Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Crouching Dollar, Golden Investment Opportunity!

Stock-Markets / US Dollar Sep 26, 2007 - 11:20 AM GMT

By: Money_and_Markets

Stock-Markets

Sean Brodrick writes: The U.S. dollar is on a slippery slope — down more than 8% from its highs earlier this year and down 54% from its all-time highs.

Make no mistake: The fundamentals have not changed, and the buck probably has lower to go — perhaps much lower. Here's a quick summary of what's driving the greenback lower …


1. The huge Federal debt. Nearly $9 trillion and counting. America is basically living on borrowed cash, and the Good-Time Charlies in Washington are keeping the printing presses busy to pay the bills.

2. The China syndrome. Overseas investors own more than half of the $4.4 trillion in marketable U.S. government debt outstanding, up from a third in 2001, according to data compiled by the Treasury Department. Most of China's $1.34 trillion in currency reserves are U.S. Treasury bonds. The country already announced plans to diversify its reserves out of the dollar, but China might accelerate that program given the latest action in the buck.

3. Bernanke's boo-boo. I think the Fed made a huge mistake when it cut the benchmark interest rate by 50 basis points. Supposedly made to protect the economy against a recession, the cut is really a bailout for big funds that made bad bets in mortgage and corporate debt. This is causing investors to lose faith in the once-mighty greenback.

Heck, the U.S. dollar is now worth about the same as the Canadian dollar (called the loonie) for the first time in 31 years!

Of course, the kind of steep decline we've seen in the U.S. dollar can go on for only so long before we get some kind of a bounce. Nothing moves in a straight line up or down.

I want you to be ready for any potential bounce because it's likely to be very temporary. So today I'm going to give you my three favorite investments to buy on any short-term rally in the dollar. These will help protect you once the greenback inevitably resumes its downward spiral …

Your Chance to Buy Hard Assets on the Cheap!

Investment #1: Precious Metals

Since gold is priced in dollars, as one goes up, the other goes down. In fact, there's about a 92% inverse correlation between gold and the dollar. I like to call this phenomenon the see-saw of pain.

Simply buying gold or a gold ETF like the streetTRACKS Gold Shares (GLD) or the iShares COMEX Gold Trust (IAU) is a very simple way to convert your shrinking dollars to something with real, growing value. Ditto for buying silver via the iShares Silver Trust (SLV).

Along with the falling dollar, there are other solid fundamental reasons to own both gold and silver. Here are just three of them:

  • According to a report from the World Gold Council, overall gold demand rose to $19.8 billion in the second quarter of 2007. That's a 27% increase over the same quarter last year!
  • Demand for gold jewelry jumped 37% in the second quarter to reach a record $14.5 billion.
  • On the supply side, mine production reached 1,298 tonnes over the first half of the year vs. 1,171 tonnes in the first half of 2006, an increase of 10.8%. However, when you take into account net dehedging, mine supply reached 918 tonnes against 889 tonnes in the first half of 2006, it was an increase of just 3.3%.

You can also get a stake in precious metals through mining companies. Most of them are leveraged to the price of the metal they mine, which means their share prices tend to rise along with underlying metal prices. You can get a diversified stake in gold miners through an ETF like the Market Vectors Gold Miners ETF (GDX).

Just remember that if you buy U.S.-based gold miners, their shares are priced in dollars. That somewhat mitigates the dollar-hedging nature of precious metals, which brings me to …

Investment #2: Foreign Stocks

Since the shares of foreign companies are priced in their home currencies, they can provide U.S. investors with gains as the U.S. dollar falls.

For example, look at this chart. It compares the iShares Canada ETF (EWC), the iShares MSCI EAFE Index ETF (EFA), and the S&P 500 SPDRs (SPY).

You can see that the S&P 500 is lagging both the broad-based foreign EFA and the Canada-focused EWC. In fact, Canada is DOUBLING the performance of the U.S. market. Part of that is due to Canada's rip-roaring market, but it's also partly due to Canada's rising currency.

So, put together the strength of precious metals and the power of foreign stocks, and you'll get my third, and favorite, way to hedge against a falling dollar …

Investment #3 — Foreign Precious Metals Stocks

Foreign precious metals stocks give you the best of both worlds! They're already on the launch pad because of rising metals prices, and the fact that their shares are based in foreign currencies gives you additional protection against a sliding greenback.

Want a concrete example?

I recommended a gold stock in Red-Hot Canadian Small-Caps — Jaguar Mining. Jaguar is a Canadian-listed miner that operates in Brazil. As of the end of trading this past Monday, its shares on the Toronto Stock Exchange had racked up a respectable 37% open gain since my initial recommendation. Not bad!

But Jaguar is also listed on the American Stock Exchange here in the U.S. Those shares are up 68% over the same time!

How is that possible? How could the shares of the same company produce such different results? Because Jaguar's base currency is the Canadian dollar … so its U.S. shares had to rise proportionally to make up for the greenback's fall against the loonie.

I'm not telling you about Jaguar so you'll go out and buy it right now. For one thing, unless you subscribe to Red-Hot Canadian Small-Caps , you won't get my signal on when to exit.

Still, I think the stock is a powerful example of how buying foreign gold miners on U.S. exchanges can give you a double shot of profits as the dollar falls.

Bottom line: I'd use any temporary bounce in the U.S. dollar to buy gold, silver, and precious metals miners, with a keen eye to foreign-based stocks or ETFs.

Yours for trading profits,

By Sean Brodrick

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in