As of late, it seems that the value of the dollar has been affecting the US stock market quite significantly. With even a small fluctuation of the dollar, the stock market responded accordingly. This past week's G20 meeting on the discussion of currency wars has not reached a conclusion, so I think this has had an impact on the dollar's power on our markets.
From what I have seen recently, the dollar has been inversely correlated gold and oil. The dollar, being pounded these last couple days/weeks, has in turn greatly increased the price of gold. Oil hit has been trading its highest in a year.
If trends continue this way, I think the dollar will have a substantial influence on these two commodities for the near future.
I agree. The inverse correlation between the dollar and commodities is a valuable profit opportunity. But how can we be sure that the dollar will continue to fall?
ReplyDelete1. QE2 will inflate prices.
2. A cheap dollar increases our exports because it makes our goods cheaper, increasing GDP growth.
3. The government has a lot of debt. If the dollar remains cheap, any debt repaid will have comparably less purchasing power. Thus, the government should have an interest in keeping the dollar cheap to pay down its debts.
If the dollar will keep falling, our plays in SLW and GG will benefit in the future.