Commodities vs. Dollar ETFs: What the Future Could Hold

Back when the world was in the midst of an economic meltdown, most countries conjured up more money to mitigate the situation. The United States was one of the more egregious offenders and now the dollar, along with related ETFs, is feeling the burden.

According to author John Rubino, he foresaw this crisis and the fact that world governments would inevitably print as much new paper currency as possible to avoid any Great Depression-esque scenario, remarks Lara Crigger for Hard Assets Investor. What he predicts next is where it gets interesting…

The increased supply in paper currency would cause paper currencies to start depreciating. In turn, people would realize their wealth is being diminished through no fault of their own and they would begin to lose faith in the concept of paper currencies.

Commodities are becoming an increasingly popular alternative to holding paper currencies. Rubino thinks that holding real assets in some farmland (something Jim Rogers is already doing), high-quality oil stocks and precious metals are a good way to spread risk.

Gold and silver are both noted for their potential for hedging against inflation, and a traditional trend shows that if f gold goes up 20% in a given month, then silver could go up 30%-40%. Oil is another commodity that could be on the rise and investors should note that rising oil prices could send money into solar, wind and other clean techs.

• PowerShares DB U.S. Dollar Index Bullish (UUP): down 3.2% year-to-date

• PowerShares DB U.S. Dollar Index Bearish (UDN): up 2.2% year-to-date

Max Chen contributed to this article.

Comments

[Bob Mayo:]

What are the best ways for a small U.S. investor to own farmland? AgCapita in Calgary won't sell to U.S. investors.

Jul 01 05:29 PM

[GazTops:]

I'm a Gold/Silver bug, and even I know that Gold/Silver is not a hedge against inflation!

Ask any lazy financial journalist or fund manager why you should invest in gold and they will trot out the line: “It’s a hedge against inflation”. This is a poorly-thought-through and, indeed, deceptively inaccurate cliche to rest.

The 1970s was a period of inflation and the gold price rose. Thus, in the minds of many, gold rises in times of inflation. But the period from 1980 to 2000 saw unprecedented growth in the supply of money and credit – in other words, more inflation. Yet the gold price fell by 75% from its 1980 high of $850 to $250.

The latter was also a period of asset-price inflation, where the prices of houses and stocks rose with the expansion of credit, while the cost of mass-produced goods (particularly electronic goods) and food (in proportional terms) fell. Gold was no hedge against this. Apart from a Sony Betamax, it was about the worst thing you could have owned. Even plain old depreciating cash was a better place for your money!

Jul 02 08:51 AM

[GazTops:]

Apologies, I meant to continue. Gold/Silver is a hedge against unanticipated inflation (i.e. a hedge against government – more specifically, against incompetent leaders and a malfunctioning state.)


On Jul 02 08:51 AM GazTops wrote:

> I'm a Gold/Silver bug, and even I know that Gold/Silver is not a
> hedge against inflation!
>
> Ask any lazy financial journalist or fund manager why you should
> invest in gold and they will trot out the line: “It’s a hedge against
> inflation”. This is a poorly-thought-through and, indeed, deceptively
> inaccurate cliche to rest.
>
> The 1970s was a period of inflation and the gold price rose. Thus,
> in the minds of many, gold rises in times of inflation. But the period
> from 1980 to 2000 saw unprecedented growth in the supply of money
> and credit – in other words, more inflation. Yet the gold price fell
> by 75% from its 1980 high of $850 to $250.
>
> The latter was also a period of asset-price inflation, where the
> prices of houses and stocks rose with the expansion of credit, while
> the cost of mass-produced goods (particularly electronic goods) and
> food (in proportional terms) fell. Gold was no hedge against this.
> Apart from a Sony Betamax, it was about the worst thing you could
> have owned. Even plain old depreciating cash was a better place for
> your money!

Jul 02 08:54 AM

[russh:]

I like silver for one simple reason... Minted U.S. Silver coins are instantly recognizable by most people in America and most of the world, for that matter. Therefore, it is a good thing to have in a safe deposit box or good home safe, in the event of a full currency collapse. Simply put, people will immediately accept it, due to it's intrinsic value. This comes from both from the silver content, and it's struck face value. Under such circumstances, it would be ideal for daily transactions (as it was MEANT to be). Dog

Jul 02 08:49 PM