Safe Money Subscribers Well Positioned
-- May 12, 2003
Gold prices rose to a two-month high today. The yellow metal is flying, and much of the latest move higher is thanks to the ever-shrinking US dollar. If you're following our advice in Safe Money, you're well positioned for both moves! First, you're holding two mutual funds designed to hedge against the falling dollar. Second, you're holding our select gold mining shares that should take off along with gold.
The dollar sank sharply today based on comments by US Treasury Secretary John Snow over the weekend. He said a weak dollar helps US exporters. This comment comes very close to tacit endorsement of a "weak" dollar policy from the Bush administration. Traders already believed that the administration is tacitly endorsing a weakening dollar, and these comments are even more evidence. That's why they continue to sell off the dollar. And that's good news for gold prices.
Gold tends to moves in lock-step, but in the opposite direction, of the dollar over time. That's because gold is denominated in US dollars on world markets. As the US dollar loses purchasing power on a global basis -- when it declines against other major currencies -- the dollar price of gold naturally rises. So, if the dollar continues to shrink in value -- and there is no sign that its decline is anywhere near over -- gold should head higher.
Bottom line: Hold on to those gold mining shares and foreign-currency mutual funds!
related article: Gold Rejuvenated By Dlr Slide, Hits 2-Mth High