An unconventional battle has started. The Chinese government is taking all the steps necessary for their currency to become a world reserve currency, while America’s government falls behind. China has been very busy, making over 20 bilateral trade agreements to eliminate the dollar from their trading activities.
They have also begun making credit available to key trading partners in Chinese currency.
In the last week China continued to work to promote their currency and undermine the US dollar. The Global Times reports that, “China’s banks will be permitted to hold overnight positions in the renminbi/yuan, a move that also allows them to short sell dollars”.
Technically, the dollar is very close to breaking the neckline noted on the above chart. It broke below it, just slightly, yesterday. If the $USD index falls to 78, I would view that event as final confirmation that a new down leg is underway.
That event would also likely mark the end of this protracted correction in the gold price.
The US bond appears to be forming a major top. After a bull lives for 30 years, it can die a very slow death, but all bulls die. The bond market is nothing more than a debt market.
There is no way the US government can pay its debts, and that means currency debasement or default are the consequences we must face. Since treasuries have to be held in dollars, they are probably a train wreck waiting to happen for holders of them.
Note how the volume has declined on this rally. A large distribution day just occurred.
The CCI indicator is rolling over, and so is MACD. There is a strong possibility of a nasty decline in bond prices.
As bad as this bond chart looks, the chart of the US dollar looks much worse, implying that a heavy sell-off in the bond would be countered by a devaluation of the dollar.
Your largest holding should be physical gold. A strong argument can be made that the longer gold takes to break out to new highs the cheaper gold is.