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Sunday, May 22, 2011

Goldman Sachs' two reasons why the dollar will sink again

Goldman Sachs' two reasons why the dollar will sink again : Gold's strong inverse co-relation to the U.S. dollar has been a key driver of high gold prices. Goldman Sachs thinks the U.S. greenback is about to go down further.

Here are Goldman Sachs' two reasons why the dollar will sink again:

1. U.S. trade and investment balances with the rest of the world remain negative.

"The U.S. trade deficit is still widening and we expect it to continue to widen," Goldman analysts said in its note. "Ultimately, it is difficult to envisage a dollar-bullish scenario without a notably stronger U.S tradable goods sector."

The bank says continued deterioration in the trade balance will pass through into a continued deterioration of the U.S. current account deficit. For the dollar to strengthen in this scenario, foreign appetite for U.S. assets need to pick up substantially to have the deficit financed through foreign direct investment and portfolio inflows, Goldman says. But data shows that is not happening.

2. The Fed will be the last among major economies to raise interest rates, and the U.S. Federal Reserve will leave interest rates on hold this year and next.

The bank now sees EUR/USD at 1.45, 1.50 and 1.55 in three, six and 12 months vs 1.40, 1.45 and 1.50 previously. It projects $/JPY at 82, 82 and 86 over three, six and 12 months from 86, 86 and 90, previously.

Dengan kekuatan struktural seperti mengemudi emas, fundamental untuk logam kuning tampak padat. Tapi fundamental tidak selalu drive pasar.
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