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Money, Metals & Mining Preview: Mary Anne and Pamela Aden
08/27/2020 5:00 am EST
The U.S. dollar is now confirming that the major trend is down, observes Mary Anne and Pamela Aden, editors of The Aden Forecast — and participants in MoneyShow's upcoming live streaming event, Money, Metals & Mining Expo, on September 1-3.
This means the dollar is now embarking on a big renewed decline that’ll likely take it down to new record lows. This probably won’t affect most people, at least initially. But over time your dollars will become worth less.
They won’t go as far as they used to, and things will become more expensive. That’s what a gradual devaluation does. But this has been going on for the past 50 years and it’s a big reason why many people feel frustrated that they can’t seem to get ahead.
The fact is, the average worker today is making the same amount of money (in real terms) that he or she was making in 1980. So real income has not increased. And now with the coronavirus damaging the economy, along with a weak dollar, it’s only going to make matters worse.
That’s why it’s important to protect yourself in the best way you can from this ongoing and steady erosion in the dollars value. And the best way to do that is by buying gold and silver.
They will gain a lot more than the dollar will fall and, therefore, this will provide the best way to not only maintain your purchasing power, but to profit as well, and make the best of the current situation.
This is basically why the world’s central banks have been easing out of dollars and increasing their gold reserves. They’ve been doing this for years and they obviously see the writing on the wall.
They know the U.S. is heavily in debt and it’s printing money like mad to pay for some of these debts. As a result, the dollar has been losing the prestige it once had as the world’s primary reserve currency.
Slowly, it’s been deteriorating over the years and even Goldman Sachs warned its clients about the longevity of the U.S. dollar as a reserve currency.
It noted the debasement risk is growing as a result of the mounting debt buildup by policy makers seeking to combat the economic impact of Covid-19. This combination “sows the seeds for future inflationary risk.”
They went on to add that, “Gold is the currency of last resort, particularly in an environ- ment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.”
We couldn’t agree more. For example, most of the world’s major interest rates remain near 0%, or below 0%. And with the way things are going, they’re likely going to stay there for a long time.
Okay, so what to do? We currently have a large cash position, divided between U.S. dollars and some of the currencies, which are showing good potential. They will rise as the U.S. dollar falls.
Gold is the ultimate currency, and this is gold’s time to shine. So we recommend using the dollars you’ve been keeping in cash to buy more gold, silver and their shares.
But since gold has risen far and fast, and it hasn’t yet had the downward correction we’ve been expecting, we would buy some new positions now and buy much more on weakness.
In other words, you’ll want to average in on new positions. This will leave you with a 30% cash position held in the euro, Swiss franc, Australian and Canadian dollars.
In our model portfolio we hold CurrencyShares Euro ETF (FXE), CurrencyShares Swiss Franc ETF (FXF), CurrencyShares Australian Dollar ETF (FXA) and CurrencyShares Canadian Dollar ETF (FXC). We also recommend buying U.S. Dollar Index Bearish Fund (UDN), which rises as the dollar falls.
Currently, the dollar is just getting started on its renewed downward path and these declines tend to last for several years. This tells us we’re still early and repositioning ourselves now for what lies ahead is an important action to take at this time.
For now, the U.S. dollar index will stay very weak by staying below 95. And if it declines and stays below 89, it’ll be well on its way, embarking on what will likely end up becoming a mega decline.
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