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

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.

7 comments:

rickjamescouchTuesday, 28 December, 2010
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.
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Dave in DenverTuesday, 28 December, 2010
Rare earths are a bubble...lol 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
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rickjamescouchTuesday, 28 December, 2010
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.
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texasgoldfingerTuesday, 28 December, 2010
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.
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Dave in DenverTuesday, 28 December, 2010
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
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QueenbeeTuesday, 28 December, 2010
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.
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AnonymousTuesday, 28 December, 2010
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.
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Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.