There Is More To Buy Than Just US Stocks And Gold When The US Dollar Is Falling In Value

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The price of gold has gone up 139% over the past five years, while the return on the S&P 500 during that time has been 82%. Yes, gold has gone up more than the US stock market in the last five years, but few Americans have any idea that has happened, because they have not been told that on their television sets and the financial commentators and gurus have not told them either.

Of course central bankers around the world know that and so do foreign investors outside the United States, because they have been impacted by the falling value of the US dollar index. When the dollar drops in value it makes it so that their investments inside the United States, denominated in dollars, also lose value.

That’s why central bankers outside the United States have actually been buying more gold than US Treasury Bonds for the past four years, which is one of the reasons why in December the Federal Reserve said it was going to start to print $40 billion a month to buy US Treasury bonds and last week Donald Trump said he wanted the government to print $200 billion to buy mortgage bonds, to try to force mortgage rates down. Money printing like this hurts the value of the US dollar, will cause inflation, and just drives more foreign investors in gold, even if Americans don’t feel an immediate impact on it.

They are happy as long as the US stock market seems strong to them.

They saw the S&P 500 go up 17.9%, but foreign investors only realized a 7.9% return on it, because the US dollar index fell around 10% on them. They actually made much more money by being invested in their own markets or gold, and the funny thing is US investors who also diversify with some of their money in foreign markets made more money than those who only invested in US stocks too. For instance, the EWG ETF for Germany went up 35% last year.

The goal of every US investor - and it certainly is for professionals - should be to beat the return of the S&P 500 every year.

Investing in sectors and asset classes beating the performance of that index is how that is done.

Watching relative strength metrics - and trends changes in that - is the key to doing.

For instance take a look at this long-term of the gold/spx relative strength ratio, with the price of gold on the bottom of it.