India, one of the much hyped BRIC countries (Brazil, Russia, India and China) has seen its currency plunge in recent months. Over the last 12 months the Indian rupee has lost 20% of its value (chart 1) compared to the U.S. dollar. If you have been one of the unfortunate investors who have owned Indian stocks over the last year, you are down 23% (chart 2). For much of the last decade the hucksters and promoters on Wall Street have pushed BRIC stocks as a growth story. But what your broker likely failed to mention during his pitch was the currency risk of investing in a … [Read more...]
Gold, Silver, and Currencies
Young Research & Publishing has been providing research and insights on precious metals and currency markets to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young's World Money Forecast, a 50-page monthly investment report on the precious metals and currency markets. Today, our research on gold, silver, and currencies is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
Currencies in Crisis, Oil Spiking: Time to Buy?
The Dow Jones Industrial Average and S&P 500 have staged impressive rallies to begin 2012. As of this morning, the Dow was up more than 6% YTD. Improving economic data and a flood of global central bank liquidity have helped levitate stock prices. Volatility has also declined markedly in recent weeks and now sits at an eight month low. As stock prices have risen, economic data has improved, and volatility has dropped, investors have become more bullish. Our chart on the spread between the percentage of bulls and bears in the American Association of Individual Investors sentiment survey is … [Read more...]
Coordinated Currency Devaluation: Time to Buy Gold
Not to be outdone by Europe or the U.S., the Bank of Japan announced yesterday that it would print an additional 10 trillion yen ($128 billion) to expand the size of its asset-purchase program. The BOJ’s decision comes on the heels of the European Central Bank’s December decision to massively expand its balance sheet and the Bank of England’s decision to increase the size of its own money printing campaign. The yen tumbled vis a vis the U.S. dollar and the euro on the news. The BOJ’s decision is yet more evidence of coordinated global fiat currency devaluation by the world’s largest central … [Read more...]
Gold King as Currencies Debased
Yesterday the Bank of England announced another round of quantitative easing, this time spending $79.1 billion on government bonds. On the chart below you can see the effects previous rounds of quantitative easing have had on the price of gold in U.S. dollars and pounds sterling. As monetary authorities in the United States and the United Kingdom have poured money on their economies, the price of gold in their currencies has skyrocketed. The continued debasement of fiat currencies has been a boon for gold investors, but a terrible strain on savers, diluting the value of their nest eggs. … [Read more...]
What the Franc!
Julia Child made cooking look easy. The same cannot be said about U.S. Federal Reserve Chairman Ben Bernanke and monetary policy. He makes it look painful. On Thursday, the U.S. Federal Reserve decided it’s in everyone’s best interest, particularly that of French banks, to increase U.S. dollar liquidity in Europe. Stocks traded up on the news, especially the French banks, while bonds such as German bunds and U.K. gilts fell, as did the U.S. dollar against the euro. All in all, another example of how interventions switch the risk trade on and off depending on the mood of the day. The … [Read more...]
Gold Surges to Record High
Gold is up more than 6.5% since the first of the month. The precious metal is rallying on fears that the euro-area financial crisis may infect Italy and an indication from Chairman Bernanke that the Federal Reserve hasn’t ruled out another round of money printing. I’m not sure who believed that the Fed took QE3 off the table, but based on the price action in financial markets today, apparently some investors did. Gold is up $18 today, silver is up more than 5%, wheat is up 6.4%, oil is rallying, the Dow is up over 100 points, and the dollar has fallen to a new low versus the Swiss franc. … [Read more...]
The World’s Most Profitable Currency
Can you guess which of the world’s currencies has appreciated the most this year? If you guessed the Paraguayan guarani, you’re right. A close second was the kina. Which country uses the kina? Why, Papua New Guinea, of course! If you would have trouble spotting either of these countries on a map, you aren’t alone. Like most sane investors, you probably limit your currency investing to developed countries and some of the larger emerging markets. Which major currency has performed the best this year? The Swiss franc. Just this year, the franc has gained 11.5% on the dollar. That crushes the … [Read more...]
Dow in Dollars and Gold
This week the Dow Jones Industrial Average surged to 12,700, about where it was three years ago. You’re back to even, right? Not really. Over the same period Gold has risen 68%. It’s true the Dow in dollar terms is about the same over the last three years but when comparing it to the Dow in terms of gold — or real purchasing power — it’s another story. Based on this chart it would appear the Fed is a little late in protecting your dollar, wouldn’t you say? … [Read more...]
Dollar Crashes to Record Low
Scott Pelley: “You have what degree of confidence in your ability to control [inflation]?” Ben Bernanke: “100%” – 60 Minutes 12/5/2010 The U.S. dollar took another beating this week. The greenback fell 1% vis-à-vis the euro, 1.1% against the Swiss franc, and 1.7% against the Australian dollar. The Federal Reserve’s continued ultraloose monetary policy in the face of both emerging global inflation threats and a more hawkish tone from almost all of the world’s other major central banks has contributed to the slide. On an inflation-adjusted basis, the broad trade-weighted dollar index is … [Read more...]
The Fed vs. the ECB
I wouldn’t trade the U.S. dollar for the structurally flawed euro, at least not yet, but I would gladly trade Ben Bernanke for the more vigilant European Central Bank (ECB) President Jean-Claude Trichet. Take a look at the contrasting views on inflation in the statements below. It should be clear after reading this post which central banker would make a better custodian of the value of the dollar. The first is from Bernanke’s prepared remarks in the Fed’s semi-annual monetary policy report to Congress. Emphasis is mine. The rate of pass-through from commodity price increases to broad … [Read more...]
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