Dollars and Pounds and Euros -- and Gold

At the time of writing we still have a frenzy of investment into US Treasuries but it seems probable that this is the final stage of the fear bubble, before it pops. At present, yields from US Treasuries are near zero or even negative so, why not just buy US Dollar notes and store them, instead? Why buy debt instruments with all the complications and risks, when you can put your money in cash -- of the folding-money sort? The problem with keeping dollar bills is the cost of storage, insurance and the fees banks charge for handling cash but we have come to the point where that would be a better investment than Treasuries if -- and let me stress, IF -- the US Dollar is where you want your money.

The US Dollar does now seem to have peaked and at some stage it will fall very sharply indeed at the same time that Treasuries fall. Timing is very hard to predict but I think we are talking days to weeks at the outside.

The GBP (British Pound) will recover against the Dollar and the Euro however the market is talking it down to parity with the Euro. It could be that it needs to touch parity before a recovery takes place. The dynamics in the short term are likely to be a small recover in GBP/USD, a sharp recovery in EUR/USD and still some decline in GBP/EUR.

Much of the money that has been going into US Treasuries will need to find an alternative safe haven. Some will go to the CHF (Swiss Franc) and some will undoubtedly go into gold. While gold will remain potentially highly volatile (making leveraged positions dangerous) we seem to re-established a bull phase which should take gold back through $1000 and beyond.