More Dollar Lows

The last week has seen a series of new lows for the USD, ending at 19.42 mg on Friday. A lack of agreement on raising the US debt limit, terrorist attacks in Norway, and a massive 3 notch cut in Greece's credit rating by Moody's all contributed to an additional spike down over the weekend. The EUR also made new lows last week, as did the JPY. The CAD is hovering just above its all time lows, as well. All of these currencies are down strongly from a year ago, 25% for the USD, and about 17% for the others.

This is reflected in the value of bonds, as SHY closed the week at a new all-time low of 1.638 grams, down 1% from a week ago and down 24% from a year ago. 30 year bonds also set a new low last week, though they managed to recover a bit on Friday. TLT was down 1.1% for the week and down 26% from a year ago.

Equities were a bit higher for the week, with the DJIA up 0.7%, the S&P 500 up 1.2%, and the Nikkei 225 up 0.9%. US stocks were 8% lower and the Nikkei was 3.8% lower than one year ago. Gold stocks followed suit, rising 0.9% for the week; they remain down 3.8% from a year ago.

Commodities were mixed, with crude oil and silver higher, and copper, coffee and cotton lower. Crude rose 0.7% to 1.92 g/bbl and silver was 3% higher at 0.77 g/oz. Coffee was the biggest loser, dropping 5.3% for the week to 46.9 mg/lb; even so, it is still 11.8% higher than one year ago. Cotton lost 3.2% to 19.2 mg/lb, while copper fell 0.5% to close at 85.4 mg/lb.

With all the economic storm flags flying, I would suggest maintaining only small speculative positions in any of the major fiat currencies, and getting the bulk of your savings into the safety of gold – in your physical possession or as close to it as you can manage. While some would say that with gold at all-time highs this is a bad time to buy, I disagree. It would not surprise me to see gold prices lower in the next few months, but that simply argues for a small position in USD or EUR to take advantage of any such development. The risks of social, economic, political or military surprises is much too high to entrust the bulk of your assets to such risky positions. If you can't bring yourself to buy a large amount of gold at these prices, I urge you to buy smaller amounts regularly, regardless of price.

There is no way out for the USD and the other major fiat currencies. Debt levels are unsustainable, and the only politically acceptable solution is the subtle default of currency depreciation. Don't be trapped! Move your savings and cash balances to the safety of gold and your investments to things that can outpace the coming inflation.

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