The Dollar Strength Illusion

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The dollar index has been in the news quite a bit in recent months. The U.S. Currency has, as measured against a basket of other currencies, appreciated in value and is currently sitting near 12 year highs. This strength, however, is nothing more than illusion. The dollar is a bubble waiting to burst, and when it does, the floodgates to economic chaos and recession will open. This could occur next week, next month or next year, but we believe that such a scenario is inevitable.

While many people are led to believe that the dollar is appreciating due to economic strength in the U.S. and an improving outlook, the fact of the matter is that the dollar rally has been Fed-driven and is seeing some support in the absence of other alternatives. The Euro has major issues, Goldman Sachs recently forecast the Japanese Yen to decline by 20% over the next two years, and don’t even look at currencies like the Russian Ruble, Argentinian Peso, or the Swedish Krona which lost 50-80% over the last 2 years. Yes, the dollar has gained, but just like a poor sports team that happens to make the playoffs coming out of a weak division, it has gained only due to lack of any competition. The lesser of the available evils… But how long can this last.

The U.S. is getting ready to initiate its first interest rate hike after six plus years of holding interest rates at zero. In many other parts of the world, however, nations are taking additional stimulus measures in order to boost their economies. China has again recently lowered interest rates. The European Central Bank has essentially stated it will throw as much quantitative easing at its economy as necessary in order to boost inflation and stop the current deflationary spiral. Japan is employing similar measures.

Needless to say, this represents a significant disconnect among global central banks.

Many investors, in an attempt to think “logically,” have been flocking to dollars in the hopes of higher interest rates. We believe that the notion of rising rates is grossly exaggerated.

The Fed is considering a 25 basis point rate hike and has maintained that any further rate hikes would be small and incremental.

Reality checkIf the economy cannot tolerate further hikes, the economy is not nearly as strong as many currently believe…

What is currently being seen in currency markets is nothing more than smoke and mirrors. As debate goes on about the fate of the euro and the health of the U.S. Economy, other currencies are quietly and behind the scenes positioning themselves to challenge the U.S. Dollar as the reserve currency of the world.

The Chinese Yuan could find itself as the preferred currency of choice sooner than people think…

We have discussed the dynamics of such a move, and as the petrodollar continues to die a slow death, the reality of the Yuan as the preferred global reserve currency becomes more and more likely.

The U.S. Dollar is running on the herd mentality, nothing more.

How can the most indebted nation in the world have the currency of choice?

Ignorance is bliss…

Unfortunately for many investors and holders of dollar denominated investments, the potential dollar collapse scenario is not a pretty one. The herd mentality and chosen ignorance of underlying market and currency fundamentals can lead to financial and economic ruin…

The move away from the dollar has already begun. Despite recent strength in the greenback, the dollar’s ultimate demise has already been set in motion. Like sheep, those that follow the herd tend to get slaughtered…

The dollar is a bubble that will burst, and when it does, the economic and financial fallout will be far-reaching and severe…

We believe that many precious metals investors see the writing on the wall-and if you don’t-it’s time to pay attention…

Gold and silver have held up despite strength in the dollar in recent months. Dips in these precious metals have been happily bought, and those who buy precious metals at current levels may be handsomely rewarded in time as the fiat collapse ensues.

Don’t wait until the bubble bursts. The time to take action is now…

Gold, silver and other precious metals have stood the test of time. Their value is not derived from any central bank or government and their wealth-preserving abilities are well-documented.

As the dollar gets more frothy, and as the bubble gets blown bigger and bigger, consider an allocation into precious metals before it pops.

One of the easiest ways to accomplish this is to consider an allocation in gold or silver within your retirement portfolio. It has never been easier than it is today to roll over retirement funds into a precious metals IRA.

To learn more about gold, silver and other precious metals, and how they may potentially fit into your investment strategy, request a copy of our gold IRA guide today.

 

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