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U.S. Dollar ETFs

Written By Luke Burgess

Posted June 9, 2009

The value of the US dollar is falling fast.

And there are several forces currently at work that will surely continue eating away at the American currency’s purchasing power over the next several months.

A major fear for dollar bulls right now is China.

The Chinese government holds approximately $2 trillion in US dollar assets, which has been accumulated through decades of exports to America and massive purchases of US Treasuries.

But because of skyrocketing US debt and government spending, Chinese officials are signaling that the country may loosen its ties to the dollar, and pushing to make the yuan a reserve currency that can rival the greenback. As a result, both Treasuries and the US dollar could weaken considerably.

The foremost concern is, however, inflation; or, at the very worst, hyperinflation, where consumer prices can double in a matter of hours.

US national public debt in the is currently over $11 trillion… and is growing by about $3 million each minute!

The total financial obligation of the United States – including social security and government-sponsored health care systems – is over $70 trillion!

To put that figure into perspective, to pay back a debt of this size at $1 million per day would take 191,781 years!

America must continue creating new debt money to pay the interest on its current debt. The increase in credit creates more interest debt and subsequent inflation. And with such a massive debt looming over the country, inflation is less speculation and more of a guarantee.

How to Profit from a Falling US Dollar

There are many different investment vehicles and products that will increase in value of the US dollar crumbles. But shorting the US dollar can get a bit tricky when you get into the more involved investment products. However, there are several products on the market today that are so easy to buy and sell that they could actually be your very first investment.

Here are the three of the most popular and easy investments that will profit as the global purchasing power of the US dollar erodes.

SPDR Gold Shares [NYSE: GLD]

Gold as been accepted as a store of value throughout human history because of its beauty, durability, divisibility, consistency, and rarity. Owning gold is always an asset and can never be considered a liability since there is no future obligation to any entity arising from past transactions or events. This makes gold the ultimate hedge against any fiat currency like the US dollar.

The SPDR Gold Shares [NYSE: GLD] is one of the easiest ways for investors to own gold. SPDR Gold Shares is the largest and most popular gold ETF in the world. Its share price reflects one tenth the current spot price of gold bullion.

iShares Silver Trust [AMEX: SLV]

Silver has also been historically accepted as a precious metal and used as a medium of exchange and store of value for the same reasons as gold. Today, however, silver is used much more frequently for industrial and electronic applications. This means that during economic deflationary periods, silver is less of a monetary metal. However, during times of inflation, silver shines brighter with monetary appeal.

iShares Silver Trust [AMEX: SLV] is the largest and most popular silver ETFs on the market today. Its market price reflects the current spot price of silver bullion.

PowerShares DB US Dollar Index Bearish Fund [NYSE: UDN]

As the value of the US dollar is eaten away by inflation, investors move their cash assets into other currencies. This effectively results in an immediate decline in value.

One of the easiest and best ways to short the US dollar directly is with the PowerShares DB US Dollar Index Bearish Fund [NYSE: UDN]. This ETF shorts US Dollar Index, which measures the performance of the US Dollar against a basket of currencies; the euro, Japanese yen, British pound sterling, Canadian dollar, Swedish krona, and Swiss franc.

End Thoughts

Now more than ever, it is vital to guard your money and investments. Since 2001, the value of the US dollar (as measured by the US Dollar Index) has fallen as much as 42%. And with the massive $70 trillion total financial obligation of the United States, a continued devaluation of the US dollar is imminent as a result of expanding credit and inflation. I urge you to take any necessary steps to prepare yourself against a significant decline in the US dollar.

Good Investing,


Luke Burgess
Managing Editor, Gold World
Investment Director, Secret Stock Files

Editor’s Note: The ETFs mentioned in this article are very safe positions against the US dollar. But if you’re looking for a bit more upside, my colleague Greg McCoach recently uncovered a new gold exploration company that he says has "one of the most compelling gold finds of the last 14 years". To learn more about this incredible gold discovery, just continue reading here.