Gold’s new “resistance” barrier is an even number, $1700. Most of the newsletter writers are saying $1550 or $1600 should stand as a bottom. More even numbers. Volatility is to be expected with moves of up to $100 a day, either way. It will probably feel worse than it actually is, ups and downs going nowhere, at least until the price decides it is time to rise; as in over $1800.
There is no doubt that the dollar is slowly losing favor as “the” currency of settlement. It’s now only a matter of time before the dollar kisses off .8000 on the USDX and heads toward the “line in the sand” at .7200. Sinclair says it will be on the third attempt. The third attempt to penetrate .7200 will be when the breakthrough occurs, then it’s look out below.
There are such strong counter forces at work it makes it difficult to predict, with accuracy, where things are headed in the short-term. As to which way the metals go from here, the long-term is easy, but the short-term is a “roll of the dice.” The reason is because there is a “bully” in the playpen with the kids. Let’s call the bully JPMorgan. It fits. The bully can intimidate the “market” for short-periods and in facts does, but in the end the bully cannot win. But the bully can make you cry a few times along the way.
The dollar literally wants to fall, but the euro is in such dire straits that it makes the dollar look like the lesser of two evils. It is a counter force to the loss of “demand” for the dollar (as the only international settlement currency). What is happening is that the truth is getting harder and harder to deny. The media can report government numbers that indicate things are improving and inflation is no-where to be found, but gas is $4.30+ in my neighborhood and you can’t bring home very many groceries for $100 anymore.
$100? My wife would give me a look and say “I can tell you aren’t doing the shopping! $100 bucks hasn’t bought much at the grocery store for a long time now.” Reality is what you believe, but it is hard to convince yourself that it is hot outside when you are shivering. It reminds me of one of my favorite Richard Prior bits where Toodlums goes to the Voodoo Lady to find out why “his feets” have swelled up and look like melons, and he is such a mess. “Miss mam,” he says to the Voodoo Lady, “please tell me what is wrong with my feets?”
The Voodoo Lady says, “Someone has put a hex on your ass.” Then she asks him, “Toodlums, what are the symptoms?”
“Symptoms,” says Toodlums. “Symptoms my ass – you lookin’ at the symptoms!”
He then asks the Voodoo Lady, “Can you fix my feets?”
I’m not going to tell you what the Voodoo Lady uses as a cure – you’ll have to find an old LP and play it for yourself, but I can tell you the Voodoo Lady did fix his feet. He got “healthy feet,” but they were tiny. He had little tiny feet. You could plug in any of the major candidates for President for the Voodoo Lady.
$4.00 gas is a symptom. $1700 gold is a symptom.
We are all “lookin’ at the symptoms!” The question is what are we going to do about it? Given the choice to see things as they are or turn away and hope for the best, most people chose to turn away and deny “the symptoms!” Every time I explain to someone why the future is not what they think it will be, or want it to be, I sense that they are saying – to themselves, of course – “Why is he so negative and why is he trying to ruin my day?” I’m only the messenger. Don’t shoot!
PS: Although there is no visible cure for the economy, the dollar and the social problems that will accompany a fall in either, there is a cure for you and me. We can slash the dollars in our portfolio and replace them with hard assets. It doesn’t help solve the problem but it will help us live through the problem. It’s about all we can do.