Gold has opened up slightly in early morning hours in Asia, still above the $1,200 resistance level and still in a range overall. Silver has been slightly stronger than gold and resting above the $17 resistance level. With the dollar perched above 96 on the Index now, it seems to be putting more pressure on the metals and this will continue unless the dollar moves below 96. Watch a break above 97 on the Dollar Index to get confirmation that gold may be headed to new lows. There is no earth shattering data coming till the next jobs report, and market makers may use this time to play havoc with gold, pushing it closer to those Nov. 5th lows of 2015. From there, gold can easily take out the $1,000 mark before settling towards a final low.
Only traders really care about what will happen next with gold, those investors and the one’s who are trying to catch a bottom to buy their last bit of physical metal. Those who view gold as insurance don’t really care that it could fall another 20% to 30% from current levels. If anything they will try to find a way to buy more at those discounted prices for a very nice profitable trade. If gold were to get those levels, it will make for the best buys in the metals seen since the early 2000’s.
While the stock market is poised for a pullback, which can take the mining shares down with it, the safe haven I think will be U.S. treasuries again, with the rate falling once more below 2%. But I think the stock market will bottom and we hit all-time highs again before October, and this should coincide with the final lows in gold.
Will there still be deflationary forces that can make this decline in precious metals prices drag out longer than I expect? Yes, there could be. But the Fed will fight this deflation tooth and nail, albeit a little slow as usual. Deflationist like Harry Dent who is calling for gold to fall to $700 (he has said lower) don’t account for this Fed action that I think will be a game changer. Let this Fed action signify we are closer to a bottom in gold if not marking “the” bottom.
As for now, as I have been saying, look at what the dollar does for short term direction/trading.
If you’ve been reading my articles and Current Thoughts for awhile, you are also then aware of my many indicators that I gladly reveal to you so you can be on the same page as me. When people call in to us and inquire about buying gold and silver, they are surprised to hear I am bullish on the dollar and somewhat negative on gold. By the time they are done talking to me, they realize I can back up what I say too. While many who sell gold have continually called for the dollar to crash, it hasn’t. In fact, since 2011, the dollar has been the best currency in the world to own, outside of maybe the Swiss franc, but even the Swiss used the Euro for a bit as their way of weakening it. The dollar has been the best game in town yet some who sell gold keep calling for a collapse.
Along with this dollar run up in strength since 2011 has been the fall in the price of gold. Is this a coincidence? I think not. I even pointed this potential deflationary scenario and a potential for a stronger dollar in Chapter 4 of my book, Buy Gold and Silver Safely which I wrote in 2010. That chapter is the outline for the future and the premise for my economic thought for my next book “Illusions of Wealth” due out later this year. If you haven’t read the first book, I suggest you get a copy and read the first 4 chapters at least. Read over all the reviews on Amazon.com and you’ll see what people think of it. My goal with what I write is to simply bring awareness so you can make good decisions when it comes to your investments. Everyone wants a win/win scenario and that’s what I try to achieve by offering the lowest prices for gold and silver coins and bars in the U.S. It’s not a bad business model to have, but what you get is my thoughts on what is occurring for free. Those haven’t been too bad either and I think you’ll find that to be the case with my next book. I give you the keys to your own investment kingdom. If you have the basics and awareness, you’ll be prepared to flourish in the years to come.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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