On Friday, Gold hit a 27 year high as investors around the world ran to safety from the plummeting US dollar. Hitting $752.80 an ounce, Gold is at levels we haven’t seen since January of 1980.
Additionally, the dollar index, which measures the greenback against six major currencies, fell 0.8 per cent to a record low of 77.66 on Friday. The index has fallen 5 per cent since mid-August. (Source: FT.com). All you have to do is look at this index to see that we’re on a free-fall.
I’ve begun to hear people from around the country asking about putting their money in foreign currencies, something I’ve never personally experienced. It seems as though those people who are aware of what is happening to the Dollar are really getting quite nervous.
To make matters worse, The dollar fell to a record low against the euro for the seventh consecutive session while the Canadian dollar hit a 31-year high as inflation data raised expectations that the Federal Reserve Bank would again lower interest rates. Longer term, the U.S. has been running large trade and budget deficits for years — factors that tend to undermine a country’s currency in the long term, unless they are offset by foreigners willingness to invest their money in the United States. (Source: Yahoo Finance)
Unfortunately, it seems as though there is a new global unwillingness to invest in the US, thanks to the growing fear of recession, and countries pegged to the dollar are wondering how to stop the bleeding in their own countries.
As the Dollar falls, people globally are looking for an alternative, and I think the Euro will reap the benefits of renewed confidence. The Euro will only grow in strength and stature as the Dollar falls.