Foo writes:
Could you please explain the impact of a US Dollar collapse on the Asian countries? From my point of view, due to the exchange rate risk, silver or other precious metals may not be a good investment for Asian people. Could you please share your opinions on my questions?
Hi Doc,
I am from Singapore. I know that when the US keeps printing money, the US dollar will keep depreciating against other currencies, like the Singapore Dollar, and also precious metals will increase in value. For example, Silver buyers in the US achieved 100% return when silver rose from USD20 to USD40. But due to the strengthening of SGD against the USD, Singapore silver buyers only got (40*1.21/(20*1.4) = 73% return.
I believe that the collapse of US dollar is inevitable. Silver may surge to more than USD 100 within next few years. However, the USD would also depreciate a lot against SGD.
So, Doc. Could you please explain the impact of US Dollar collapse on the Asian countries? From my point of view, due to the exchange rate risk, silver or other precious metals may not be a good investment for Asian people. Could you please share your opinions on my questions?
Foo:
Great questions!
We share your beliefs that the collapse of the US dollar is inevitable and that silver is likely to surge to $100 and beyond in the coming years.
However, silver's 10 year bull run has not been entirely the result of dollar debasement. Silver has exceedingly strong supply and demand fundamentals, even without systemic currency issues with the dollar that could eventually send silver parabolic.
There is a world-wide shortage of physical silver at current manipulated prices. This is a primary driver of the increase in silver price.
I won't go into further details here regarding the industry consumption statistics and rest of the bullish supply/demand figures for silver, as an in-depth analysis can be conducted for yourself by reading The Silver Bullet and The Silver Shield by our friends at Dont-Tread-On.Me.
The other primary driver of gold and silver prices is fiat currency debasement by all nations.
ALL FIAT currencies have been in serious bear markets vs. both gold and silver over the past 10 years.
The SGD is a fiat currency just like the dollar, yen, euro, renminbi, etc. Even the CHF hasn't been backed by gold since 1999 (thanks to an IMF mandate).
While the US dollar may win the race to the bottom, all fiat currencies will undergo a MAJOR PARADIGM CHANGE when the US dollar reserve currency system collapses and takes all fiat currencies down with it.
Lets take a look at the price of silver in Singapore dollars (SGD) over the past 10 years. (this was the only decent long term chart of silver vs. SGD that I could find, and wasn't able to insert it into this post)
Notice the SGD's deterioration vs. silver over the past decade from ~8SGD/oz in 2002 to 60SGD/oz in May of 2011!
You say that silver or gold may not be a good investment for Asian people, yet in your own currency silver is up 650% in 9 years!
Take a look at long term (10 year) charts of various Asian currencies vs. gold or silver.
Let me know if you find one that has gained vs. either gold or silver over the past 10 years.
There is an old saying that is simple, yet true: The trend is your friend. Until the secular bull market has exhausted itself in gold and silver, continue to accumulate on dips. Take a long term perspective, and position yourself accordingly.
Friday, the HKMEx launches silver futures in Hong Kong, providing Chinese investors with opportunities to purchase physical silver in 1,000 oz lots. This has the potential to increase access to physical silver to millions of Chinese, which could result in another long-term driver for higher silver prices to establish market equilibrium with supply. (assuming that the HKMEx is not an extension of the cartel, which is a possibility).
In summary Foo, silver and gold provide excellent protection from fiat currency debasement in all nations, and will also provide protection from the widespread contagion that will quickly develop from a collapse of the US dollar. The collapse of the US dollar will take down the entire system as we know it.
In short, yes, we would strongly recommend that Asians exchange their fiat currencies for silver.
-Doc
