The U.S. dollar and gold are dancing to different tunes and the investor will have to decide which market or exchange traded fund (ETF) he or she will choose in a capricious economy.

Early last week, the dollar rallied against a 13-year low vs. the yen and a 12-week low vs. the euro, reports Aaron Task for Yahoo! Finance.

  • This may be because of actions taken by the Bank of Japan or the European Commission that have also dramatically reduced rates. After all, the United States isn’t the only country slashing interest rates.
  • The short-term effects of growing strength of the dollar is also noted to be the effects of risk-aversion trade where some do not believe the stock market has hit its bottom. This stems from issues like the current U.S. automaker industry debacle.

But intermediate-term results could be favorable for gold and bearish on the dollar as the effects of extensive government borrowing for a bailout bonanza takes place.

ETFs affected:

  • PowerShares DB US Dollar Index Bullish (UUP): up 5.1% year-to-date

ETF UUP performance

  • PowerShares DB US Dollar Index Bearish (UDN): down 4.6% year-to-date

ETF UDN performance

  • SPDR Gold Shares (GLD): up 0.2% year-to-date

ETF GLD performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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