EUR/USD: will the return of the dollar last?

In times of economic and financial crisis, investors take refuge in safe haven assets. They buy gold, silver, Bitcoins, etc., in the hope that their alternative investments offer portfolio protection.

In the long term, they can enjoy the benefits of diversification. But in the short term, the focus should not be on the alternatives - but on what they compare to. Specifically, the USD.

The USD shows why it isn't close to losing its status as a reserve currency.

Gold reached a new record this year. It exceeded $2,000 for the first time in its long history. Silver tripled in 3 months. Bitcoins regained the ground lost in March and soared to over $12,000.

What do they all have in common? The world's reserve currency - the USD.

As the Fed increasingly prints and makes dollars available to all central banks in need (for example, the Fed still has dollar swap lines open since April), the liquidity of the dollar has improved. As a result, the currency has fallen.

This is where it becomes interesting. The dollar took a hit as investors fled the USD and bought other alternatives. Some even diversified into other cash currencies, such as the euro, the Australian dollar or the GBP - they all rose sharply against the dollar.

However, in an environment of risk, at least some of these alternatives should keep their value intact. Or, more or less, be stable against the dollar. However, as we have seen in the last few days, the dollar is proving to be the only safe haven, as stocks, treasury bills, gold, silver - all have been sold.

12 years ago, just before the great financial crisis, gold reached a new historical high. For the first time, it traded above $1,000. Many were quick to point out that gold will rise further as the crisis unfolds. But exactly the opposite has happened. The market's first reaction was to seek safety - it found it in the dollar, despite the fact that the crisis originated in America.

What followed was a copy/paste scenario compared to what we see today. The Fed relaxed, opened liquidity swap lines and the dollar fell back. Gold rose to over $1,900 9 years ago, returning to $1,000 a few years later.

This shows that gold does indeed represent a store of value, but that the USD, its counterpart, is the most sought after asset in a crisis.