A Case for holding US Dollars?

[fishduck]

I would like to discuss whether there is a case among anyone here for holding US dollars at least short/mid term as either a diversification of a temporary hedging strategy.

Apparently this topic is gaining momentum at least in Asia where many people are starting to treat this as a haven play. They are treating US dollars with an equal weight of importance to gold (many people are suggesting to buy Gold AND US Dollars, without distinguishing the nature of both), which I guess is pretty sacrilegious to the nature of this forum, but I can see a case of at least holding this very temporarily.
Their logic is that it will still be better than their local currency (minus the Yen) and I can see the case where the Dollar would have relative strength against theirs.

My question is would this be relevant with the Australian Market? Though the AUD is relatively popular, its not as widely used as the USD and at least in the short/mid term, it is showing that the USD is holding better than the AUD.
If anyone here is holding USD as an investment or hedge, could I ask why one is doing so? Is it to get more metals due to a favourable currency? Why would you do that instead of going directly to the metals?

Would anyone here hold US Dollars or any other currency (except for AUD for obvious reasons) and if so, why?

 

[mmm....shiney!]

Would anyone here hold US Dollars or any other currency (except for AUD for obvious reasons) and if so, why?

Yes. Gold can be a currency hedge so it makes sense to hold some USD to reduce exposure to a falling gold price.

Go here for my strategy on how to do this cheaply: https://www.silverstackers.com/foru...-of-diversification.88911/page-6#post-1100330

 

[SilverDJ]

I get a lot of my business income in USD, and over the years I've experimented with holding it in USD for extended periods as a hedge against the AUD.
If you look over the last 10 years you can say it was a good idea, but over the last 5 years it's been, meh, just up and down all over the place.
I don't bother doing it any more.

 

[mmm....shiney!]

If you look over the last 10 years you can say it was a good idea, but over the last 5 years it's been, meh, just up and down all over the place.
I don't bother doing it any more.

I don’t see a “meh, just up and down all over the place”, that graph shows your USD earnings are worth more in AUD now than a year ago and 5 years ago and that’s unlikely to change for a while.

Edit to add: and the chopping and changing period between 2016 and 2018 is really quite stable in comparison to 2015-2016 and 2018-2019

 

[Ipv6Ready]

If you are earning Australian dollars, it doesn’t make sense to invest in USD at this time. Unless you are thinking Aussie pesos will go near/below 50c

Like any investment there is one simple fundamental rule to long term 7 year plus horizon.....

Be it property/stocks/metals/currency buy on the way up and sell on the way down.

1. You don’t have to buy at the very bottom
2. You don’t have to sell at the very top

the golden rule catch the momentum.

 

[fishduck]

If you are earning Australian dollars, it doesn’t make sense to invest in USD at this time. Unless you are thinking Aussie pesos will go near/below 50c

Like any investment there is one simple fundamental rule to long term 7 year plus horizon.....

Be it property/stocks/metals/currency buy on the way up and sell on the way down.

1. You don’t have to buy at the very bottom
2. You don’t have to sell at the very top

the golden rule catch the momentum.

Well the current momentum doesn't favour PMs at the moment, more like stocks and real estate look more favourable at least in a glance. And with momentum, if there is a market crash (which many stackers are anticipating), that momentum could change very quickly to haven assets like PMs, assuming the market reacts differently to the last one.

I guess the question comes to, would anyone here buy USD if they think the AUD will lose its value quicker than USD, or would they go straight to PMs, or would like buy all of them because they don't know what will happen and would be happy to diversify?

 

[alor]

one thing is sure, it's getting harder to get big gold in the future, there would be plenty of USD when people started to exit
unless you have a USD Debt to pay in the near future

 

[fishduck]

one thing is sure, it's getting harder to get big gold in the future, there would be plenty of USD when people started to exit
unless you have a USD Debt to pay in the near future

And yet from what I've been observing with Asia (HK, SK, China), people seem to put an equal weight of value on USD if not more than gold (silver is rarely mentioned), mainstream and online. And it seems to be the same thing with South American countries introducing restrictions on purchasing, holding and taking USD out of the country. They put value in USD and governments seem threatened with their citizens holding USD, while there could a more compelling case if citizens held PMs.

So I guess the question again would be, what would be the case to hold USD over PMs and for the Australian people, would they hold USDs in addition to AUDs and PMs?

 

[Jason1]

you would certainly consider USD when the exchange rate is good, but its not, so you wont get very much for your AUD, not a good time to buy it right now with AUD.

 

[leo25]

you would certainly consider USD when the exchange rate is good, but its not, so you wont get very much for your AUD, not a good time to buy it right now with AUD.

True, but another consideration is that Australia holds the world record for longest period of growth among developed economies. With everything going perfect our dollar is where it is now, what will happen when things are not great. I see more reason for the AUD to drop then reasons for it to rise in value.

The RBA is already openly saying they are more then happy to ass rape the AUD.

