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A few months ago we wrote an article
talking about how gold could rise to a price level that would represent
inflation, and if it was high enough it would pressure the economy (represent
that cost pressure). Oil prices rising to $5 gas in the US are in effect, and
indeed both high oil and high gold prices have converged and the US economy
is pressed.
At this same time, the USD appears to be
testing multiyear lows on the USDX, which I peg at about 70 on that index.
That index is heavily Euro weighted by the way, with the Yen a distant
second.
In any case the USD appears possibly
close to bottoming near this level, or perhaps 72. If so, it would be a
continuation of a multiyear low range for the USD at about 70 on the USDX.
What could this mean for commodities and gold and silver? Take a look:
Because we believed the USD may be
bottoming, we alerted subscribers that Silver was a sell to us:
Here was the alert sent April 25, 2011 :
25 Apr 2011 (11:39 am Central)
PrudentSquirrel alert - USD
GOLD YEN OIL DOW
“Subscribers,
The Dow appears to be driving market
sentiments, I know people have other more 'relevant' indexes but I like
to use the Dow. It’s testing that range 12200 and 12500 now.
The USD should find a bottom here
somewhere above the critical 70 level on the USDX particularly if US markets
weaken.
Gold is priced pretty near where I
believe it should be and Silver worries me as a bubble. Problem with bubbles
is they gain the most at the very end making it almost impossible to get out
mentally.
I do not feel gold is in any kind of
bubble but is presently fairly valued. Several years ago I told readers to
buy gold at anything under $1000.... That looks right on now. We actually
were the first that I know of to talk of the Gold $1000 USD floor several
years ago.
I don’t like this silver
bubble and who knows how high it will go. Silver is a classic speculator
market by the way, in case you feel it’s so -safe-
Just be warned of the silver hype. I
personally, now would sell it. That’s me and don’t yell at me if
silver rises to $100 then crashes!
The Yen has been weakened and that is
market friendly in general but this is probably only temporary. Oil is in
chaos with the ME in a new mess every week. This is totally unprecedented. Do
not speculate in chaotic markets…”
Needless to say that was one timely
call!
We do all our own research and I am not
aware of any other specific call like that on this silver bubble. We
reiterated this view to subscribers several times before this large silver
correction. We also have calls on silver’s real price today (where it
should settle, or bottom).
As to the USD let’s take a look:
If the USD were to find its usual
multiyear bottom at around 70, this can combine with market sentiments to
pressure some commodities and precious metals. Gold is much more reasonably
priced, and should resist hard corrections, we have new levels for a gold
bottom, as well as silver bottom.
Once again we have made an incredible
call, two weeks before this latest big market change in the USD and in
precious metals and commodities.
It is possible Silver can correct to a
new much higher base, which formerly was in the teens for a long time. Silver
should keep a good chuck of its gains but will find a new lower base.
Silver has other issues with its market,
it’s supposed to be smaller and much more speculative than gold, while
gold kind of meanders along steadily around $1500 for the moment. Again, gold
is steady and silver is very hyper or volatile.
In case you think this call might be a
fluke, we have made incredible calls on the USD now for years, usually
several weeks in advance of major changes. So, this is not a fluke for us.
To find out more about our recent calls
on gold, silver and the Dow and other major markets stop by our site and have
a look.
The Prudent Squirrel newsletter is our
financial and gold commentary. Subscribers get 44 newsletters a year on
Sundays, and also mid-week email alerts as needed. The alerts include quick
notification of important financial news developments by email. Subscribers
tell us that the alerts alone are worth subscribing for.
I had one potential subscriber ask me if
the newsletter has much more content than these public articles, i.e., if it
was worth subscribing. The answer is that the public articles have less than
10% of our research and conclusions that subscribers see, not to mention the
subscriber email alerts of important breaking financial news. We have
anticipated many significant market moves in the last year, such as imminent
drops in world stock markets within days of them happening, and big swings in
the gold markets within days of them occurring. We have also made a number of
good calls on big currency swings, such as with the USD, the Euro and the
Yen.
We invite you to stop by and have a
look.
Chris Laird
Prudent Squirrel
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