Monday, December 27, 2010

Is The U.S. Dollar About Ready To Take Another Spill?

Despite a determined, concerted effort by the bullion banks to push the price of gold/silver lower, the precious metals have managed to maintain a surprising degree of buoyancy.  In fact, many of us have been discussing this departure from the usual pattern in which the price of the metals historically during this bull market have typically succumbed to to a painful beating when the cartel decides to work on liquidating the COT open interest. 

As such, i'm wondering if the dollar is getting ready to roll over start heading south again.  Here's a chart (daily, spot basis):

Certainly the fundamentals which underpin the dollar continue to deteriorate pretty quickly. In today's 2-yr Treasury note auction, the primary dealers had to swallow 57% of the deal. That's an unusually large amount for a shorter-duration note auction. The economic data, despite the colorful lipstick being slapped on the pig by the media, is showing some deterioration. And of course the dollar is responding today to the China's interest rate hike.

Having said all that, it is clear to anyone who puts a little thought into it that the only hope the U.S. Government has of financing its deficit spending and possibly stimulating economic activity is to print a lot of money and take the dollar a lot lower.


  1. Long and strong my $40 strike Mar Silver Calls.

    OT: Dave what do you think about the rare earth trade?

    I like Avalon Resouces, as they have the highest indicated reserves, mucho heavy RE's and the closest to production out of the heavy RE's.

  2. Rare earths are a just kidding. In all honesty I have not looked at them at all. I put all my focus on the precious metals market. I'm sure I'm overlooking a great opportunity, but as long as the rare earths are grabbing a lot more attention than the pm's, I am confident the pm's have a LOT of upside to go

  3. I have been looking at a world post precious metals. Meaning what the hell do I do with the money that I make in metals, and where to put it (certainly not in t-bills).

    I am sure you have started pondering where to put your hard earned duckets once the pm bull runs its course.

    Full disclosure, I have 80% of my investable net worth in metals. 5% in rare earths, and 15% in Mannkind.

    All these people getting pissed about SDRG, it's a junior folks, these kind of things happen.

  4. I think the dollar index is too distorted by the heavy weighting of the Euro to be a meaningful representation of dollar strength and weakness. The dollar is significantly weaker against almost every major currency today, but the dollar index is higher due to a weak Euro.

  5. texas: agree. the weighting lets them more easily my manipulate or support the index. really they need to put the yuan in there since china is our largest trading partner now.

    rick: i'm worried the world post a big precious metals run will look like the world described in The Road lol

  6. In response to RickJames I follow all miners and Avalon is a decent company. REE is another, but hang on for the ride. Another smaller one is Great Western Minerals Group Ltd GWMGF. Keep in mind that the recent volatility was because China pretended that they weren't going to play any more and that sparked a lot of interest where there was none. They are the primary miners of Rare Earths. Most people don't know what they are and how invaluable they are to our day to day lives. Dave thank you for your common sense blog as I added it to my blog roll as soon as I saw it. I think I found you from Jesse's.

  7. Dave stated:
    "I'm worried the world post a big precious metals run will look like the world described in The Road".

    In a "Road" like future certain useful items (with shelf life) that are no longer being produced ... (or exorbitantly difficult to procure)..will be the things to have.

    And it's sooo easy to get them now, even
    with ever more worthless paper,fiat money.

    THESE ... are the good ol days.