Dollar May Be Breaking Down
The U.S. dollar took a dump today and gold, silver, commodities and hard assets of many sorts celebrated. The dollar has some further downside exposure from here unless it quickly recaptures a safe haven bid. Failure to do so could mean continued strength for traditional anti-dollar assets, gold and oil in particular. Next level for oil is $70 per barrel and gold could conceivably test the $1000 level in a best-case scenario. Silver needs to break $14.60 and from there it would target $16. These are not predictions, and there are many reasons why these targets might not be achieved. In addition, the contrary bet is actually that the move will peter out because it is based in large part on a false “green shoots” mirage.
Short-term trends do, however, favor gold and silver adding to their moves and I’m in the process of looking for trend-based indicators to time the move, mark targets and indicate appropriate stops. If you have any, we would appreciate you letting the rest of us know and if I come up with something I promise to do the same.
While the dollar completes its current move there is no point talking about fundamentals, and even the technicals are subject to capricious machinations by forces that control the world reserve currency’s immediate destiny. As a result, we are likely entering a period of higher reward, higher risk and higher volatility. That said, I don’t see this as the dollar’s last swan dive and I don’t expect to see the dollar head immediately to the 70-72 (US Dollar Index) low from last year. If it does, gold might be off the races.
GEAB No. 35: Global systemic crisis, June 2009; when the world steps out of a 60 year old referential framework. For anybody in FRN, this is pretty much a bad acid trip. The rest of us who read this site, stock up on non-perishables and keep your gas tank topped up, as things could move more quickly than you could imagine. Code Red, in my opinion, is now.
Wasn’t oil on its way to $25 and gold on its way to $550 a few months ago based on trends and technicals? Rather than buying into strength and selling into weakness based on (in my opinion imaginary) levels of support and resistance, I’m convinced that the only long-term winning strategy is to keep accumulating on dips.
I know I keep hearing how gold is way overbought and is going back down to $650-$600. That would put silver at current ratio’s about $9.00 give or take either way. Of course anything is possible and never say never. However as more people get on board the PM train. Institutions right down to the small retail investor. Rigging a 30% or more drop in gold and silver, may finally cause the regulatories to do something. Because I would imagine with a big drop like that as was the case last time. I believe a buying frenzy in the physical end would cause some serious physical shortages and this would not only be in the retail end this time. I personnaly believe that is what alot of people are waiting for a big selloff to occur. Shorterm I feel gold and silver have about petered out. I don’t see gold getting through $950 or silver about $14.55-$14.65. I would not be surprised if tomorrow is a big down day for PM. I see silver back below $14.00 before this long weekend. A nice pullback to $13.10-$13.20 would probably be healthy.
Man, this is like one big game of chicken! Is there a consensus here that the S+P 500 is near a top? If it falls hard will the big money throw the baby out with the bathwater again and exit commodities in a repeat of last year? Seems like all the mainstream “experts” are yammering about growing surpluses in just about everything.
Yes they were and then things changed. You can keep accumulated on dips but you need to have something to accumulate with. If you have a secure job or source of income (trust fund?), congratulations. For others less fortunate, disciplined buying and selling a portion of you non-core portfolio based on whatever method works can generate income that can be used to accumulate.
@forwill
I hope there is no consensus because even a consensus among contrarians is a consensus, and following a consensus is not a good way to invest. For my own part, I think 900 on the S&P500 is at the extreme end of fair value based on business conditions so that should be a fundamental top, but there are a lot of crazy people out there (many of them are even called “experts”) so who knows where and how high their BS can take the markets. The scenario I am looking at is still for S&P500 to range between 700-900 with short sojourns out of that range.
I think the least expected outcome right now would be a continued rally in stocks. I see almost universal bearishness/ pessimism / disbelief around me, yet the market continues to act very well. Likewise GBPUSD, which has been highly correlated with stock markets over the last year. Worth keeping an eye on this pair for early warning/confirmation of trend.
Don’t start making price predictions. Your track record sucks. I won’t start listing all your ridiculous forecasts, like oil to $20 etc…but I easily could make a long list. Including you telling me not to buy a 1000oz bar, a few months ago, when it was $9.
Adrian Douglas makes some good points: the Chinese have been using their
treasury debt as collateral against fixed interest rate loans. They will have used this money to buy real assets. They can sell some of the assets they bought but at prices much higher than what they paid and so pay off the loans with worthless dollars, or they can simply default and lose their collateral of now worthless U.S. bonds…The Chinese have vault-loads of intrinsically worthless Treasury bonds that they no doubt have used as collateral to buy intrinsically valuable assets. In contrast, Western central bankers had vault-loads of gold that they loaned or sold to buy intrinsically worthless interest-bearing government debt. (here’s the punchline.) I bet Confucius would have had something to say about that.
