Currency crisis builds, Gold Responds and No Correction In Sight

Currency crisis builds, Gold Responds and No Correction In Sight



So, we’ve been out of it for a week due to travel or so but we’d like to get back on track with daily updates. Over the last two weeks we’ve been vehement on the medium term bullish signs in the market and the record highs to continue for both the S & P and Dow. Again, the cheap money macro-global central banking policies, risk on investor sentiment and  failure for any other asset class to make itself attractive are likely to continue to drive equities higher in the recent non-linear fashion.

Recent Developments

FOREX – The battle of the weakest is breaching new grounds. The dollar hit 52 week lows at more than 1.38 EUR/USD in late October due to expectation of Dove-ish Policy, but was beat out today as the European Central Bank followed suit by not so shockingly deciding to keep interest rates at .025 for the near term due to… lack of inflation. A strong GDP number also aided in strengthening the dollar.

This currency bubble continues to grow. Since 2008, bubbles have been the talk of the market – every analyst and doomsday-er looking for the next major pop. When looking at debt/GDP levels of developed nations, accompanied by the amount of loaned money added each month– you cannot deny the underlying fundamentals of the currency crisis building. Both the US, and Europe have undergone a massive increase of currency supply only to be displeased with low levels on inflation. Inflation is a typical 16-24 month trail of asset purchases, the impatient central banks need for immediate gratification lead them to purchase more now, which will follow with massive inflation– and in some demographics hyperinflation down the road.

Precious Metals- The same events have led to a stronger dollar and weaker Gold price. We believe the strength in the dollar is extremely misleading but will continue as the Euro Zone, in a much more severe predicament economically, pushes their central bank further than we are willing to. ***A break of support at $1280/ounce could lead a sharper move to June lows below $1200.

Bottom Line

We’re excited for long opportunities in equities into 2014. In a longer term range, we’re isolating specific commodities and ETFs sensitive to inflation and a rise in interest rates. The investment opportunities being created by central bankers are eye-opening, but as we’ve preached, we also believe in not ‘fighting the Fed’ for the short term.

We’re looking for the DJIA will trade between 15,300-16,000 within that period, with a possible break of the unprecedented 16,000 mark. Of course we expect this to be accompanied by worry over Federal Reserve Policies and the Budget ‘showdown’ in December, both of which are extremely serious issues concerning the future of our currency and economic standing, but will not be dealt with as such. We’ll be watching closely for any changes from now until January and ready to respond pro-actively.

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