MoneyandMarkets.com: Dollar Hits New Lows While Gold, China Surge

While most U.S. investors stayed home Friday, foreign investors were running away from the dollar. The greenback plunged to a 19-month low against the euro and a two-year low against the British pound. The utter speed of its decline rattled Wall Street, added new momentum to rising commodity prices and raised the specter of massive dollar selling by foreign central banks. This weekend, with no specific news to blame, currency experts scrambled to find an explanation, according to Martin Weiss, Ph.D.

JUPITER, FL (PRWeb) November 29, 2006 -- While most U.S. investors stayed home Friday, foreign investors were running away from the dollar. The greenback plunged to a 19-month low against the euro and a two-year low against the British pound. The utter speed of its decline rattled Wall Street, added new momentum to rising commodity prices and raised the specter of massive dollar selling by foreign central banks, warned Dr. Martin Weiss. This weekend, with no specific news to blame, currency experts scrambled to find an explanation.

In this issue of Money and Markets, Dr. Weiss addresses four potential consequences:

--Consequence #1 A New Flight to Gold. Despite the fact that the New York Mercantile Exchange was closed on Friday, gold bullion surged $9.60 to $638.60 an ounce in electronic trading.

--Consequence #2 A New Surge in Energy. A barrel of crude oil -- and virtually every other major source of energy -- is measured in U.S. dollars. So if the value of each dollar declines, the number of dollars per barrel must go up accordingly. That means the price of crude oil needs to quickly adjust upward by about 9% just to compensate for the dollar's decline.

--Consequence #3 Even Sharper Gains in Energy and Gold Stocks. For the past two months, while the price of crude oil has been mostly flat or even sliding, energy exchange traded funds (ETFs) have been recovering swiftly. That's still off from its closing peak of nearly 164 last May. But with the dollar sinking and oil prices likely to adjust higher, it could easily reach, or exceed, those highs by early next year.

--Consequence #4 China's Leading Stocks Gain New Momentum. A powerful fundamental force behind the dollar's decline is the blatant contrast between (a) a weakening U.S. economy and (b) the stronger economies of Europe and Asia, especially China.

So the dollar's slide parallels China's rise. And any further flight from dollar-denominated investments can only boost Asian stocks still further. That's why leading indexes of China's stocks surged so dramatically last week. And it's also a key factor behind the surge in our favorite China ETF.

For more information on these events and how they affect the economy, visit this link: http://moneyandmarkets.com/press.asp?rls_id=389&cat_id=6&

About DR. MARTIN WEISS & MONEY AND MARKETS

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Wendy Montes de Oca at 561-627-3300 or visit www.moneyandmarkets.com.

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