Faith in Obama? Not according to gold prices
Today's Financial News - Posted May 21, 2009
The dollar is on the decline and gold is on the rise. It may not be an overnight surge to riches, but the gains are on the way.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): In less than a week, the U.S. Dollar Index has dropped by 1.6%. In terms of the sorts of moves the equity markets make, it seems like a miniscule weekly swing. But figure in the absurd change in global wealth when trillions of dollars decline by just a percent or two and the news is much more acute.
As U.K. citizens ponder the economic impact of a possible credit ratings cut, many America citizens are watching the situation very closely. After all, we could be next.
The way the Obama administration has been spending lately and with renewed Treasury-buying interest from the Fed, the global markets have every reason to re-evaluate the value of the American dollar. China must be sweating bullets.
With the rapid, but not-so-surprising drop in the dollar (currently trading for 1.388 euros), it is not surprising to see gold’s price climbing just as rapidly. As I write, the shiny, precious metal is trading for $950 per ounce, very close to the top of its six-month range.
I have no doubt the bullish activity is going to continue. The world realizes the United States (at least with its current laws and leadership) is no longer the sole economic powerhouse it once was.
The world is flat
Instead of one financial leader, countries like China, Japan, Brazil and even the European Union will step up their involvement in global financial matters, shuffling the American stronghold and forcing us to blend in with the pack.
As the cries for a global “basket” currency continue to rise, the value of the dollar will fall.
We have not seen anything yet. If you have read my recent commentary, you know I am extremely bearish on the situation.
Bearish for the dollar, that is.
As for gold… let the bulls charge.
The metal’s surge towards new records will not happen at the pace in-and-out traders would hope for, but for buy-and-hold investors, well, gold may be the only asset worth actually buying and holding these days.
By the time Washington is done spending hoards of money and the economy is back on four wheels, gold prices will have likely topped out well above the $1,500 mark.
A 50% surge may not sound like much in the span of, say, 24 months or so, but consider that gold has virtually no chance of declining to a value of zero and will not be calling Uncle Sam for a bailout anytime soon, the risk/reward equation should make any wary investor ready to make a move.
America is no longer the economic powerhouse it used to be. That means the value of the dollar is on the decline and gold is on the rise.
If you think there is money to be made from gold you are dead-on right. The action in the commodities market is going to be even hotter.
Next Article: It is time to buy back into the Russian stock market?
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