For months and months I’ve been warning investors that the dollar was going to come under extreme pressure sometime this year. I expected it to probably happen in the spring. Many people thought I was nuts. They were sure it was the Euro that would collapse, despite the fact that the EU is doing everything they can to protect their currency while Bernanke is doing everything he can to destroy ours.
On Friday the last confirmation occurred to signal the final collapse is now underway. On Friday the November yearly cycle low was violated. Cyclically that is a major catastrophe.
We are now going to see the dollar get absolutely hammered for the next couple of months. The viability of the dollar as a currency will be questioned. There is a decent chance it may start to lose it’s status as the world’s reserve currency. (Coincidentally about the time everyone becomes convinced the dollar is going to hyperinflate that will be the point where the three year cycle low will bottom and we will see an explosive rally, along the same lines as what happened in late `08.)
This is what all the top pickers in gold and silver fail to understand. They are all trying to call a top based on charts without any understanding of what is happening to the currency.
In a currency collapse the market will flee into assets that will retain their purchasing power. Four weeks ago we went past the point of the stock market being able to protect one from Ben’s printing press any longer. So buying stocks as protection is no longer a viable solution.
Four weeks ago spiking inflation rose to the point where profit margins are now being hit. Ben will no longer be able to prop up the stock market by further debasing of the currency. Stocks have now decoupled from their inverse correlation with the dollar and will now follow the dollar down.
The more Ben prints and the faster the dollar collapses, the faster the stock market is going to fall…and the quicker the economy is going to roll over into the next recession.
What will happen is that liquidity will rush into the commodity markets as the only true protection against the accelerating currency crisis.
This is why one has to ignore the top pickers and chartists. Overbought oscillators and stretched conditions are meaningless in a currency collapse. This is all about fundamentals. It’s about protecting your purchasing power. You can’t do that by exiting the one sector fundamentally best suited to protect you during this storm.
Now isn’t the time to be selling your gold, silver or mining stocks, its time to be buying more.