Whether or not a notable pullback correction comes for gold, who knows? Who cares? This is not a time to go in & out, selling & buying back a gold position. It is a time to acknowledge a powerful global shift that will send the US Dollar into the dungeon, and deliver gold to unheard of heights. The next target for gold is 1300. The targets for gold are dictated by the size of the jumps from the head and shoulder of the inverted Head & Shoulders pattern. The lost respect from the gold bullion bar fraud, the Weimar output of printed money, the monetization dependence from global isolation, and the lack of leadership all tend to pull the US Dollar down. More accurately, these factors will push gold up into a dominant currency position fully recognized, as nations struggle to rebuild their banks after toxic US infection that does not end.
G-20 CONFIRMS PARADIGM SHIFT
The Scotland gathering of bankers had some key signals to report. Note the signal how they ignored the US Dollar as a topic in the open chambers. Conclude they wish for benign neglect, where the US$ can find its true value much lower, and eventually depart as the global reserve currency. Note the signal how they urged continued global stimulus. Conclude they wish for the major governments to continue to debauch, undermine, and destroy the major currencies such as the US Dollar, British Pound, European Union Euro, Swiss Franc, and Japanese Yen. Conclude they wish for the emerging market economies to be given massive assistance by the industrialized submerged market economies. The more the prominent older nations render harm to their banking systems, economies, and balance sheets, the easier it will be for Brazil, Russia, India, and China to conduct the business of walking the earth as new leaders. The new BRIC nations will build their dominant positions one brick at a time. The Paradigm Shift is away from the US Dollar, with power shifting from West to East and in particular toward the BRIC nations. Their most recent visible victory is killing off the G-8 Meeting, which does not convene anymore. Not only does the G-20 serve as the global banker conference forum, but the Chinese have a lead voice, precisely as they demanded. Creditors win their way.
The commodity currencies are in a different earth zone. My analysis has stated that the prominent older nations, the so-called industrialized nations, will not raise their official interest rates. They will only talk, since their banks are insolvent and their government debt securities are caught in asset bubbles. The Euro Central Bank is the most likely to raise interest rates, but only as part of a more diverse strategy to split the EU itself. The German nation has been drained by $40 billion per year for each of the last ten years, and resentment is strong. The Australians and Norwegians hiked their official interest rates in recent weeks. They have commodities to fortify their national economies, and do not concentrate on the sale of inked paper in tainted export.
The Paradigm Shift is toward a more legitimate group of currencies. It is toward currencies backed by hard assets. The currency basket from the Intl Monetary Fund seems like the temporary device. It is actually a Straw Man carrying a straw basket. Before the grand shift is complete to at least one hard asset currency, the doomed currencies will be bound together with IMF twine. The bankers believe the IMF straw basket will give them the power to control the decline of the US Dollar, or protect themselves from that decline. The strategy might succeed. It will surely enable the gold price to climb versus all currencies. Gold will be like Moses in a basket as a baby, except moving upstream. The candidates for hard asset currencies are the New Russian Ruble, the Gulf Dinar, maybe even a New Nordic Euro. The process will take time, as some bumpy roads lie ahead, and military protection is required.
EXIT STRATEGY & WEIMAR DOLLARS
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