Saturday, August 28, 2010

Decoupling Now, Currency Crisis Soon

NIA believes that the decoupling we have been predicting of precious metals from the Dow Jones has now officially taken place. A year ago we would consistently see precious metals and stock market prices rise and fall in parallel. We have now seen the Dow Jones decline by 6.1% from its high on August 9th, along with both gold and silver rising by about 3.3% during this same time period.

The Dow Jones to gold ratio is now down to 8.1, near its low for 2010 of 7.9. The gold to silver ratio still remains at a historically high level of 66. However, silver was up today by $0.65 to $19.03 per ounce, its biggest one day gain since early June. We expect silver to significantly outperform gold in the months to come.

One year ago, almost all mainstream economists on CNBC were calling for either a "U" or a "V" shaped economic recovery. NIA said that prices were rising only due to inflation and there would be no economic recovery. NIA went into detail about how destructive government programs like the homebuyers tax credit were helping to artificially boost economic numbers, but as soon as these programs were over, economic activity would collapse to new lows. NIA was right. Now that the government has ended its homebuyers tax credit, we just saw sales of previously owned homes decline in July by 25.5% from one year ago, to their lowest level in a decade. We also saw new home sales in July based on the signing of new contracts decline by 32.4% from one year ago. (more)

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