The Dollar Is in Trouble… Time to Buy Gold?
Alex Moschina|April 8, 2023
Welp…
We had a good run, didn’t we?
For more than half a century, the U.S. dollar has served as the world’s primary reserve currency.
Now it’s looking more likely than ever that the dollar’s dominance may soon come to an end.
It could have a swift and sweeping impact on your portfolio.
Like a shiver of sharks going after a 50-foot whale, the BRICS nations – plus several other emerging market countries – are exploring the launch of a common currency that would take a bite out of the dollar’s strength overseas.
(Did you know a group of sharks is called a shiver? Don’t say we never taught you anything.)
Russia’s Deputy Chairman of the State Duma Alexander Babakov teased the new currency last week at the Russia-India Business Forum in New Delhi. He added that Beijing could be instrumental in the creation of a currency that would help advance the bloc’s “shared objectives.”
The forum came on the heels of the latest gathering of the Association of Southeast Asian Nations. Can you guess the topic du jour? That’s right… strategies to reduce dependence on the U.S. dollar.
Clearly our economic rivals have had enough.
Jim O’Neill, former chief economist for Goldman Sachs, has no doubt been cheering the action from the sidelines.
For too long, he says, the dollar has had an outsize effect on global economies. He emphasized this point in a recent paper for Global Policy:
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Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic. |
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Proving O’Neill’s point – and our long-standing view that money goes where it’s treated best – the dollar has weakened precipitously over the past six months as interest rates have ratcheted upward.
After all… who wants to invest in an economy that’s on the verge of recession?
No one, that’s who.
The U.S. Dollar Index (USDX), which measures the dollar’s value against six major foreign currencies, tells the tale…
Ouch.
But while the dollar’s rapid decline may look rough… it isn’t all bad news.
With interest rates at levels not seen in decades, “boring” instruments like CDs are turning out strong returns.
Crypto markets – which are more or less borderless – have enjoyed a powerful resurgence.
And, of course, there’s every doom-and-gloomer’s favorite investment for times like these… gold.
When the dollar’s strength is in free fall, it’s truly the yellow metal’s time to shine.
The pair’s inverse relationship is especially glaring right now…
Folks who adhere to our Modern Asset Portfolio allocation for gold (10%) are sitting pretty.
The way the economic winds are blowing, gold’s ascent should only continue from here.
It’s rough news for the dollar… for now.
But deep down, we all know it’s just a matter of time before the Fed fires up its printing presses again.
It’s the American way.
That’s why we’re urging you to take action NOW to protect what’s yours.
Because what’s coming could be even worse than what we saw in 2022.
Manward has published a simple, five-step solution to what could be the gravest threat to our money… in our lifetimes.
