May 24, 2005

Marc Faber on Currencies, Commodities

From the Bloomberg:

Once the US economy deteriorates, the Fed "will go back to the old medicine, which is essentially to print money and the dollar will weaken again," Faber said in an interview with Bloomberg News yesterday. "Compared with the euro, the Asian currencies are very, very inexpensive."
``The foreign exchange market will anticipate this easing beforehand'' resulting in a drop in the dollar, said Faber, adding that he was a ``reluctant'' holder of dollars.

Some investors and traders disagree. Fifty-nine percent of the 54 strategists, investors and traders surveyed globally on May 20 said the dollar is poised for its longest winning streak against the euro since 2000 on expectations the U.S. currency's three-year bear market has ended.
Faber is also betting on gold because it has become cheaper compared with commodities such as crude oil.

Today, one ounce of gold, trading at $417.60, is worth about eight barrels of oil, according to Faber. In 1998, when oil fell to less than $11 per barrel, gold was trading at about $285 an ounce. That's equal to about 26 barrels of oil per ounce of gold.

``You should be long gold and short oil,'' Faber said. Commodity markets ``aren't particularly attractive.''

Hard to disagree with any of that. I would not hold dollars right now - even "reluctantly".

The EUR/JPY chart I put up just before the strong U.S. retail sales numbers still seems very relevant.

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