New Dollar Low


Today the USD hit a new all-time low of 20.02 mg. What more is there to say? Until real interest rates turn positive, or the US economy shows signs of real recovery, the appeal of the dollar is very limited. With the end of QE2 in sight, the Fed is faced with a tough dilemma: go for another round of money creation with QE3, or see the economy really start to fall apart around it. The true question is not "if" there will be more quantitative easing, but "how soon and how much".

And speaking of the US economy…

The Dow Jones Industrials, which closed today at 242.76, have retreated to their lowest level since March 20th, 2009, and now stand only 10% above their 2008/2009 financial crisis low of 220.22, set 10 trading days earlier on March 6th. Once that level is breached, prices will have rolled back to the level of January 1991, with the next support at about 200, and below that at 180 (which was the low for 1990 and the high just preceding the "Black Monday" crash of 1987. The S&P 500 shows almost exactly the same picture.

US Treasury bonds continue to fall, with SHY making a new all-time low in gold, and TLT just 2% above it's all-time low, even as they approach their old highs in dollar terms.

This week we've added coverage of natural gas to the site, another commodity sitting near it's all time lows. Home prices were also updated this week, and they are – surprise! – also making new lows.

Commodities were mostly lower last week, with crude oil, silver, copper, and coffee down, while cotton was up 5.4%. Commodity prices have risen significantly over the last year, however. Silver and coffee are up over 50%, cotton is up 63%, crude is 6% higher, and copper is 7.4% higher from one year ago.

The Canadian dollar is following close on its US cousin's heels, and the Euro and Yen, while they gained a bit last week, they are both down solidly over the last year. The Swiss franc is the one currency I track that seems to be holding it's own. Take a look at the currency charts for more.

Of course, if you own bonds, or large-cap stocks, real estate, or hold lots of currency (whether USD, CAD, EUR, or other), this sounds all sounds very depressing. But it is important to remember that it also means these things are ON SALE for those who do their saving in gold. They may get cheaper yet, so I'm not suggesting that you go "all in" at this point, but by following two simple rules, you will be ready to take full advantage when the time comes.

First, keep your "cash" and savings in gold, whether physical, in, in ETFs or closed-end funds (I use a combination of all of them for my own savings) and

Second, monitor your other investments' values in gold to be sure they're growing (and be ruthless about cutting your losses when they're not). If it isn't growing in gold value, you're better off just holding metal until you can find something that is growing. Don't forget that the USD and other currencies are potential speculations that make sense from time to time, but only hold them when they're appreciating in gold terms; at all other times, hold as little as possible.

Do these things, and you will find that the whole world will eventually be yours at fire-sale prices.

This is how great fortunes are made!

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June 9, 2011