Gold and Dollar Market Summary
Reality is starting to hit major money centers. Former Chairman of the Federal Reserve Greenspan saw to that today. Both Greenspan and former Chairman Volcker have now put RIP on the dollar box.
As you can see from the article posted here diversification out of the US dollar is multifaceted. It is not simply enemies of the US but friends and competitors that are in the diversification mode. Please understand that diversification does not necessarily mean selling dollars. What it means is not more significant buying.
Diversification out of the dollar has two implications. One is that markets are momentum devices and therefore all that is required to bring the dollar down to .8050 is a deceleration of buying. That has happened.
The other implication is that if central banks are diversifying out of the US dollar they are less likely to purchase US dollar products. That speaks ill for the US Treasury Capital Inflow known as the TIC report. If the inflow of non-US capital is less than the US Trade deficit for three months in a row the US dollar will break well below .8050. If the TIC report ever went negative two months in a row the lower estimates for the USDX would be achieved.
As far as the geopolitical situation goes, it could not be worse. There is no question whatsoever about there being a civil war in Iraq. It is there. There is no hope Iraq forces that have failed and continue to fail to show up at the battle will handle all security matters a year from now or ever. Iraq is a lost cause if the made in Hollywood government goes down as it probably will if not now, soon.
The Taliban are more organized and better equipped. They are significant opponents for the heroes that fight at the orders of their commanders. Any force that can take on US Marines head to head are dedicated fighters. Afghanistan is getting hotter and hotter as Iraq goes up in civil flames.
The dollar is going lower. Gold is going to $682 then $750. It will in 2007 and 2008 equal and then exceed old highs.
The break out is either here and now or after the first week of January. Both are so close as to make defining the difference a matter of splitting hairs.
Today you witnessed how the chairman of the board is demoted to meaningless as the US Treasury finalizes a friendly acquisition of the Federal Reserve System. Who knows, in time it might even work better.
Right now the economy takes precedent over the dollar but unfortunately they are both going south.
Click here for today’s action in Gold and the USDX
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