Why the Dollar Is Overvalued

The U.S. dollar has been on the stronger side of the ledger in recent months. There are numerous factors at work that have kept the greenback moving higher, including strong U.S.  economic data and weakness in other regions.

Creeping Weakness Affecting the Dollar

Recent months have seen some significant weakness creep into the U.S. data stream, however, and China has been reporting some serious weakness of its own. The dollar has likely enjoyed the benefits of weaker growth in emerging markets and the fear of Q1 global growth showing a major contraction. Concerns over global output have almost certainly been a major hindrance to EM currencies as well, allowing the dollar to move higher.

The current backdrop of global weakness could continue for some time and may even be indicative of the next recession. Regardless of what happens to the global economy this year or next, at some point the environment for global growth will improve. When it does, emerging market currencies as well as those of the G-10 may start to gain traction. A number of G-10 currencies, like the euro, still have negative interest rates, making the dollar look more attractive. As monetary policy is normalized, whether it be next year or several years from now, interest rate differentials will start to make other currencies look increasingly attractive and may weaken the dollar.

Unsustainable U.S. Debt to Consider

Of course, there is also the issue of major, unsustainable U.S. debt that must be considered as well. With the current debt load over $22 trillion, the U.S. will not be able to kick the can down the road indefinitely. In fact, it could have no other choice but to debase the currency. Such a move could make the cost of everything, from a gallon of gas to a loaf of bread, skyrocket. It could also erode the value of investment returns as each dollar earned buys less and less.

With so many issues pointing to an eventual reckoning for the dollar, now is the time to act accordingly. As the dollar weakens, it will erode the purchasing power and net returns of those using the currency. That is why now is the time to add assets to your portfolio that may help to counteract the negative effects of a weaker dollar.

An Asset Class With Upside Appreciation Potential

There is one asset class that is widely considered to be the only true form of money. This asset class comes with significant upside appreciation potential and may act as a key hedge against dollar weakness and rising inflation. Adding physical gold to your portfolio has never been easier, and maybe never more important.

Speak with an Advantage Gold account executive today to learn more about the potential benefits of gold ownership and how it may play a key role going forward. Our associates are here to answer any questions you may have and can even show you how to incorporate this key asset class using an IRA account.

Don’t wait for the next major recession to sink stocks or for the dollar to weaken further before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.

Tags: , , , , , , , ,

Category |