Don’t get me wrong, we still feel like gold is an excellent long term investment, but we can’t stress how important it is to keep your portfolio diversified. And my advice for those of you stocking up on gold in anticipation of the collapse of the dollar would be to keep some greenbacks around. The dollar has been around for a long time. It is highly sought-after throughout the world and is the most powerful form of currency in the world. It is not going anywhere anytime soon.

Dollar takes a drubbing, gold surges

Via USAToday.com
An interest rate rise in Australia, a disputed British newspaper story and worries about ballooning U.S. debt combined Tuesday to hammer the dollar.

Investors moved out of dollars and into almost anything else. The greenback hit $1.47 against the euro, continuing a months-long slide, while gold closed at $1,038.60 an ounce, an all-time high.

The trigger for Tuesday’s action was the surprise rate increase by the Reserve Bank of Australia, the first G-20 central bank to tighten monetary policy. The RBA raised its benchmark lending rate a quarter of a percentage point to 3.25%.

“Economic conditions in Australia have been stronger than expected. … The risk of serious economic contraction … now (has) passed,” said Glenn Stevens, RBA governor.

In the depths of the financial crisis, the dollar rose, thanks to investors seeking safety and liquidity.

But since earlier this year, the U.S. currency has drooped amid concerns that inflation will erode its value. “Dollar weakness is just going to be a grind for the next couple of months,” said Marc Chandler, senior vice president at Brown Bros. Harriman.

A weaker dollar makes U.S. exports less expensive but also means higher prices for imports.

Markets also were unsettled by a report in The Independent newspaper, which said the Gulf Arab states, China, Russia, Japan and France had secretly agreed to abandon the dollar as the standard for oil trading.

Several of the countries denied such talks had been held. Saudi Central Bank Governor Muhammad al-Jasser called the report “absolutely incorrect.”

Analysts likewise were dismissive. “I don’t take the (story) from the Middle East all that seriously. It doesn’t make much sense for any of the Gulf states to abandon the dollar,” says Greg Salvaggio, senior vice president for capital markets at Tempus Consulting in Washington, D.C.

The U.S. Treasury declined to comment.

Gold bugs weren’t convinced. “There has been increasing talk for months and months about the role of the dollar as the world’s reserve currency,” said Caesar Bryan, manager of Gamco Gold fund. “The Russians have raised the issue, the Chinese have raised the issue, the OPEC countries have raised the issue.”

World Bank President Robert Zoellick drew notice last month when he said the euro and yuan one day could rival the dollar.

Chinese officials, who have much of their $2.1 trillion in reserves invested in U.S. Treasuries, have publicly fretted about seeing those investments decline. Still, for all the talk, the Chinese today hold more of their reserves in dollars than they did one year ago.

Gold to Hit $1,040 ‘Very Quickly’

Gold’s “breaking out” to a higher level as imminent, Chris Locke, managing director at Oystertrade.com Management, told CNBC Wednesday, as other analysts have said the precious metal could shine again as inflation fears resurface.

“We’re on this point of the market making a substantial move to the upside,” Locke said.

“We will see the market move through the bull market highs of $1,040 very, very quickly,” he added.

The S&P 500 index has maintained its uptrend from the March lows and the next target for it is 1,050, Locke said. But for the fall period, Locke sees the index weakening.

Locke told CNBC he’s been looking for a signal that the U.S. index will peak in August before correcting slightly, but that signal hasn’t occurred yet.

But he said he’s “seeing some kind of loss of momentum to the upside” and therefore predicted that the September to November period “will be weaker” and will test the levels below 950.

He also sees sterling reaching “levels towards parity” against the euro, at 95 cents. “Sterling looks the most vulnerable to me,” he said.

Via: CNBC