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.
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