Gold a Better Bet Against the US Dollar than the Euro

The euro traded Friday at a new all-time high…US$1.4966. Yes, we’re about to hit another milestone there too. Here at Markets and Money we predicted that the dollar would fall to US$1.50/euro. That was when the dollar was still trading at less than US$1.30. Now, it looks like our target could be hit today or tomorrow. (Is it too late to move money into euros? More below…)

Is it time to buy euros? A quick answer: we don’t know. The rise of the euro was a cinch…from 88 cents to US$1.50. Now, it’s not such a cinch. The euro is a paper currency too. The ‘esperanto currency,’ we called it when it first came out.

We know who backs the US dollar – that’s why we mistrust it! But who stands behind the euro? And how long will the Europeans accept a rising currency? A strong euro makes it hard for them to export to the United States. And while the European Central Bank is less concerned with full employment than its US counterpart, Brussels has windbag politicians too – just like Washington.

What’s more, there are powerful, natural mechanisms that tend to keep currencies from diverging too much, one from another. How much higher will the euro go? We don’t know. But it’s no sure thing. As a hedge against the dollar, gold is probably a better bet.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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Any one thinking of jumping into Euros now should ask themselves why they want to do it. Perhaps they want more paper? Nothing lasts forever (except gold). One day soon the Euro will start to decline vs. the dollar, or at best will begin to reach a top and yo-yo. Any new investors-cum-speculators will find few gains and much danger. One day soon the unexpected will happen too – it always does – and the US will announce a unilateral withdrawal from Iraq, a massive tax break or interest rates will begin to soar a la Paul Volcker. Gold may… Read more »
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