Analysis
The US dollar rally was predicted by many analysts to be “mighty”. I projected it to be short lived, and argued that it would become a meltdown situation. Technically, a head and shoulders formation is now clearly apparent, and the neckline has activated a move towards a target of 73.
Sentiment indicators, as discussed last week, continue to show the dollar is poised for a serious decline. My technical work continues to project a 65-66 longer term target. This dollar forecast, if it even plays out partially, is enormously bullish for hard assets.
Fundamentally, I’m no fan of the fiat currencies. In Europe there are attempts to implement austerity measures. Is it too little, too late? Time will tell, but historically real austerity often tends to come only after government currencies hyper-inflate their currencies.
Is there a solution for America? The current administration’s showcase achievement seems to be nothing but a giant mushroom of debt. August numbers released by the Treasury Department show the national debt has increased $4 trillion on President Obama’s watch, in just two and half years. We are supposed to believe that a “debt commission” will fix this problem. As an investor, the only rational course of action is to hold some physical gold & silver outside of the banking system.
Analysis
The correction in gold has been healthy and necessary. A significant rebalancing market sentiment has occurred, putting the gold market in a powerful stance. The MACD on this chart is giving one of the most powerful buy signals in the history of the bull market.
Leverage has been greatly reduced because the speculators have been “stop lossed” out of the market, in size. Gold held strongly without the support of these leveraged speculators, and this is the exact situation that sets the stage for a major advance.
When the traders with the most money (the commercials) step up the size of their investments, that has historically been the time to employ capital, rather leverage your position for a quick trading gain. The gains that occur when the market is positioned as it is now can be absolutely enormous.
This has been a time to increase your physical investment in gold outside the banking system, and a time to consider making gold your base currency. The decision boils down to a philosophy of speculative buying versus value buying.
I said on October 14th in this space, “…New power uptrend projected to start on or near Oct 21st.” For the record, the gold market bottomed on Oct 20th.