It is higly unlikely the dollar breaking down will be a signal to ALL the HYPER-SPECULATORS/INVESTORS/TRADERS to lever up and jump back big into those anti-dollar trades i.e. long commodities,long commodity currencies,etc,as this one way bet ended in total disaster last summer as the ELITE engineered those massive liquidations thereby causing that synthetic dollar short squeeze and in the process a stampede into T-Bonds.
So again we may witness something similar this time round if the USDX breaks 80 heading towards 70 or below.
The ELITE must be preparing.GOLD slowly heading towards $1000….USDX breaking down as well as long term TREASURIES is flashing YELLOW ALERT right now….LET THE INTERVENTIONS(VERBAL&ACTUAL)BEGIN:
So the first step….S&P downgrades the U.K.’s credit rating(who’s next i wonder?Europe…Canada…Australia)
and they execute a weak rally in the USDX recovering from 80.80 intraday today and the selling in the broader stock indicies globally contributes to money flowing back into TREASURIES.
If the above is insufficient in generating a dollar rally and treasury bond rally then there’s a option of S&P downgrading the credit rating including those listed above and whole host of other countries.
In addition,Bernanke,Geitner may get the crooks from Wall Steet to
Washington lower ALL MARKET EXPECTATIONS of growth/recovery from the so-called GREEN SHOOTS to GREEN WEEDS via their friends the media networks(FOX NEWS,CNBC,ETC)and releasing THE TRUE REALITY of very poor economic data on the US Economy to accomplish this rally.
THIS ALSO HELPS…..
Yeserday former Fed Chairman Alan”Mr Magoo”Greenspan stated in an interview in Washington that “until the price of homes flattens out we still have a very serious potential mortgage crisis” and also warning that U.S. banks must raise “large” amounts of money.
Ya see folks these are part of the neccessary ingredients required for the recipe to make a DOLLAR&T-BOND RALLY.
@Jeff S.
re: natgas & oil
NOAA sees up to seven hurricanes in Atlantic
re: S&P, it seems that some people watch price w/o dollar index considerations
if the dollar is falling, it takes more dollars to buy a share.
“hey look, the market is up” -yeah, right !
which is why I’ve previously mentioned & I think Silverax tried to determine (mining) PE in gold grams
You are a filthy liar! I didn’t “predict” oil would go to $20, I gave the technical and fundamental case for why it could possibly do that. I also stated reasons why it might not. As for telling you not to buy a 1000oz bar when it was $9, that is libel.
Here is what you said on September 16 (http://silveraxis.com/todayinsilver/2008/09/15/cash-is-king/#comment-1880):
“I’m looking at adding a 1000 oz bar, this week. It seems like the time is getting right. One more drop for OPEX, and I’ll order.”
And I said in reply (http://silveraxis.com/todayinsilver/2008/09/15/cash-is-king/#comment-1881):
“mark: You might still be early but I can’t fault you.”
And here is what actually happened:
Silver Low Week of September 15: $10.42
Silver Low September 22-December 12: $8.72
Silver High October 16-December 12: $10.68
Number of Times Silver Exceeded $10.42 between October 16-December 12: 6
Silver Average Range October 16-December 12: $9-10
So again, you are a liar.
@Kipling
Excellent points Kipling, but it still bears repeating that the Chinese would not have accumulated those Treasuries were it not for the very U.S. policies and consumers they are now blaming for all the problems. It is simply ridiculous.
What’s happening is that the green shoots mentality that was prevalent over the past few weeks is starting to wilt. That is not universal pessimism.
Hi Tom,
I have been letting you know that gold is breaking out big time. Any long position in gold should be either entered above $950, or at $932, with a stop at $918. This rally is going to get only big, since most of the analysts are waiting for their favourite setups, pullbacks et al. It is not going to oblige them. The time analysis gives me the feeling that we are going to see 5 months of continuous rise starting May 13. This is also confirmed by the near backwardation situation in gold.
@silverax
should have stated my own ‘universe’. People around me (colleagues, friends, other forums) seem bearish as a group. It’s quite possible I only associate with conservative, low leverage types…but the feeling I get is ‘boy I can’t wait for the market to fall hard again so I can pull the trigger this time’. Market is short term overbought, but a lot sectors/stocks are coming up the right hand side of bases…and look solid. Significant breakout in GDX as well this week…things are pointing up.