Quite a few experts have taken the July payrolls report in the US as an indication that the worst is behind. And now, there has been another landmark event that has had its genesis in the same report. As readers would have noted, ever since the onset of the global financial crisis, every sign of US economic recovery has been greeted with a fall in the dollar and vice versa. However, this trend, which lasted for about 18 months, was broken recently when the employment report came in better than expected, leading to a rally in the dollar. This has led many to believe that the US dollar has now embarked on a new journey, which will see it surge even more in the coming months. And if the upcoming Fed meeting has some bullish undertones on the US economy, it will give the dollar's rise even more wings.
However, not all are convinced. Some believe that the dollar's rise just as in the month of May is a temporary phenomenon and the dollar is likely to remain under pressure till Fed raises interest rates, something that is not going to happen at least until 2011. Clearly, with the US not likely to turn into trade surplus anytime soon and with its assets not expected to generate substantial returns, interest in the US dollar is likely to be speculative at best.
Indeed, if the US dollar is likely to remain weak and hence, erode its value in real terms, gold is likely to reinforce its case of being the most suitable countervailing asset class. Infact, as per a leading daily, in almost all but a global soft landing scenario, gold is likely to rally and with a global recovery unlikely to be smooth, the two main threats, viz. inflation and US dollar are both a big positive for gold. Little wonder, gold prices are expected to continue with its good performance in 2009 and also likely to breach the 2008 highs of US$ 1,030 per ounce as per the same daily. What's more, even after the rally of the past eight years, the yellow metal is still just half of its inflation adjusted previous peak, leading many experts to believe that its price may touch US$ 3,000 per ounce in due course of time.
However, not all are convinced. Some believe that the dollar's rise just as in the month of May is a temporary phenomenon and the dollar is likely to remain under pressure till Fed raises interest rates, something that is not going to happen at least until 2011. Clearly, with the US not likely to turn into trade surplus anytime soon and with its assets not expected to generate substantial returns, interest in the US dollar is likely to be speculative at best.
Indeed, if the US dollar is likely to remain weak and hence, erode its value in real terms, gold is likely to reinforce its case of being the most suitable countervailing asset class. Infact, as per a leading daily, in almost all but a global soft landing scenario, gold is likely to rally and with a global recovery unlikely to be smooth, the two main threats, viz. inflation and US dollar are both a big positive for gold. Little wonder, gold prices are expected to continue with its good performance in 2009 and also likely to breach the 2008 highs of US$ 1,030 per ounce as per the same daily. What's more, even after the rally of the past eight years, the yellow metal is still just half of its inflation adjusted previous peak, leading many experts to believe that its price may touch US$ 3,000 per ounce in due course of time.
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