Coming Dollar Crisis = Lower Stock Prices + Much Higher Gold Prices

A Massive Gold Rally Is Underway

With the U.S. dollar in decline Treasuries will also be panned. As such, cash is beginning to head toward real money in a flight-to-safety – and there is no way precious metals can absorb a panic-level volume of capital without a massive price adjustment. Words: 530

So says Deric O. Cadora (www.thedocument.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com,  has reformatted and edited […]  further for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Cadora goes on to say: 

The U.S. Dollar Is On The Verge Of A Breakdown

[An analysis of the chart of the U.S. dollar below suggests that it is on the verge of a breakdown which will] bring an end to the cyclical equity bull market that began in 2009. Periods of uncertainty and turmoil tend to bring down stock prices, and I expect the result to be no different when the turmoil is dollar-centric.

The S&P 500 Has Just Pierced Its Intermediate Trend Line

Typically, a weak dollar would be expected to drive equity prices higher, but as stated above, the suspicion is that when the decline is extreme, traders will seek safety rather than speculate. Is it any small coincidence that, as the chart below shows, the S&P 500 is piercing its intermediate trend line just as the dollar is threatening to break down?

I suspect that once the big boys realize the jig is up, they will be pounding down every exit door in sight. Another test of the 75-week moving average might be in store for the near future.

Sign up for our FREE weekly “Top 100 Stock Market, Asset Ratio & Economic Indicators in Review” 

Gold Is About To Become The New Flight-to-safety Asset

So, if a flight-to-safety is to ensue, what asset will money seek if the traditional target of flights-to-safety… the dollar… is the asset causing the panic? Precious metals seems to be the most likely answer.

Gold needed less than a month to recover most of the $120 drop out of its December high… and the dollar hasn’t even broken its trend line yet… Gold rallies tend to accelerate during each of the daily cycles contained within a larger-degree rally. Furthermore, gold and silver markets are quite thin compared to, say, the Treasury market, which usually receives the bulk of safety-seeking capital. Treasuries can easily absorb such inflows, but with the dollar taboo, Treasuries will be panned as well. Cash is headed toward real money, and there is no way precious metals will absorb a panic-level volume of capital without a massive price adjustment.

Conclusion

The stage is set for the largest precious metals rally of the bull market.

*http://www.thedocument.com/stock_market_blog/2011/20110224_dollar_crisis_to_send_stocks_lower.cfm

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
• Sign up to receive every article posted via Twitter, Facebook, RSS feed or our FREE Weekly Newsletter.