Investors have taken to terming the flight from risky assets into gold a
newworld’s banks on track — bedeviling investors across
the globe — has produced a safe-haven trade into the likes of Treasurys and the
dollar. However, the dollar’s success
is, in some ways, a mirage, improving
only because other major world
currencies have been dreadful. currency trade. The ongoing
concern about the enormous task of getting the

The dollar
has strengthened in the last couple of months, along with gold, which is an odd occurrence, and speaks to the dearth
of worthy investments around the
world. But the shift to gold has picked up as
“everyone is trying to devalue their own currency against everyone else,”
says Sean Peche, manager at BlueAlpha Investment Advisory Limited in London.

That
explains the dollar’s strength of late, one founded on risk aversion. Since the
beginning of the year, the dollar has gained 9.5% against the euro and 2.3%
against the pound, while gold, in
dollar terms, is up 9.4%. The yellow
metal closed up $25.50 to $967 an ounce Tuesday, highest since July 17, 2008.
“Gold is telling you the dollar’s rally
is not going to continue,” says Lance Lewis, fund manager at Lewis Capital Partners.

He adds
that “other countries have a better ability to finance what they need,” in reference to China and a few others that are creditor nations (others
owe them money), rather than the
U.S., a debtor nation.

U.S.
Treasurys have remained a favored purchase for those seeking safe assets, but
even that picture is clouded. Luo Ping, director general of the training center
of the Chinese Banking Regulatory Commission, was quoted last week as saying there are few real alternatives to holding U.S. Treasury
securities — but the semi-official China News Service later said Mr. Luo said buying U.S. debt
is one of China’s options, but not the sole option.

Still,
according to Treasury International Capital figures released Tuesday, foreigners
purchased $24.4 billion of Treasurys in December, following sales of $37.6 billion in November.
China’s holdings rose by more than
$14 billion to $696.2 billion, of which nearly $11 billion were purchases of short-term
obligations.