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The Dollar Isn't Dead Yet, But Gold Will Shine in 2009
Posted Dec 19, 2008 09:22am EST by Aaron TaskUpdated from 9:22 a.m. ET
After hitting a 13-year low vs. the yen and a 12-week low vs. the euro earlier this week, the dollar has rallied in the past 24 hours due to a combination of factors Ashraf Laidi, chief strategist at CMC Markets, says will prevent the greenback from suffering the worst fate predicted by others, including:
The Fed isn't the only central bank slashing rates and taking other extraordinary action — and many of its peers are playing catch-up. On Friday, the Bank of Japan cut its target-lending rate to 0.1% and said it will but commercial paper assets. Meanwhile, the euro slipped on expectations of more ECB rate cuts ahead after the European Commission said the region may suffer a "substantial" effect from the credit crisis.
The risk-aversion trade is coming back on. "We think the stock market has not seen the lows yet," Laidi says.
After a 20%-plus rally from the Nov. 20 lows, stocks are came under pressure Thursday and early Friday due to renewed concerns about the fate of the automakers, as well as the financial sector after Standard & Poor's put a negative outlook on the debt of GE (citing its GE Capital unit, specifically) Thursday, and Friday cut the ratings and outlooks of 12 banks, including Goldman Sachs, Bank of America, JPMorgan, Citigroup, UBS, and Credit Suisse.
Update: Stocks futures turned higher and the market rallied early Friday after President Bush pledged $17.4 billion to aid the automakers, removing concerns about an imminent bankruptcy.
"Allowing the auto companies to collapse is not a responsible course of action," President Bush said.
Earlier: These factors, among others, will prevent substantial dollar weakness in the short-term, according to Laidi, author of Currency Trading and Intermarket Analysis.
But in the intermediate-term, Laidi is bearish on the dollar because of the extent of the government's borrowing to pay for bailout mania.
"I'm not telling people to put on a blindfold and buy gold [but] gold is going to going to continue to lead other industrial commodities not only against the dollar but all other fiat currencies," he says.
Gold may suffer short-term if and when the risk-aversion trade (which is good for the dollar) comes back on, but Laidi forecasts the metal will hit $1,100 ounce in the second half of 2009.
76 Comments
- Friday December 19, 2008 09:38AM EST
Gold. Doesn't it always boil down to "gold or food". Many have chosen gold. The Lippencott's (you know, send in your old jewelry) are buying it up. Look for gold to go to $3000 by the end of 2010. At that point, nobody will be able to buy or sell it. Just a little prophecy for you. The Parakletos.
Yahoo! Finance User - Friday December 19, 2008 09:40AM EST
You can't keep printing trillions of dollars and expect the dollar to live. It's on life support.
- Friday December 19, 2008 09:40AM EST
I have some. Getting physical delivery is harder than it used to be....
- Friday December 19, 2008 09:41AM EST
If there is one thing everyone agrees on it's that gold will be up in 2009. Why does that raise red flags?
Yahoo! Finance User - Friday December 19, 2008 09:42AM EST
Johnnny.... Are you there... I waiting for some smart comments...
Yahoo! Finance User - Friday December 19, 2008 09:50AM EST
Are Johnny's comments ever smart? He's captain obvious and I can't understand a word that guy says most of the time.
- Friday December 19, 2008 09:52AM EST
Why the dollar is dead........All country is using dollar as their reserve and they used dollar in international trade and oil exporting countries use dollar........Will you use Yen,Pounds,Euro,and other countries in importing oil....The answer is no.....|Dollar still play an active role.....It is stronger than gold and other commodities......The Dollar will never die and be stronger than ever.
- Friday December 19, 2008 09:52AM EST
Obama, like FDR, will make it illegal to own gold. The gold police will visit your home.
- Friday December 19, 2008 09:54AM EST
Haven't we been hearing gold will go through the roof for years now. I keep hearing it will soar past $1,000, then $2,000. It never does and it never will. Buy stocks and hold them. Five years from now you'll be glad you did. Many stocks have been driven down by momentum. There's a lot of value out there right now, if you're not in a hurry.
- Friday December 19, 2008 10:05AM EST
We are stocking food. You can't eat gold. Although it is pretty (especially that new double eagle the US Mint is coming out with in 2009). Too many countries rely on the dollar I think for it to "die." But there are serious issues that if not resolved soon....
- Friday December 19, 2008 10:06AM EST
Since Obama works for George Soros and David Rockefeller, I wouldn't be surprised if they confiscated all gold again. Their goal is the reduction in standard of living of the American people. This will be accomplished by further bailouts to insolvent companies which eventually will force the U.S. to default on its debt brining a U.S. dollar devaluation and a rapid increase in prices. This will be an inflationary recession. Eventually the central banks led by the Rothschilds and Rockefellers will use it as an opportunity to take further control of the people and centralize the banking system further.
- Friday December 19, 2008 10:06AM EST
Johnny starts his comment saying "why the dollar is dead" then ends with, "the dollar will never die and be stronger than ever". What?! He also said the dollar is stronger than gold, but why has gold more than doubled in value in the past 5 years while the dollar is on a long term down trend? The facts contradict that claim. There is very little propping up the dollar right now including other currencies being even weaker and flight to the dollar out of more risky equities etc. Disclaimer: I own gold bullion..
- Friday December 19, 2008 10:08AM EST
If you trust government, hold cash. If you do not, buy gold..
- Friday December 19, 2008 10:09AM EST
Dow/gold relationship will go down to 1. That's when you sell gold and buy stocks. History has repeated itself constantly and will do so again. The only commodity/stock to retain its value year to year is gold. Platinum was at 2200/oz. Rhodium at 10,000/oz. they now trade at gold prizes. People forget, even the US treasury refers to its gold assets as a monetary reserve, even though they do not recognize it openly. Best method is to diversify, 40% gold and 60 % stocks. Thats where i am at.
- Friday December 19, 2008 10:11AM EST
Has anybody noticed that the government keeps making market moving announcements on the same day that options expire? I'd be interested to see what positions in the market they and their cronies had prior to the announcemnts.
- Friday December 19, 2008 10:11AM EST
BTW, Obama will not confiscate gold. Look for a 50% luxury tax on gold. jejeje. :). Smarter way of paying off the debt.
- Friday December 19, 2008 10:12AM EST
How can we aford to bail anyone out if we can't even get ourself out of debt?
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- Friday December 19, 2008 09:37AM EST
Doubtful...How does gold hit new record highs in a liquidity starved, recessionary, near delationary environment?