There has been much happening in world markets. A lot of actions.
Euro and Pound fell close to 12% not much against Dollar but a lot against Gold. Gold made new high of 836 in Euro. Pound fell breathlessly 10% in short little over 1 month.
Confidence of market participants and institutions have been falling in currencies( or better to say in Governments rapidly) and thus investing more in Gold and such precious metals, in Commodities and even in Emerging nations to safeguard the purchasing power(value) of their money.
Broadly the themes, I have been reinforcing, like all currencies are getting devalued- gold price will soar- agri commodities price will rise and China about to surge 50% higher, are truly intact.
Hitherto, we are getting more evidences of themes proving right day in day out.
Let us take one by one.
I wrote last on 17th Feb about “Quick Update: Dollar topped out(link: https://investmentacademy.wordpress.com/2010/02/17/quick-update-dollar-topped-out/ )” and uncannily predicted resistance
at 81 for dollar index. Dollar index has been jostling to breach it since last 15 days, but failed to overturn it.
Look at chart: A fight to cross the barrier.
My regular blog readers know it that I was among the firsts to predict short term rally in Dollar, on 7th Dec and further reinforcing it on 17th Dec,citing European and England financial woes. I had given enough reasoning on European financial difficulties and the resultant effect on Dollar.
[ $ will continue up move!!!!, Link: https://investmentacademy.wordpress.com/2009/12/17/will-continue-up-move-2/].
What is likely next move in Dollar?
Long term decline in Dollar value is far from over. It may resume fresh decline anytime soon.
Concerns: Though Dollar is in fundamental secular bear run. But, if European countries namely England, Greece, Portugal, Ireland, Iceland, Spain and Italy falters further which is very much likely, Dollar may consolidate around this level and may breach 81 and consolidate at higher levels between 85-87. This would be short term change for dollar until its own fundamentals again override those of European nations.
As noted market observer said
” Currency market is no more a beauty contest. It is a ugly contest. And, the ugliest currency is Dollar. ”
Euro has fallen more against Gold than against Dollar in last 2 months. Gold made new high of 836 Euro in Euro currency.
Pound has been falling breathlessly, look at the chart.
What next in Currency movements?
To answer, this question we need to ask How long will it take to solve sovereign debt problem?
In st rat of 2008, we heard that crisis started in America and rest of the world should survive. By the end of 2008, entire world had fallen a cliff along with US and some had fallen even more than US(specially dependent economies).
Come 2009, another center of crisis emerged, Europe including England.
Now, we know the total liabilities of Governments in entire Europe and US has reached to astronomical highs to their GDP and real economies have continued to fall, apart from Govt sponsored statistics. Thus reducing Govt’s ability to repay their debt.
Yes, efforts are being made to save the nations as nations earlier tried to save companies.
But, this is different scenario. Here comes political boundaries and vested interests of nation.
2010: A year of reckoning
Greece will be bailed out by Germany. But, then who will bail out the long list of nations Portugal, Ireland, Iceland, Spain, Italy and Finally England & US. Moody and other rating agencies have already declared that England and US may loose AAA rating if deficits are not reined in.
Probably, under pressure rating agencies may not downgrade these superpower nations but who can stop market participants from abandoning their long term bonds, treasuries and currency?
And, I am sure this situation is in making and will certainly unfold very soon driving interest rates up, taking yields down , forcing hundreds of thousands foreclosures and and thus setting reality.
I will write shortly on market outlook, Sovereign debt risk, Alternative energy scenario and on the extraordinary valuable stocks which can not only double but could give five to ten fold returns in short five years.
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