The drop in the US Dollar over the last 5 years has contributed to the upswing in gold & silver prices. In the foreseeable future it should continue to languish helping maintain the pressure on metal prices. David Bloom, the global head of foreign exchange strategy at HSBC in London, reported on CNBC, While we had been looking for the dollar to weaken in 2011, the fall has been more rapid and larger than we had expected.
There is significant uncertainty in the Dollar due in large part to the fiscal irresponsibility of the Fed’s monetary policies along with Congress & the Presidents mis-management of the US National Debt. These factors contribute to the ongoing questioning by financial markets in keeping the Dollar as the world’s main reserve currency. (Dollar on Verge of Losing ‘Reserve’ Status)
In order for the Dollar to strengthen its position these two fundamental issues need to be addressed in the near-term. Waiting is not an option from our vantage point, the longer the US waits to put its financial house in order, the closer the Dollar moves towards irrevocable annihilation.
Many experts agree that the weakness shown by the Dollar will continue for the mid to long-term. The conclusion has to be that the dollar is unlikely to see more than short term rallies based on position liquidation and that it is likely to remain fundamentally weak for a further protracted period, said Bloom.