Gold and Precious Metals UUP (US Dollar Proxy) Chart
US Dollar Analysis:
- Your focus is gold, I know. But I want you to focus also on the fact that the action of the US dollar in the last week is not impressive. I have said repeatedly that when the natural trend is up and all you get is distribution followed by lower prices, we may be entering the look out below season prematurely. That time is now.
- There are rumors in the last few days that the Fed might announce an end to QE. Personally, I don’t think that is possible, not now. That would require strong leadership. We don’t have strong political leadership. Conservatives in congress have talked about real solutions and they are ridiculed. Liberals and socialists want nothing to do with responsible spending and governing; their desire is for power. The action of the Fed works hand in hand with this insanity by bailing out politicians with money printing.
- One of the headlines in the past few days is from the World Economic Forum: “Over US$ 100 Trillion Additional Credit Needed to Support Global Growth”… This is Keynesianism on steroids! What is not as obvious in this headline is that credit is DEBT!
- The Dollar and Euro are already in trouble and this would have a profound impact on all currencies, and therefore on the value and price of Gold. Everyone is focused on the correction (which I predicted would occur and has, with a $1260 target for gold). Focus on what $100 trillion in new debt means for gold, not today’s $10 drop or whatever. Currencies around the world are already being diluted and that dilution is accelerating.
- I have said in recent months, “After this Chapter of History is written no one will trust Fiat Currencies.” The Federal Reserve is diluting the currency to the tune of $75 billion per month while claiming that lower asset prices mean there is no increase in the money supply.
- Consider the following facts: Metal now represents only 0.6 % of total global financial assets which is stocks, bonds and cash. Correction or no correction….Gold is tremendously undervalued.
- In 1980 Gold accounted for roughly 22% of financial assets. Today? A mere 5%. These facts make my longer term target of $4000 per ounce for Gold look very reasonable.
- A Gold Standard in some form will have to be reintroduced eventually, and that will see Gold revalued considerably higher. Not buying Gold now has been called a “medical insanity” by one fund manager.
- I issued a SFS buy signal for SGOL on Jan 27. I still expect a move to $1260 for gold. We have made further progress towards my target this week and I have bought all the way down.
- Since the Momentum chasers ran out of gas in October, sentiment has turned quite negative. We have come from a frothy mkt to a depressed one, in just a couple of months. I must say this is healthy and normal, and essential to keeping the bull intact.
- On Tuesday one large Hedge Fund was selling large leveraged gold stock positions. This is unbelievable. Just as this fund manager was dumping his shares, I am loading up SFS subs and hopefully the gold community too. I have recommended buying more Gold shares than any time since last summer, and done so myself. This is the kind of news that lets you know the bottom is near or here in these Gold stocks.