Tags: dollar | gold | euro | stock

The Rise of the Anti-Dollars

Monday, 03 Feb 2014 06:46 AM

By Sean Hyman

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If there's one thing you can normally count on — it's that when the U.S. stock market goes up, the U.S. dollar goes down.

Why? Generally speaking, as risks are lowered due to economic improvement, investors tend to move into riskier assets like stocks and foreign currencies. But when economies are soft, stocks tend to remain weak or decline and the U.S. dollar heads higher.

Remember, in "good times" money flows all over the world to places with better growth. In "bad times" that money repatriates back home, which pushes the dollar up and generally makes it a defensive asset due to that reason (not because it's such a solid currency, because it's not).

OK, with all of that said, I found it very interesting that over the past week, when we had a large drop in the U.S. stock market, that the dollar acted like it didn't even take note. In fact, the dollar actually DECLINED as stocks declined.

And if the dollar couldn't catch a break then, it's not going to catch a break! Therefore, right now, I see "the rise of the anti-dollars" again.

What are anti-dollars? They are the assets that are highly inversely correlated to the buck. The primary anti-dollars are the euro and gold.

The euro is an anti-dollar because the United States and Europe are the two most liquid financial markets in the world. So if large investors aren't comfortable with what's going on in the United States, the first place they run to is Europe. And when Europe is falling apart, they run to the United States. So that makes the dollar and the euro trade opposite of one another.

Gold is an anti-dollar because it's a "hard money" versus "paper money" issue. In other words, when paper money isn't trusted (mainly due to the money printing of the Federal Reserve), investors run to "hard money," which is gold.

Well, now that the dollar is slumping once again, we're already seeing the euro perk up and respond accordingly. And it looks like gold might be the next to turn, because while it hasn't officially turned upward yet, it has stabilized. That's what it would do before turning higher.

Therefore, right now, the euro is functioning as the top anti-dollar right now. But gold is likely going to be right behind it (and silver too).

So, I believe we're going to see the metals and several foreign currencies perform well against a declining dollar. However, the euro is the best one to start with. (There is an exchange-traded fund that tracks the euro).

Then, keep a sharp eye on both gold and silver (and even platinum). They'll all likely turn higher too. Remember, if you aren't a buyer of gold and silver coins, etc., you can always just check out the ETF that track these metals and own them through your stock brokerage account.

But, whatever you do, get ready for the rise of the anti-dollars!

God bless!

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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