Sean Hyman
Contributing Writer
instructor@mywealth.com
On the 18th of this month, the Royal Bank of Canada made a startling statement: China is stockpiling commodities as part of a reallocation of its sovereign wealth amid concern that its dollar assets may decline!
China is one of the fastest growing nations on Earth right now. So, when China does something, the world listens. Sounds like an old E.F. Hutton commercial ...for those of you like me, that are old enough to remember it.
However, it’s true. When China does something, it has so much purchasing power that it can really “stir the pot” quickly.
For the last few months, they’ve voiced their concerns about their “dollar holdings” which amount to almost 2 TRILLION DOLLARS!
Why is China so fearful? Because of the hundreds of billions of dollars that the U.S. is spending on bank bailouts and in stimulus packages. They fear it will cause “higher inflation and a weaker dollar”.
What is China doing about it? Well, they’ve proposed “a new global currency to reduce reliance on the dollar”. However, since that’s probably nothing more than a “pipe dream” at this point, they know they have to take other courses of action.
Therefore, they are buying up iron ore, copper, oil, etc. When China buys..they “buy big”. Just in April alone, they’ve bought up 57 million metric tons of iron ore and 399,833 metric tons of copper! They also increased their purchases of oil by 14% last month too!
One thing I’ve learned about the Chinese and much of the rest of Asia, is that they are shrewd in business and usually “get it right” over time. I also must say that I agree with China’s fears. Why? I let the charts tell the story. Let’s take a look.
Oil starts its ascent in March; the Dollar starts to fall in May!
The “Cost of Goods” is Heading Higher as the Dollar Crumbles!
Which Currencies Benefit from all of this? The Euro & Aussie Dollar!
To sum it all up...there’s never been a better time to jump into the currency market. Whether you’re reading this from the U.S. or around the world...you can profit from a falling dollar!
If you buy the EUR/USD and AUD/USD pairs, you will be able to benefit from this new trend.
Why these two currency pairs? The euro is the “anti-dollar”. It gets that nick name because it’s one of the first to benefit from a falling dollar since it is the world’s NEXT most liquid currency outside of the greenback.
Why the Aussie? Because Australia is a huge commodity exporter. As commodities go up, they benefit and therefore so does their currency.
PLUS, both of these currencies are also vs. a falling dollar. So it’s a double whammy! You take advantage of the falling buck by shorting it...but at the same time, you’re buying currencies that will directly benefit from its fall!
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