Morning Note: Gold Replacing Dollar as World’s Reserve Currency?

Central banks are "running" from U.S. Dollars and into gold. Gold, Silver and Oil have become the inflation hedges of choice in this economy.

Published: Thursday, 24 Mar 2011 | 11:53 AM ET

By: CNBC Producer Catherine Holahan
CNBC

$105 per barrel oil. Cotton prices at record levels. Food prices at 2008 highs. Typically, such commodity price increases would send central banks running to the U.S. Dollar to secure the value of their savings. After all, the dollar has been the reserve currency since World War I.

But not this time.

Central banks are shedding dollars [DXC1 75.92 -0.125 (-0.16%)], reducing their holdings by about $9 billion in previous quarter, according to Nomura Securities’ Jens Nordvig, global head of G10 FX Strategy.

What are they buying instead? Gold [GCCV1 1429.80 -8.20 (-0.57%)].

The yellow metal hit a fresh record high this morning, while the dollar index dropped to a 15-month low. The news had Fast Money’s Brian Kelly looking to add more gold and silver longs to his portfolio Thursday morning.

“What is working is gold, silver [SICV1 37.17 -0.028 (-0.08%)] and oil [CLCV1 105.40 -0.35 (-0.33%)],” said Kanundrum Capital’s Kelly. “I wish I had more.”

Gold and silver have become the inflation hedges of choice for some investors. Gold hit an intra day high today of $1,448 per ounce. Silver is trading at 31-year highs, hitting an intra day high of $38 per ounce.

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