Gold has always been used as a hedge against devaluing currencies including the US dollar. Silver has always had a high industrial demand. However now it is also being used to hedge inflation being dubbed the “poor man’s gold.”
The US dollar for decades has been relied upon as the world’s reserve currency, always maintaining a high value against other industrial world currencies. But with excessive money printing going on from the Federal Reserve currently (covertly) and from 2009 through 2011 when QE 1 and QE 2 were implemented the value of the dollar as measured on the Dollar Index has fallen sharply. Presently the situation in the Euro zone is unpredictable. There is no positive resolution currently in place to fix the European debt problems and now the euro currency is currently at all time lows. The US Dollar has now risen back up on the Dollar Index as measured against the euro.
Gold and Silver Prices Signal the Devaluation of the Dollar
1. Beginning with the Savings & Loan crisis in 1990, each engineered crisis is growing in intensity and carnage. First, there was the Internet bubble crash then the Real Estate bubble meltdown and now we are at the footsteps of an unprecedented acceleration of price increases in food and energy.
This makes the dollar “appear” very strong, while negatively affecting gold’s market price. With the dollar ranking high on the Index many investors have been dumping gold and buying dollars. This action is giving the impression that the dollar is in even a stronger than before, while lowering gold’s market value. Many investors with weak stomachs, cannot ride out gold or silver’s current ups and downs. Investors get cold feet then start selling their precious metals in fear prices will stay suppressed for some time. This is not the time to be exiting out of precious metals. Rather, it’s time to be buying more of it.
In reality however, the US dollar’s purchasing power is not increasing, nor getting stronger as it appears. The intrinsic fundamentals for the dollar have not changed at all. Yes the dollar appears as if it is increasing but only when measured against the euro which currently is in worse condition than the dollar. The euro is a currency currently used by numerous broke and nearly bankrupt nations.
The reasons for the global loss in purchasing power for the US dollar remain firmly intact, while the Federal Reserve maintains near zero interest rates, at minimum through 2013. That means that real interest rates will stay negative for quite some time. Also there won’t be any indication as to when things will start turning positive again. With the M2 money supply increasing 10% within the last year, money supply expansion rates will stay positive.
America’s debt and deficits have spiraled completely out of control therefore defaulting would seem the only logical solution left. When the European crisis finally comes to America (we are not far behind) the dollars true value will finally appear. Because the real value will no longer have the advantage of being cloaked behind a currency more broken than itself.
The value of the US dollar and euro are steadily falling. Both are declining quickly, however the euro is eroding faster. This gives the appearance the dollar is better off when comparing it to the euro. Both are heading for a crash landing, where ultimately both will be destroyed. Only physical gold or silver will cushion that landing, allowing you to escape massive financial losses.
If you’re worried even the slightest about the economic situations occurring in the US and Europe, then buying and storing physical gold and silver are what you need to do today. It is also important to mention that keeping these physical metals outside world banking systems is the best protection you can have. The Reason is because only you at that point have total control of your investment.