Where the gold skeptics have their argument wrong is their belief in the almighty dollar. If the U.S. dollar crashed then gold prices would undoubtedly surge as the only credible rival safe haven currency, except perhaps the Swiss franc and the crashing of the U.S. dollar is not an unrealistic expectation. Let me explain.
The following are edited excerpts from an article* by Peter Cooper (www.arabianmoney.net) originally entitled How the gold price will defy the skeptics and stage a huge comeback.
The dollar has staged a stellar performance since the start of the year but, that said, if the dollar crashed then gold prices would undoubtedly surge as the only credible rival safe haven currency, except perhaps the Swiss franc. Where the gold skeptics have the argument wrong is their belief in the almighty dollar. Why? Because according to the likes of former Federal Reserve chairman, Alan Greenspan, the U.S. economy is ‘extraordinarily weak’
Dollar crash coming?
It is more fair to say that the U.S. economy looks stronger than its competitors but it is weak enough all the same:
- labour participation is the lowest in modern history,
- housing is flat on its back,
- consumer spending is down despite the huge falls in gas prices and now
- the exchange rate is massively overvalued making exports uncompetitive.
How then can the U.S. continue to support an extraordinarily strong currency? Is it not living a lie? Could the next few months not bring a realization that the U.S. economy is not such a paragon of virtue?
Indeed things are looking so weak in the first quarter it could be heading for a recession which would mean the Federal Reserve rethinking its current position and kicking the prospect of an interest rate rise out into the long grass. In fact if the economy slows enough it still has room to cut rates.
What would this mean for the dollar and the gold price? Why the dollar would instantly lose its appeal and fall from the very lofty place it now occupies in currency markets. Is the recent spike in its chart not an obvious sign of an unsustainable rise? These exponential spikes crash and burn.
Go for gold
The smart money is quietly shifting to gold now as it would be the major beneficiary of dollar weakness as the only currency in the world without a central bank printing like crazy behind it.
We’ve seen a strong dollar before major financial crises many times before and this time may be no different. When that crisis happens it will be time to ditch the greenback for the one currency you can trust and, given the relatively tight precious metals market, gold and silver prices would soar into the stratosphere, especially if monetary instability pricked the bubble in global bonds and brought down equities too.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and has been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original Source: http://www.arabianmoney.net/gold-silver/2015/03/15/how-the-gold-price-will-defy-the-skeptics-and-stage-a-huge-comeback/
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