Tags: Dollar | gold | emerging | bonds

Experts: Gold, Emerging-Market Bonds Recommended to Counter the US Dollar Decline

Friday, 28 Sep 2012 09:13 AM

By Dan Weil

The dollar has dropped 5 percent against a basket of six major currencies over the past two months amid expectations, and now the fact, of additional easing by the Federal Reserve.

The concern is that the third round of quantitative easing will ultimately spark inflation. This worry could well continue, driving the dollar down further.

Experts have several recommendations for investors to deal with such a trend, SmartMoney reports.

Editor's Note:
This Wasn’t an Accident — Experts Testify on Financial Meltdown

First is gold, which generally moves in the opposite direction from the greenback. Drew Kanaly of Kanaly Trust in Houston has increased his customers’ holdings of SPDR Gold Shares (GLD), an exchange-traded fund that is made up of the precious metal.

Another option is emerging-market bonds, which might benefit from economic growth that is stronger than in the United States.

Donald Dempsey, a financial adviser in Williston, Vt., has put some of his clients’ money into the WisdomTree Emerging Markets Local Debt fund (ELD), SmartMoney reports.

The fund doesn’t hedge its currency exposure, so investors can benefit both from rising bond prices and rising currencies in emerging markets. To be sure, that strategy could turn into a double whammy if the opposite occurs.

As for gold, it has soared 11 percent this quarter, with the December Comex contract trading around $1,780 an ounce Friday morning.

Anticipation of monetary stimulus around the globe is also boosting the precious metal. “Gold buyers are responding to stimulus possibilities," George Gero of RBC Capital Markets tells Reuters.

Editor's Note:
This Wasn’t an Accident — Experts Testify on Financial Meltdown

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