Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. Dollar Set To Surprise by Falling to Test All Time Low

Currencies / US Dollar Nov 30, 2009 - 01:48 PM GMT

By: Captain_Hook


Best Financial Markets Analysis ArticleThe dollar ($) is set to surprise the few remaining speculators that think it can't happen by falling further straight away, possibly taking it down to test all time lows at 71. Here, we are talking about the possibility of a more disorderly decline in the $ developing as a result of gold progressing into a parabolic rise, primarily predicated on year-end hedge fund buying into December. First it will be this that takes precious metals higher into year-end, and then the rally could continue for numerous other reasons, not the least of which being a lack of physical, which appears to be a growing concern.

You will know real trouble is brewing in this regard when you see silver sail through the $18 mark, which is critical technical resistance as far as the cabal is concerned. Two consecutive closes above this mark could prove interesting indeed with dwindling and low official inventories, potentially catapulting the white metal $5 to $10 higher in very short order. (Note: Yesterday was day one.) And this possibility has been heightened considerably with the recent price action in the Gold / Silver Ratio, where it is likely finished having traced out a corrective zigzag, which will be covered in greater detail below. So watch for a close over $18 in silver today for the ‘buy signal’, and if planning to buy more physical, as supplies could dry up quickly afterwards.

If silver fails to finish over $18 today then, we could be looking at a more meaningful correction finally, possibly taking us past options expiry. It would not be surprising to see equities weaken post expiry this Friday anyway, without the support of puts to keep prices buoyant. You should know open interest put / call ratios have been rising sufficiently to support this rally in equities, and this is primarily why it’s happening. And by the same token until proven otherwise one should expect put buyers to return every month until proven otherwise, even if the majority of buying is for hedging. It’s the pros buying these days, hedging their long bets. The little guy is either wildly bullish or an exhausted bear; effectively out of the speculating game either way.

The larger buyers will soon return if a near-term correction ensues however, as outlined last week, to protect fees and bonuses into years end, along with window dressing related buying. And while this might create a larger liquidity related concern in early January, again, as described last week, expect hedge fund managers to be buyers of gold (precious metals) right up until the end in December, possibly taking prices higher in manic fashion into decade’s end. As you should know from recent undertakings, this would be consistent with previous decennial patterns concerning the strongest sector of the decade, with gold and precious metals having this distinction since millennium’s turn.

So, it appears our greedy bankers / brokers will have their Merry Christmas this year, hoping the public continues to ignore the increasingly embarrassing message a runaway gold price is throwing off, but they will likely not escape entirely, and in the end. The irony off all this is price-managing bankers may have finally outwitted themselves in terms of their own eventual demise, with the greedy hedge fund industry they have nurtured and used to do their bidding all these years forced to turn on them – it’s survival of the fittest. If they bid gold up too fast it will create a mania, which in the end will bring attention back to precious metals in roundabout fashion.

Martin Armstrong has a new commentary out calling for much higher gold prices, and for the right reasons. I recommend you read this document as many times as it takes you to come to an understanding of the primary concepts of why prices move the way they do, and more specifically why gold is set to vault higher well past December hedge fund related buying. Martin has identified April 16th (my birthday) as a potentially important panic cycle related turn-day in 2010 that could be set to mark a high in gold (precious metals), and possibly equities in general. This is because the dollar ($) could be set to surprise on the downside, for reasons that go far past carry trade related selling or hedge fund speculation and gaming.

You should know most hedge fund buying is exactly that, nothing more than competitive gaming. These guys are not in it for the long-term, and it wouldn’t matter to them if they were trading gold or widgets. So, if the $ keeps falling past year’s end some observers would be surprised, despite obvious reasons in plain view for all to see it will continue to offer no fundamental demand. Sure it seems ridiculous for China to criticize the US for printing money when it’s own activities appear just as bad, however they have not increased their monetary reserves more than a hundred times over the past few years like the socialists in the States, which is what all the hubbub is about. The Chinese are worried the ridiculous little people in Washington will start monetizing pensions plans, etc., taking the practice too far, not that it’s already not happening. (See Figure 1) 

Figure 1

If you were wondering exactly why the $ is falling against all the other rapidly depreciating fiat currencies out there now you know then – because Barack and the boys in Washington are out of control, never mind the Fed. And it’s not likely they will stop expanding the extent of their monetization practices voluntarily, which is the message gold is giving us unbeknownst to the gamers buying it for year end window dressing purposes. Despite this price managers will attempt to stabilize the $ as much as possible to hide their money printing activities, but as indicated in Figure 1 above it will not work, not with both internal and external forces bearing down on it – pun intended. What’s more, and as can be seen below, while there’s always the possibility of a minor degree (a – b – c) correction in sympathy with the second leg of deleveraging that is sure to arrive at some point, the longer-term trend is undoubtedly down – way down to 30ish if the Fibonacci resonance derived projection is accurate. (See Figure 2)

Figure 2

This is why I say the $ is set to surprise – surprise on the downside. And this is also why equity bears might continue to be surprised about how resilient prices remain, not that real measures against gold will not continue to plunge. Of course there’s always the exception to the rule, which in this case is silver. Here, if history is a good guide, we would see the Gold / Silver Ratio closer to the teens than these lofty levels, finally breaking price management related dependency in suppressing this easily controllable little market. The risk price managers have created for themselves here is serious if talk of some sort of silver standard returning to international monetary affairs becomes a reality (or perhaps just serious talk of commodity based currencies in general, which is starting now), quickly turning an easily manageable little market into a not so easily manageable big problem overnight. This is when the Gold / Silver Ratio could really plunge. (See Figure 3)

Figure 3

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our continually improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2009 Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules