Wednesday, October 14, 2009

Gold Keeps Heading Up on Weak Dollar

Surprise! As the dollar heads down, gold keeps heading up.

Got gold?
U.S. gold futures ended higher in choppy trade on Tuesday, after hitting a record high early
in the session, as a weaker U.S. currency prompted investors to hedge against the depreciation of dollar-denominated assets.

* Most-active December gold futures GCZ9 settled up $7.50 at $1,065 an ounce on the COMEX division of the New York Mercantile Exchange.

* Ranged from $1,052.20 to $1,069.70 -- surpassing the previous all-time high of $1,062.70 set on Oct. 8.

* December futures initially rose toward $1,070 an ounce, and though bullion held higher it eased back as the dollar trimmed losses.

* The fact that gold was making new highs and had last week closed above the key $1,030 an ounce level should set up a rally to $1,300 an ounce over the weeks and months ahead - CitiFX, Citigroup's forex and asset markets technical research unit.
SOURCE: US gold ends up, stays near record on weak dollar | Currencies | Reuters

Down, Down, Down: US Dollar Hits 14 Month Low Against Euro

What's so great about the Euro? It's not the US Dollar, that's what.
The euro hit a 14-month high against the dollar in Asian trade on yesterday as investors worried about the outlook for the U.S. economy.  The euro climbed to US$1.4887 in Tokyo afternoon trade - the highest level since August 2008 - up from US$1.4852 in New York late Tuesday. The European currency slipped to 132.36 yen from 133.30. The dollar fell to 89.90 yen from 89.67.

While some market watchers attributed the greenback's losses to waning demand for "safe-haven" currencies, others blamed it on disappointment that the world's largest economy is not recovering as quickly as many had hoped. "I think the euro rose against a backdrop of falling confidence in the U.S. economic recovery," said Marito Ueda, dealer at FX Prime.
SOURCE: Euro hits 14-month high against U.S. dollar - Taiwan News Online

Tuesday, October 13, 2009

NY Post: Will Bernanke Go Down in History as "The Man Who Killed the Greenback?"

Who shot the dollar? Helicopter Ben Bernanke, that's who.
Ben Bernanke's dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.

Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital. The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.  Currently, dollars account for about 62 percent of the currency reserve at central banks -- the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.
Dollar loses reserve status to yen & euro

Dollar Slump Means Gold's Gain

The story's the same today: the US dollar is down and gold is up. Will we see another repeat tomorrow, and the next day, and the next day, and the next day . . . ?
Gold futures rose to a record as the slumping dollar spurred demand for the precious metal as an alternative asset.  The metal is on course for a ninth straight annual gain. This year, gold has gained 20 percent. Today, the price reached a record $1,069.70 an ounce in New York, surpassing the previous high on Oct. 8. The dollar has dropped 6.6 percent in 2009 against a basket of six major currencies, touching a 14-month low.

“There’s lots of concern about the weakness in the dollar, and this has been driving gold,” said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany.  Gold futures for December delivery gained $3.50, or 0.3 percent, to $1,061 at 11:05 a.m. on the Comex division of the New York Mercantile Exchange.
Gold Rises to Record as Dollar’s Slump Spurs Investment Demand -

Four Simple Ways to Short the US Dollar

Finally, some practical advice! Live and learn boys, live and learn.
For decades, the U.S. dollar has been among the mightiest currencies in the world. Now, the question on some investors’ minds is how low will the dollar go?  On Friday, Oct. 9, the dollar Index, which tracks the U.S. dollar against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, touched 75.9, its lowest level since August 2008.

During the past year, the dollar has been subjected to formidable forces, and one of the most influential has been global economic momentum. Many countries that hold large reserves of U.S. currency – China is sitting on more than $2 trillion – are watching nervously as the nation’s debt continues to rise and its deficits with trading partners in Asia and the Middle East continue to grow, says Clyde Prestowitz, the president of the Economic Strategy Institute, a think tank in Washington, D.C., that advocates for responsible globalization and describes itself as nonpartisan.
4 Ways to Short the U.S. Dollar at

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Who Needs the "Obama Dollar" Now?

Who indeed? Is that a trillion dollar bill with Obama's face on it? Good, now you can buy a loaf of bread.
President Barack Obama’s effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets.

As threats of a financial meltdown fade, the currency is falling victim to an unprecedented budget deficit, near-zero interest rates and slow growth. The dollar is down 10 percent against six trading partners’ legal tender in Treasury Secretary Timothy Geithner’s first eight-and-a-half months, the sharpest drop for a new occupant of that office since the Reagan administration’s James Baker persuaded world leaders to boost the deutsche mark and yen by debasing the dollar in 1985. This year’s drop followed its best two quarters in 16 years.

“The dollar had been strong because the U.S. was a haven in the storm, and now that the storm is abating, who needs the dollar?” said Edmund Phelps,

Obama Dollar Retreats Most Against Commodities in Wealth Shift -

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What the Dollar's Decline Really Means to You and Me

So, what exactly makes our currency worth less each day? Lack of demand. Which could then increase interest rates and start an inflation fire. Anyone got marshmallows to roast?
The dollar's future is dicey for as long as the Federal Reserve maintains extremely low short term interest rates. The lack of demand for dollar assets could also drive down prices for Treasury bills, thus driving up long-term interest rates as the U.S. comes to terms with having to pay a premium in order to norrow. The Treasury got a taste of this when a weak 30-year bill auction drove up yields. That could have hurt the dollar the next day except that Federal Reserve chairman Ben Bernanke's Thursday night speech halted the dollar's slide.
The Dollar In Decline -

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Weak Dollar Helps Boost Price of Precious Metals

Did someone say "buy gold?" As the dollar dives the stuff that glitters is going up and up.
A weaker U.S. dollar boosted precious metals Monday.  December gold rose $8.90 to settle at $1,057.50 an ounce on the Comex division of the New York Mercantile Exchange. "Gold is just reacting to the dollar right now," said Michael Gross, broker and futures analyst with The metal often moves inversely to the greenback because it is considered a dollar hedge and, more broadly, an alternative currency.

Gold is also seen as an inflation hedge, and George Gero, vice president with RBC Capital Markets Global Futures, says metals continue to be in demand as some see future inflation due to weaker currencies.  Shortly after gold closed, the ICE Futures U.S. dollar index was down 0.197 point, and Nymex November crude was up $1.59 a barrel. Higher crude also helped gold, which may have entered into a higher trading range of $990 to $1,075, Gero said.
PRECIOUS METALS: Weaker US Dollar Boosts NY Precious Metals -

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Time to Take Dollar Weakness "In Stride?"

This guy still thinks there will be an orderly race to the exit after the rest of the world yells "fire!"  Some people already smell smoke and are already making their way out. That's how you avoid getting trampled to death, not waiting until some government official tells you it's time to panic.
The hand-wringing over the U.S. dollar's fall has been overdone. The greenback is expected to remain weak, but few think declines will accelerate in spite of debates over the dollar's role in the world economy. This week the dollar fell to a 14-month low against a basket of six major currencies .DXY, in part because of concerns about the slow recovery in the U.S. economy.

But the decline in the currency has been orderly and other measures of risk, such as the rally in stocks and low interest rates, suggest a healthy outlook toward U.S. assets and economic growth.  The worries heightened earlier in the week when several Asian central banks intervened in the markets to buy dollars to weaken their currencies. Markets were calmed only later after U.S. Federal Reserve Chairman Ben Bernanke made comments that supported the greenback.
Taking U.S. dollar weakness in stride | Markets | Hot Stocks | Reuters

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Monday, October 12, 2009

Dollar Reaching Breaking Point? Oh Snap!

Everyone has a date for the prom but the US Dollar. Looks like it might be time you dumped her as well.
Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades. Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991.
Dollar Reaches Breaking Point as Banks Shift Reserves (Update3) -

Sunday, October 11, 2009

Analysts Say Dollar Facing "Power-Shift

A power-shift, and not in a good way.
The dollar's position as the world's leading reserve currency faces increased pressure as the financial crisis allows emerging economies greater influence on the world stage, analysts said.
A report last week in The Independent claiming that China, Russia and Gulf States are among nations prepared to ditch the dollar for oil trades has heightened the uncertainty surrounding the US currency's future.

The dollar slumped against rivals last week in the wake of the British daily's controversial report.
"The US dollar is being hurt by the continued talk of a shift away from a dollar-centric world," said Kit Juckes, an analyst at currency traders ECU Group.
Dollar facing power-shift: Analysts- International Business-News-The Economic Times

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Breaking US Dollar Collapse News

What's Behind the Decline of the US Dollar?

This is one the of the best and simplest explanations we have seen:
The U.S. dollar's downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency. - Wall Street Journal, April 23, 2011
Interestingly, the Federal Reserve is responsible for, or an active participant in all three of these factors.