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przemyslaw-radomski

When do you expect the USD to crash and gold to sky-rocket?

December 20, 2008, 12:00 PM Przemysław Radomski , CFA

It's impossible to tell. One speculative attack on the USD could begin a dramatic selloff as either party holding large amount of dollars (Japan, China, ...) could panic and dump their reserves on the market. This would trigger even more dumping and before you know it, the financial system as we know it could cease to exist. This is not likely to happen any time soon - the powers that be still have aces up their sleeves. As a general rule, currency- and financial crises materialize later than everyone think they would, but when they finally do happen, they do so in a fashion more rapid and causing more damage than was expected.

It's like building a house of cards - if you are very good at it, and you take your time, you can build a house that is very high, but you can't convince anyone that if you keep adding more cards, you can do it indefinitely. Why? Because most people tried it and know that it's impossible. Now, when it is the international economics and monetary policy that is concerned, very few people are able to 'try it' and see the immediate effect. This time the details are more complicated, but one can look at it this way - if someone is building a house of cards 50 years now, does it still mean that this house has to go down? Most likely, yes. Why? Because the past experiences (history) and cold logic proves so.

In my view, it is impossible to tell when the dollar will definitely crash and gold will definitely sky-rocket, but instead of trying to guess that date, I prefer to design and follow a strategy that will make my capital grow regardless of that date. I think that putting part of one's holdings into precious metals bullion, part into PM-companies as a long-term investment, and using the rest to speculate in the short- and medium term is the way to go. Thanks to this approach I am protected against a serious financial turmoil, I am positioned in a sector that has very favorable fundamentals (long-term growth) and thanks to speculation I'm able to make money along the way. I wrote about this approach in the 'Universal Investor' essays - you can find them in the Research section.

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