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What's the logic?

Today stock markets are falling again and gold is down as investors sell heavily.

Market analysts suggest that "fear that neither the U.S. nor Europe are able to tackle their sovereign debt problems drove investors to the dollar."

Can someone explain why, if one of the fears is that the U.S cannot tackle its debt problems, investors would consider the dollar a safe haven?

Is it really a least-worst option? Better than anything else?

Comments

  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Because comodities are traded in USD. To buy them you need to buy the currency in effect.
  • Does this mean investors are leaving stocks, gold, currencies etc. and moving into commodities?
  • Precious metals are a commodity.
    The reason to sell may be different for different people but essentially they are all predicting a downturn in the economy and therefore in the value of stocks and shares. People may want to sell out before a predicted big drop and the dollar or pound may be a better bet that stocks that fall by a significant amount. A while ago some of these people and others may have bought into gold but it has (in general) been soaring high and I think people are now as bearish about it as they are about other investments in the current economy.

    Dont forget all the of the movement downwards is not just because of people selling out per se. There will be a re-jig in valuations for other reasons too.

    t
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