There are many who love to short the dollar, no I am not one of them, but these folks have made some hefty prices over time in doing so. Likewise the introduction of more dollars and the FEDs strategies lead many to believe that the dollar is eventually doomed. Of course, one could easily say that about the Euro and the Yen as well.
In any case not long ago, an acquaintance from overseas, from South East Asia asked me what I thought about various economic issues, such as the dollar, oil, gold, and inflation. In his first question he specifically asked; “Is the Dollars Hitting its Lows and Gold Peaking?”
Short Answer: Probably, both yes.
China and India, others are buying gold now in record buy brics reserved currency amounts, this has kept the gold markets peaked – we have another issue, and that is there is not enough gold available in the world to allow it to be a currency backer. There is enough of the element, but not enough dug up and mined right now.
European Union’s EURO is in trouble of coming apart. The BRIC nations are pretending to have a say in the dollar as a reserve currency, but they don’t have stability themselves, well, stability which is not manipulated that is. EU debt issues could buoy up dollar, our FED might re-strategize things, a whole bunch could happen.
Gold did good in 2010 up 30% and silver unbelievable 84%. I haven’t liked gold for a good six months, but it kept going up, there was a little bit of a pull back in Dec 2010, which looks like it’s testing its highs, looking turbulent and choppy, but for a gold trader, they like volatility. I believe it’s peaked, but where the top actually is depends as much on manipulation and commodity power plays than it does any sense of reality.
Some folks believe that all currencies should be backed by gold, but I disagree, especially for reserve currencies, mainly speaking of the Dollar, and also the Euro, and Yen to a lesser degree. There is not enough gold in the world to back all the currencies, nor do we want to create an unnecessary run on that noble metal either. Right now it seems that folks are looking for gold reserves all over the world to mine.
In fact, a new UK study suggests that gold deposits near sulfur deposits often have an 8% higher accumulation rate, perhaps due to how the sulfur causes it to accumulate as that metal comes from far beneath the surface during volcanic eruptions. Many agree that gold looks very toppy, I believe it is, but who can say what will happen if there were a crisis in with one of the other very large currencies, or an economic reckoning in China. Please consider all this.