PowerShares DB US Dollar Index Bullish (UUP), iShares Silver Trust (ETF) (SLV): Why Gold Will Continue Its Plunge

If so many companies continue to regard employees as expendable, then how will the consumer strengthen? A resulting decline in consumer demand could lead to deflation and lower commodity prices.

What’s the solution?

Taking a logical look at the current situation, investors should consider investing in the U.S. dollar. This can be done through PowerShares DB US Dollar Index Bullish (NYSEMKT:UUP), a good option for conservative investors. PowerShares DB US Dollar Index Bullish (NYSEMKT:UUP) trades slower than an elderly snail, but it’s great for capital preservation, and it’s an excellent way to play deleveraging and deflation.

If you’re not a believer, simply take a look at how the U.S. dollar traded in late 2008 and early 2009,  the only deflationary environment this country has seen since The Great Depression. The United States Dollar Index, or DXY, reached 90 in early 2009.

Conclusion

If historical deflationary environments are any indicator, deflation is likely to last for five to 13 years prior to natural economic growth taking place. Therefore, gold is not where you want to be.

However, when this natural economic growth eventually happens, it’s likely to come with a massive amount of inflation. The effects of Bernake’s monetary stimulus programs won’t be felt until there is true economic growth. In that environment, gold and silver will have a good chance to break their record highs. But for now, the U.S. dollar looks to be the safest and wisest investment.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Why Gold Will Continue Its Plunge originally appeared on Fool.com is written by Dan Moskowitz.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.