 

[Jason1]

True, but another consideration is that Australia holds the world record for longest period of growth among developed economies. With everything going perfect our dollar is where it is now, what will happen when things are not great. I see more reason for the AUD to drop then reasons for it to rise in value.

The RBA is already openly saying they are more then happy to ass rape the AUD.

yer AUD likely will drop, but you would want to buy a hell of allot of USD it to make it worth while, if you were to buy now, and there would be a fair amount of risk associated with doing that.
I dont think the US economy is doing that great either, I dont think they learnt a great deal from their last recession.

 

[mmm....shiney!]

yer AUD likely will drop, but you would want to buy a hell of allot of USD it to make it worth while, if you were to buy now, and there would be a fair amount of risk associated with doing that.
I dont think the US economy is doing that great either, I dont think they learnt a great deal from their last recession.

According to the OP the choice is to either hedge your investments with credit notes from the world's largest economy (USD), hoard credit notes from the world's 13th largest economy (AUD) or buy gold ? Why not not buy gold and buy USD whilst keeping enough AUD to pay the bills? You can always convert Au and USD back into AUD at a moments notice when required.

Edit to add: and if the OP's location is to be believed, you definitely don't want to be hoarding CHF.

 

[Jason1]

According to the OP the choice is to either hedge your investments with credit notes from the world's largest economy (USD), hoard credit notes from the world's 13th largest economy (AUD) or buy gold ? Why not not buy gold and buy USD whilst keeping enough AUD to pay the bills? You can always convert Au and USD back into AUD at a moments notice when required.

Edit to add: and if the OP's location is to be believed, you definitely don't want to be hoarding CHF.

you definitely wouldnt just do one of those options. you would be putting your self in a bad position, Be like hoarding PM's with out leaving your self any AUD for living expenses or emergencies that life throws at you, sure you can sell the metal or USD at the drop of a hat, But the likelyhood PM'S or USD being high when you need the AUD the most is stacked against you. so you would put your self in a position where you cant pick when you sell either of those. So chances are you could see a loss unless you were lucky, especially if you were entering the PM or USD market right now.
You need to have a good chunk of AUD no matter which way you choose togo.
But that is common sense and I dont think to many people would advise you to throw every cent you own at one thing and leave your self short of your own currency in case of a emergency. You always want to stack AUD as well.

 

[tigger2]

Would anyone here hold US Dollars or any other currency (except for AUD for obvious reasons) and if so, why?

I think maybe you're a bit late.

I get paid in USD. I started exchanging for AUD under 70c with the expectation that 60c would be the low. I don't really see going under 60c because of experience from last time when this probably became detrimental to GDP.

Remember there are significant USD transaction costs and spread even using cheaper 3rd party services.

 

[mmm....shiney!]

Remember there are significant USD transaction costs and spread even using cheaper 3rd party services.

Not in the crypto market.

 

[mmm....shiney!]

you definitely wouldnt just do one of those options. you would be putting your self in a bad position..

I imagine the question was what would non-USD income earners do with excess funds after living expenses have been accounted for in their native currency.

 

[Jason1]

I imagine the question was what would non-USD income earners do with excess funds after living expenses have been accounted for in their native currency.

are you talking about scenario where the OP is turning the left over cash from his pay into USD or Metals after paying living expenses and not having AUD savings?
If so that would be a bloody stupid thing todo, and was what I was mentioning above.
I cant even count how many times Ive bought cheap silver from People who did exactly that and something big came up in life and had no AUD savings as they thought Metals was their savings, which is fine until something big comes up and you forced to sell it at a very bad time and at a loss. its common sense to have proper savings with any investment. putting all your eggs in one basket isnt smart, be it USD, Metals Or shares.

 

[mmm....shiney!]

putting all your eggs in one basket isnt smart, be it USD, Metals Or shares.

I don’t recall saying that. I was just saying that for those of us who don’t get paid in USD it is my opinion that it’s better to save USD than their native currency.

 

[fishduck]

Yep and I guess the question is how do you guys balance it out?

If you have too much AUD, you lose your purchasing power and opportunity on the day PMs go to their true market price (and this is not factoring in a possible procurement issue when demand for physical PMs go up).
If you hold too few AUD and too much PMs, you get the exact problems mentioned above.
For Non-USD income earners, would you be adding USD into the mix if you think the AUD will decrease relative to USD?
It's not happening as badly in Australia but if you look at some South American and possible some Asian currencies, they have been losing relative to the US Dollar.

And the Yen and CHF seem to be popular alternative suggestions in conjunction with the USD. Would anyone here venture further to diversify?

 

[Jason1]

I don’t recall saying that. I was just saying that for those of us who don’t get paid in USD it is my opinion that it’s better to save USD than their native currency.

wasnt accusing you of saying you thought that was a good idea, Sorry if it came across that way. was more hypothetical with what the OP asked.

But i differ on the opinion about saving some one elses currency over your own as your main form of savings for the reasons mentioned above, would be different story in a third world country however, which we are not. But having USD isnt a problem as long as you have backup savings in AUD.