How to get around the dollar

In its $1000 per ounce of gold, one thousand dollars is psyching up, it is giving an impression to many investors the feasibility of investing in gold. Commodity prices are running high due to inflation rate at the beginning of 2008.

Silver is also running high, it has already reach its tip at $20 at an ounce level, the black gold crude oil also had a price crunch at one hundred ten dollars, soybeans costs as much as $16 and natural gas peaked at $10, wheat as the staple food in America, UK and Europe pegged to $20 per bushel. Foreign currencies are trading very well but the weakening of some currencies is felt all over the economy, consider euro, with a $1.56 price hike compared to yen, and traded in the 100 handle.

Is Euro a good idea?

A friend in Germany contacted me as he extended his stay in that part of the world. He decided to keep Euros and gold as a good option for the falling dollar. Wise guy! The euro is gaining strength because of their own oil refineries, gold will upgrade on its own because it is a prized commodity. Foreign currencies in fact are backed up by gold in their respective countries for value appreciation. Euro because of its strong real economy actively in place will undoubtedly be a good option for a dollar.

How about gold?

Gold being the base of all currencies is the only stable monetary base. IMF and BIS have tried to manipulate the markets but, it is really a matter of mining it for your country to be able to have more reserve in the banks. The gold as a natural resource is deflating, it means the supply is what is mined and therefore limited, naturally the cost rises.

The euro will continue to appreciate in so far as the economy is doing well; compared to gold it cannot be inflated. The best way to see the cost of gold is to price it with Euros. In 2001, the gold has appreciated at 133% based on Euros. The price of gold is the best judge of inflation, compared to comparing two strong currencies. Theoretically speaking the rate of inflation between the dollar and the euro is equal approximately to the price increase of gold priced in Euros and gold priced in dollars. It is actually 153% difference, which is not really a 64% appreciation versus the dollar.

The question is will the trend change against the two popular options? Will gold be the best ever dollar option as compared to the Euros? The answer is not a simple yes, it will never be, but at the moment in my opinion, they are the best option against the dollar.