Image via WikipediaThe U.S. dollar seems to be strengthening this week, but, Don't be fooled. It is going to dive much lower over the next few years. That according to Dow Jones News Wire and even George Soros, who actually doesn't like any currency today. Soros says that:
"the usd is a weak currency, except for all the others"!
Now, how do we mortals interpret that statement? Soros went on to point out that China's currency would be an interesting story if they let it float on international currency markets, but they won't.
If you had almost two trillion dollars in international reserves like China does, and you wanted to try and keep that value in today's market, where would you try to store that value? In China's case, they seem very unhappy that the majority of their monetary reserves are in the usd. So, where do we put our two trillion?
Commodities, that's where! This spring there has been a rally in commodities. Now do you think that China's hoarding of commodities might have a little something to do with that run up? Soros certainly thinks so. I believe a fund manager who made over 1 Billion on the currency market just last year alone should know a thing or two about this subject. The Chinese obviously believe that they will hold more value in commodities than in the u.s. buck. I think they are right, but how can we mere mortals gain from this knowledge.
Back on June 16th, I mentioned in this blog, that a number of hedge fund managers have stocked up on gold as of late. They will probably sell it into a buying binge of scared investors during the next downturn in the markets. If you buy it then you will make them lots of money, and lose your own. There is, however, a silver lining. As I mentioned in that previous blog, I believe silver is undervalued . This week, it appears, Analysts from Dow Jones agree with me. They are calling for a short drop in the price of silver, possible to the $12.90 level, but then call for it to reach $15 over the next few months.
If you are nervous, and don't believe my "favorite company" tech recommendation ( Wilan Technologies ), then silver might be a good place to store some value in the short term, while you "wait and see" along with the other Trillions of dollars sitting on the sidelines.
That is, of course, if you are a U.S. citizen. If you are Canadian however, you might want to sit tight as silver, gold, and commodities are most affected by the decline in the u.s. dollar over time, and what does Canada have an abundance of? You guessed it! And the Canadian dollar will rise because of it, against the greenback.
Though the Canadian Government doesn't want parity, it's coming, and soon.
Predictions: ( I know I shouldn't make them)
End of year - U.S. dollar - Canadian dollar at par
End of year: Wilan $5-$7 share (Currently $ 1.49)
Oct 2009 - Silver $15 Gold $1,000
Update: Sept 10th