WHAT’S good as gold these days? Absolutely nothing, except perhaps silver. As the holiday-shortened week opened for trade, gold continued to set new highs, climbing above the $1,500/oz. level while silver surged, coming to within a few points of breaking above the psychologically important $50/oz. barrier on the way to setting a new record high.

The rally in precious metals has been relentless, as investors continue to diversify from fiat currencies, fearing further monetary dilution from America’s Federal Reserve and more bailouts from European fiscal authorities. The breakout in silver suggests that it could soar past the $50 mark while gold could ultimately target $2,000/oz. as investors grow more weary of deficit spending in the G4.

While hard assets have performed well as a store of value, paper money has become the classic case of a one-eyed man in the land of the blind. Although the euro continues to be hounded by the problems in the periphery, core Europe is doing well, leading currency traders to speculate that ECB will tighten further. Therefore the single currency is outperforming the dollar due to anticipation of widening interest rate differentials. Meanwhile, the yen is under renewed weakness because the Bank of Japan signaled it might increase the size and scope of its own quantitative easing (QE) program in response to the lingering economic shock from the tsunami and the earthquake.

Everything comes down to today’s Federal Open Market Committee meeting. Will Ben Bernanke unequivocally confirm that the Fed’s second round of QE ends in June? If so, then dollar-yen could rally to ¥84.00, because Japan will be the only G4 economy still practicing QE.

The dollar will likely gain against the euro and other majors as well, but the rise could quickly fade as Bernanke is highly unlikely to suggest any Fed hikes in the foreseeable future, leaving the greenback to suffer from interest rate underperfomance.

If, however, the Fed chairman hedges his bets on the fate of QE and does not provide a clear termination date, all bets are off for a dollar rebound. Euro-dollar could push towards $1.5000 as the market sells the buck mercilessly.