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Is Your Retirement Losing Value With The Weakening Dollar?

By August 3, 2020 No Comments

Investors are flocking to gold and precious metals as the dollar weakens.  Should you be doing the same?

The national debt is skyrocketing, making the crash of the U.S. dollar inevitable due to our country’s out-of-control deficit. With the current trifecta of rising Coronavirus cases, increased unemployment, and looming economic collapse, it’s no wonder the dollar is weakening but what does this mean for your IRA or 401K?  A solution that investors are resorting towards is investing in precious metals, and especially investing in gold.  Rolling over an IRA or 401K into a gold IRA or gold 401K, is an option that has been taken very seriously in 2020.

In A Nutshell

As the Fed is printing more and more money, a dollar collapse seems imminent.

A weak dollar will have detrimental economic effects. For example, if a country that the U.S. has trade partnerships is experiencing its own weak currency cycle, that can result in lower prices for the goods that the country produces. The side effect is that it becomes more difficult for domestic manufacturers to compete with those reduced prices.

On the other hand, if a foreign country’s currency remains strong or gets stronger while the dollar weakens, that can result in higher prices for imported goods. Those higher prices will then be passed on to consumers. Likewise, traveling abroad will become significantly more expensive, as a weak dollar will not be able to stretch as far overseas.

As far as the dollar decrease, a question that you have to ask yourself, is whether the investment options that you utilize today will benefit you tomorrow?  In these times of market volatility, portfolio hedging is seen as the safest bet to maximize gains and minimize losses in this economic roller coaster.  With the profit gains that precious metals like gold and silver have made during the Coronavirus pandemic, investors are eager to hedge their portfolios with these safe havens.

Should You be Concerned About a Dollar Collapse?

The risk of a dollar collapse is currently made far worse by the Coronavirus pandemic, but truthfully, these economic concerns have impaired our nation for a long time. 

For years, Congress has spent and wasted taxpayer dollars without a thought to future generations. It has racked up an enormous $26 trillion to the national debt, and no one in Washington is talking about ways to reduce the deficit and get the debt under control which could potentially lead to a dollar reset.

Could a Dollar Reset Be Next?

According to the World Bank, countries whose debt-to-GDP ratios are above 77% for long periods experience significant slowdowns in economic growth. Every percentage point above 77% knocks 1.7% off GDP, according to the study, via Investopedia. To put things in perspective, the current US debt-to-GDP ratio is 106.5%.

In other words, the US is accumulating about the same amount of debt – currently $26 trillion – as its annual economic output. Each year another trillion dollars gets added to the national deficit. This can’t go on forever. 

With this growing national debt and current state of economic and health crisis, there have been talks among financial experts on why the US dollar’s destabilizing reserve status in the world economy has to end with a potential new currency to take its place in the global markets.

What a Weak Dollar Means for Your Wealth and Investments

To put it bluntly, a global recession is inevitable. There will be a significant period of enormous and unpredictable volatility in all paper assets. 

Consequently, investment diversification in any of the paper assets such as Stocks, Mutual Funds, Bonds, ETFs, and Cash Deposits, will not help protect your money this time. It will simply be diversifying your losses. 

So what can you do to secure your assets? If there’s a commodity that does well and sees significant profit margins, especially in a time of crisis, it’s precious metals such as gold and silver. Since the beginning of the pandemic lockdowns in March 2020, gold and silver soared to record highs with gold increasing it’s value by 20% over the past few months and silver doubling its value.  Gold is a definite hedge against inflation.  As most of the yields are going down, gold continues to increase in value.  If not for this global pandemic, we would not be seeing this rapid rise in gold.

Portfolio hedging can truly diversify your portfolio because it minimizes losses and the negative impact of adverse market movements and price swings.  By diversifying your portfolio into either gold, silver, or other precious metals, you will be securing your future for what tomorrow brings.  This sudden rise in the price of precious metals is an alternative investment option that will increase the worth of your assets.  It counterbalances negative returns on your core portfolio. Take back control of your finances.

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