Gold Headed Higher and the New Bubble in the US Treasury Market

By Bill Bonner • May 22nd, 2009 •

Are you watching the dollar? Maybe the unwinding of the dollar- based paper money system is coming sooner than we expected. Yesterday, the dollar fell again - now it costs $1.37 to buy a euro. And if you want an ounce of gold, it will cost you $937.

It looks to us as though gold is headed to $1,000 again...maybe higher. This is not what we expected... Not yet anyway.

What we still expect is a broad, long rally in stock prices. We think the Dow might go back to 10,000 before it is over. This is the rebound we were waiting for. It should boost asset prices generally - including gold, commodities and oil - as well as stocks.

Oil, by the way, rose $2 yesterday too. It's back to $62.

But this trend is probably a fake out. Underlying the positive market news is an economy that continues to decay, degrade and deflate. Remember, this is a depression, not a recession. The bubble era is over. Because the transmission is broken. The financial industry has blown up. It won't be repaired. Instead, it will be bailed out...nursed along...and mollycoddled. (more)