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Bad Sign for the Buck? Dollar Not Rallying on Crisis

by Brett on March 1, 2011

Sentiment on the dollar is in the tank – and we’ve got a pretty decent crisis on our hands in the Middle East.

So you’d think with all the bad news already priced into the buck that this turmoil would be enough to send the dollar sprinting higher.

Good guess…but thus far, an incorrect one!

US Dollar price chart March 2011Bad news for the buck? It’s actually sold off since the (latest) Mideast crisis began. (Source: StockCharts.com)

Is King Dollar no longer a “flight to safety” destination?  Steve Sjuggerud explores in today’s DailyWealth:

In this crisis, instead of fleeing to the safety of dollars, investors have pushed the price of gold up, and silver has soared.

Are gold and silver the new safe havens for the Big Money? It’s been decades since that was the case. But it may be the case again now.

Another explanation here is that Tunisia, Egypt, and Libya don’t matter in the world of high finance… They don’t matter enough to move the Big Money’s needle. They don’t matter enough to send the Big Money rushing for safety.

That might sound harsh. But when it comes to global economic growth, those three countries are barely a rounding error…

Let’s put it in perspective… When Europe’s banking system is crashing, the Big Money rushes to the dollar. But when Libya is collapsing, it’s basically irrelevant… The Big Money’s assets in London and New York are unaffected, and that’s what the Big Money is concerned about.

So which is it? Why has the dollar weakened in this crisis? Is it because the Big Money has chosen gold and silver? Or is it because the Big Money isn’t rushing for safety – yet – because of this current crisis?

Personally, I think it’s the latter… The Big Money isn’t losing sleep over Libya… but is still buying precious metals instead, in a big way.

Source: DailyWealth

And check out the price action in gold and silver of late – each has rebounded earlier, faster, and quicker from their recent pullback than even the most ardent precious metal bull had predicted:

gold price chart march 2011silver price chart march 2011The “one way” trades of going long gold and silver continue!

Maybe it is different this time – er, maybe it’s not 2008, at least.  Gold and silver continue to shine, while most other assets are beginning to show some cracks in the armor.

Though remember that gold last peaked in March 2008 – many months after stocks had begun their epic free fall.  The precious metals could again be the last holdouts of this rally – but the fact that these are “higher highs” from 2008 (and all-time highs in the case of gold) would make the secular bullish appear to be a strong one.


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