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ENDLESS HORSE POWER: Gold Shows Uncanny RESILIENCE!
Investors are forgetting that although the USD represents 63% of the world’s currency supply, the Yen and the Euro represent a combined 25% of global currency units as well.
As you can see, in terms of Japanese Yen, it looks like we’re on the verge of blowing through the ultimate resistance level any day now.
It’s not just the Yen, though – gold is trading at all-time highs in over 70 national currencies. What’s huge for us, then, is that it’s also rallying big in terms of dollars – even though, compared with other currencies, the USD is also rising in relative value.
In other words, we’re in the midst of (1) rising stock market prices, (2) rising USD value and (3) rising gold price environment, which is an extremely rare combination.
We last saw this back in 2005 and between 2008 and the middle of 2010. Right after these moments, gold began its most aggressive moves, as the dollar fortress finally cracked wide-open.
Let me tell you that we’re nearing another one of these eruptions. Gold is already clearing the way in the world’s 2nd most robust currency, the Euro:
One of the most profitable trades of the past decade has been converting dollars into gold, exploiting the bear market in USD-denominated ounces to own additional ounces; then selling gold for depreciating Euros, and buying distressed real estate apartments in Germany – which has become an attractive housing market.
Having a global frame of mind in place is critical. Enjoying diversification – not only between asset classes – but also among various continents, jurisdictions, and political systems is imperative these days.
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Gold is already trading for $1,345, but this is happening while the markets are enjoying their strongest rally in 27 years and are extremely OVERBOUGHT. Not only that, but the dollar is actually holding strong – though the FED minutes clearly show that the era of higher interest rates and balance sheet reductions is mostly behind us.
Wealth Research Group is well aware that most investors are watching the yield inversion between the 2-yr and 10-yr bonds like a hawk for the purpose of predicting recessions, but we must keep in mind that nearly 40% of bond pairs are already I-N-V-E-R-T-E-D at this point, as the chart above shows.
What we need to turn this little party into a genuine Brazilian Carnival is SILVER. When the gap between gold and silver narrows below 75:1, the speculative traders will jump on the bandwagon and this will turn into a full-blown firework show. Currently, the ratio sits at 83:1, which, again, is a rare occurrence.
Every indicator out there is working against gold: a high dollar, a major gap in the gold/silver ratio of 83:1; but as it stands, the price is nearing 52-week highs, trading at a 10-month record.
The S&P 500 is going to either hit a brick wall at the 2,800 level and retrace forcefully back by 5%-10% – as it has, historically, when reaching such OVERBOUGHT technical patterns – or it will break through and rally to all-time highs. If it corrects back, we have our Watch List candidates; if it blows through 2,800 like a hot knife through butter, the precious metals sector will light-up. The central banks will be cornered, not able to hit the brakes on inflation.
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