Gold & US Dollar Rise

We are taking some time today to reflect on some recommendations by investing guru Richard Russell. Read the whole thing here.

Gold is no longer seen as “just another commodity,” but increasingly it is accepted as the “only safe currency” (this is increasingly the big money view).

The Greek situation is far from being solved. Should Europe and the IMF bail out Greece? Germany is taking a hard stand against a bailout without very harsh new disciplines for Greece. Germany’s lady leader, Ms. Merkel, is proving to be one tough baby, and she’ll do what, in the end, is best for the fatherland. If Greece is bailed, will Portugal and Italy and Ireland be next?

Managers of sovereign funds don’t know where safety is. They know it’s not in euros, and they suspect it’s not in U.S. dollars. What’s left? Could it be gold? China and Russia think it is

Gold is rising in the face of weakening oil. It would be dramatic and bullish if gold detached itself from oil and all other commodities.

My suspicion is that the stock market is tracing out a major top is becoming stronger. The stock market is loaded with amateurs who have been hoping to recoup their losses. If the stock market is actually topping out here, the public is going to turn black bearish. In the past month or two, many Americans have returned to the stock market, and others have bought foreclosed property under the belief that real estate has hit bottom and finally turned up. The Russell opinion – if the stock market is topping here, I believe that the real estate market will sink to new lows (and this time we’ll see the commercial real estate market collapse along with the housing market). If you’re thinking of buying a real estate bargain, wait a while.

The action of gold during this period is superb. I’ve asked my subscribers to be in gold and cash, and to await developments. That’s still my preferred position – cash and gold.
We examined the Oil & Gold relationship some time ago.  The following chart will revisit our findings:

As the charts indicate, gold is decoupling from other commodities, including oil. As oil falls and gold strengthens, an ounce of gold now buys nearly 15 barrels of oil. Gold has also decoupled from the US dollar. Gold is now moving higher even as the dollar index rises rapidly. This is a warning regarding the long term health of the US currency and all other fiat currencies.