USD vs. Gold – Which Wins As A Safe Haven?

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The U.S. dollar continues its reign, but is the U.S. currency the ultimate safe haven? Kitco News speaks with Professor Eswar Prasad, author of The Dollar Trap, to see how he thinks current USD strength can ultimately affect the American economy, foreign exchange markets, and gold. “Certainly the fact that the U.S. dollar has strengthened against virtually every other major currency, over the last year or so, is a reflection of the fact that the U.S. economy is doing much better most of the other major advanced economies,” he says. “The dollar seems like the best safe haven right now,” he adds. However, Prasad says that although it seems like the economy has not been hurt by the rising dollar, it is a possibility. Looking to gold’s role as a safe haven asset, Prasad says he wouldn’t be surprised to see more demand for the metal by retail investors and global central banks looking to diversify away from the dollar. “But I don’t think gold is in a position in any way to challenge the dollar’s role, but it still does have some characteristics of a safe haven,” he argues. Looking at Forex markets and currency devaluations, Prasad says that “ultimately, currency wars come down to one problem, which is that most of the major economies around the world are still relying on monetary policy,” he argues. “[A]nd ultimately monetary policy cannot by itself revive growth in these economies.” Kitco News, February 12, 2015.

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