Currencies and Commodities Part 2

Currencies and Commodities Part 1 discussed how the dollar is affected by the deficit and interest rates. We can expect the dollar to remain considerably low for the first half of this year as the deficit remains high and rates remain low. It is the second half of the year that we need to keep watch for.

Gold has been on a tear. As the dollar depreciates, gold is seen as a haven. Prices soared to $1200 an ounce before stepping back as the dollar rebounded. Mining has been a positive side effect. Cash money was made in precious metals and mining as gold soared. We can expect this to continue as long as the dollar remains weak.

Oil and agricultural commodities are supposed to continue to do well in 2010. These are also considered hard assets that can be used as a hedge against the dollar. Unlike gold which will falter as the dollar strengthens, these commodities should continue to rally. As GDP recovers in the emerging markets, demand for these will follow.

In summary, the dollar is weak and looks to be under pressure for the first half of 2010. It should begin to strengthen as an increase in interest rates become more prominent. Gold, oil, and other commodities can and have been used as a hedge against the dollar. As long as the dollar remains weak, cash money can be made be investing in metals, mining, energy, and agriculture as many investors suspect. However, the surge in agriculture should continue as demand around the globe for food increases. Invest accordingly.