We'll See Stronger Dollar, Weaker Gold Through Year-End
Doug Eberhardt | Aug 28, 2013 12:12AM ET
Being one of the few out there who sells gold and has called gold lower since September of 2011 when the dollar hit bottom, and having called a summer rally most recently in June, I turned cautious on August 12th for short term traders, expecting a bounce in the dollar. The double top for gold has turned into an extended formation in the chart as seen below, and I think we are about at the highs based on the price action yesterday.
We also saw the gold mining stocks get hammered from their intra-day highs yesterday, despite the price of gold not pulling back that much.
In this article I will show the dollar and gold charts again and try and predict short term price action in gold, and also explain more on what’s going on with the dollar that will effect gold’s price over the short term. Lastly, I will lay out my reasoning as to why gold could fall into the end of the year and why January may just be a stellar month and 2014 and beyond, stellar years. But we have to let this deflationary credit contraction play out a little longer.
Positives for Gold Over the Short Term
1. We are fast approaching $17 trillion in national debt.
Congress is set to battle it out on increasing the debt limit from its current agreed upon limit reached in May of $16.7 trillion to some higher number like Congress always does. We are Flow of Funds report .
F.1 Total Credit Market Borrowing and Lending
To sum this section on deflation up, the amount of derivatives were contracting in 2009 and 2010 with the financial crisis ending the lives of some corporations like Lehman Brothers and seeing others swallowed up by larger players with back room deals with the Fed. The Dodd/Frank bill was passed and everyone learned their lesson right? NO – what has occurred is the Too Big To Fail (TBTF) banks now know they have a life-line in the Fed and are doing whatever they want. Why? Because the Fed is the entity that handles oversight of the Financial Stabilization Act! The Wolf is in charge of the Hen House and guess who the Hens are? This is my number one reason for having possession of gold as insurance yet you never see anyone write about it.
Get The News You Want
So even though this is under the “negatives” for gold short term, the derivatives issues is still a longer term (probably starting next year) recipe for disaster for our entire financial system.
Conclusion
I didn’t address QE as the entire last year when the Fed was implementing QE, the price of gold fell, and currently with talk of tapering, the price of gold is rising. The dollar is what I look at for the short term. At some point, as I have said, I will become dollar bullish and gold bullish.
As I state in many of my articles, they way to invest in gold and silver is to dollar cost average into a position.
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