INFLATION JITTERS; Gold Soars, Dollar Slides, Investors Hedge

The Washington Times (Washington, DC), September 9, 2009 | Go to article overview
Save to active project

INFLATION JITTERS; Gold Soars, Dollar Slides, Investors Hedge

Byline: Patrice Hill, THE WASHINGTON TIMES

Worries about loose money and budget policies around the world sent gold soaring and the U.S. dollar slumping Tuesday, reviving a trend that threatens to reignite inflation for consumers while tarnishing the privileged reserve status of the dollar.

Gold broke through the $1,000-an-ounce barrier for the first time since February as investors piled into the best alternative to the dollar and a classic hedge against inflation. Worries about rising prices were triggered over the long weekend after the Group of 20 finance ministers at a London meeting stressed they are intent on maintaining loose money policies and will not move to lower bloated government deficits until the global economy clearly recovers.

Concern about inflationary policies by Congress and the Federal Reserve have weighed on the U.S. dollar in recent months, provoking talk about abandoning it as the world's reserve currency. The dollar's slide accelerated Tuesday after a new United Nations report endorsed moving away from the central role of the dollar in the world monetary system.

With yet another organization calling for a move away from the U.S. dollar as a global reserve currency, the dollar has come under pressure, said Adarsh Sinha, currency analyst at Barclays Capital, noting that the U.N. would like to establish a system of managed exchange rates like the European Monetary System in an attempt to stave off future dollar-related financial crises.

This radical suggestion at present seems far more remote than even the possibility of alternatives to the dollar as the dominant reserve currency, he said. A rapid shift by reserve managers away from dollars remains unlikely as it would be self-defeating for central banks from China to Brazil that have invested heavily in U.S. markets and would lose money if the dollar falls further, he said.

The case for a new reserve system is strong, but the alternatives remain unclear, he said, and that's why Barclays expects the dollar to decline only gradually over the next year.

News about the U.N. report and action by the G-20 sent the European currency soaring to $1.4520 from $1.4332 Monday in New York trading, reaching an eight-month high. Gold rose to $1,009.70 an ounce in New York before losing some of its gains to close at $999.80. Gold is within spitting distance of its all-time high of $1,033.90.

Investors have more money than clear opportunities, and much to worry about as central banks crank up their money-printing machines and governments splurge on debt, said Martin Hutchinson, analyst with BreakingViews.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

INFLATION JITTERS; Gold Soars, Dollar Slides, Investors Hedge


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?