By: The Financial Times, commentary by John Fisher; March 1, 2011
“Even for long-term dollar bears like ourselves, this is a worry,” Standard Bank executive says.
Long seen as a place of safety in times of turmoil, the dollar may be losing its haven appeal.
Soaring oil prices, driven by upheaval in the Middle East, falling equities, and elevated volatility have all made investors uneasy. A flight to the dollar usually accompanies increased risk aversion.
This time, though, while the traditional havens of the Swiss franc and the yen have benefited, the US currency has suffered.
“It seems the dollar’s haven status has vanished,” says Steve Barrow at Standard Bank. “And even for long-term dollar bears like ourselves, this is a worry.”
The main reason for the dollar’s under performance, analysts say, is concern about the effect of rising oil prices.
The dollar has dropped to a record low against the Swiss franc and fallen 2 per cent to Y81.82 against the yen in the past two weeks, just shy of the all-time low of Y79.7 it hit against the Japanese currency in 1995. It has also lost ground against the euro and sterling.
The fear is that higher oil prices will lead to a transfer of funds from oil-importing countries to the sovereign wealth funds of oil-exporting nations.
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Note: At the close on Tuesday, March 2nd, both gold and silver had broken new records. Gold prices settled at a new record high on Tuesday of $1,435/oz. Silver surged to new 30-year record nominal highs at $34.74/oz. Prices surged in dollars and all major currencies and look set to reach record highs in other currencies.
All Things Considered – John’s Commentary
One of these days the dollar will fall as the reserve currency of the world. Never, since Bretton Woods has there been any discussion regarding the dollar being replaced. Now, you can read about it every week, if not every day. Google “IMF global currency”, “global currency” or “Chinese reserve currency” and you will see what I mean. Because gold and silver are denominated across the globe in dollars, when that changes – watch out.
What to buy: If you are reading that silver supplies are tight – they aren’t. Let me clarify that I am referring to the silver supply available in the consumer/retail inventory. The only exception is silver Eagles due to current Mint rationing. Pre-1965 silver is still the best bargain available.
For a better understanding of the looming macro silver shortage risk, click here for our video in which Eric Sprott provides the details.
Quote of the day: “Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today.” – Peter A. Burshre
