The Yen Is on Fire, Gold and Silver Continue Their Breakout

We kept wondering the past 4-5 months when the dollar would end its head scratching rally; last week we wrote that signs of "the" shift were finally afoot, but we wanted to wait a bit longer to see confirmation. [Dec 11: Dollar v Gold - Can we Trust this Change?]

These signs continue, and at this point, I want to be a buyer of gold, silver - heck even perhaps the Yen on pullbacks. For pure momentum guys, I guess you can buy here, but these are "too hot" for me at this point. Even the euro is firing on all cylinders versus the dollar. To 'save' the economy, the Fed made it clear yesterday that it is willing to trash the dollar.

The scary proposition for us as Americans is if their campaign will transfer the worry from a financial crisis to a currency crisis. My stomach was rolling yesterday to see the giddy economists on CNBC last night saying the Federal Reserve can buy every asset in the United States if they want - their balance sheet is "infinite". Sure, if you want to be USSR and you want a currency similar to Zimbabwe.

The yen is on fire

The euro is on fire

The inverse of the dollar is on fire - UDN

These are our 2 positions in gold and silver from last year

Kinross Gold (KGC)

Silver Wheaton (SLW) - a double in under 2 weeks!

Here is the double long gold ETF - DGP

Disclosure: No positions

Comments

[Greg Pinelli:]

For weeks we've been hearing (on this site and others) that the Fed was out of "bullets!" Nothing could be further from the truth. The Fed has unlimited resources since they are created out of the imagination and virtual air.
The demise is not to be worried about..hedge with gold and some of the equities Mark mentions above..SLW and AUY look very solid..and ESPECIALLY beaten down CDE is highly desireable.
In this upswing gold will likely cross the $940 range before retreating..Silver is (as always!) the outlier..my sense is it could go to $15 by the end of January.

2008 Dec 17 08:57 PM

[nmelendez:]

I am curious now. What is the hipotesis you use to arrive at this conclusion?
I am looking at historical K-waves, Dow/gold ratio and dollar devaluation and all i see is gold at 1200. i do see it going back down to 800 and staying there due to demand but thats still a ways off.

2008 Dec 17 10:13 PM

[Philly Jim:]

Doesn't make any sense! Shippers and comms back on the rise?! There is nothing to ship, oil is sitting on ships in the water, grains and other foods are stockpiling, factories are shutting down en-masse across the world, and were back to pumping up commodities and breaking down the dollar? My only theory is that institutions need to park their clients with risk appetite's money somewhere and why not commodities? If we talk them up, they will go up, against the fundamentals, seems to be a favorite bubble to inflate. The Euro's pop against the dollar is just ridiculous, were way ahead fo the curve and will be out of this speculator's disaster faster than anyone else. I'm looking forwad to the Obama nation! -=) Happy Holidays everyone!!!

2008 Dec 17 11:45 PM

[GMiki1:]

I bought more SLW last week. If I traded currency, which I don't, I'd buy the Canadian dollar. I've never seen the yen this strong against the dollar in my life--and I'm not as young as I used to be. But I prefer the Canadian economy based on resources than the Japanese economy, based on manufacturing.

2008 Dec 17 11:55 PM

[hedgeman:]

DX finally moved back down. Out 2009 target remains 65.xx for DX. We have closed our EURJPY shorts and hold only USDJPY and DX shorts. We also entered long gold after daily close above 835.

EURCHF broke 1.5550 and we went short the brake. Today we also open SP500 shorts (we hold 950-970 are as potential top and will accumulate shorts above 900). Our view is down till March09 and then 6month of stability - rising equity markets. However tempting it is to short UST it is still too risky at the moment.

2008 Dec 18 12:28 AM

[who:]

The Fed can buy everything under sun if its credit is intact by trashing the dollar credit is lost. No one will buy US assets if the currency continues to drop.

2008 Dec 18 03:34 AM

[rabid sasqu...:]

Jack that gold up so the fed can use all the gold its hording to pay off its partners in crime. They will have plenty enough to spare for the new gold backed currency we will not be able to afford.They own us now...say good bye to the dollar as we know it.

2008 Dec 18 04:48 AM

[Econ 101:]

OK, they use gold to pay off the US debts. Then they cut the price of gold and force everyone to sell back to the government (ala FDR).

How will Pelosi's new Windfall Profit tax on retirements effect that? I think I will go to Mexico and sneak back in as an illegal so I can get on her gravy train.

Which set of crooks is going to win??

2008 Dec 18 11:07 AM

[Nikola:]

You think Mexican illegals are riding the gravy train? I dare you to "sneak back in as an illegal," and see what that life is like.

You are full of it.....

2008 Dec 20 11:13 AM

[drl274:]

then why are there 7 million of them here?


On Dec 20 11:13 AM Nikola wrote:

> You think Mexican illegals are riding the gravy train? I dare you
> to "sneak back in as an illegal," and see what that life is like.
>
>
> You are full of it.....

2008 Dec 21 02:42 AM

[know nothing:]

We are in a bullish cycle for commodities,this cycle could last out to 2012 or beyond. Expect stock market to have modest gains in this time frame,as company's become more efficient,the weak die off, giving the companies that survive a larger customer base to profit from, and as retailers depleat inventories inflation should increase, , for it's safer to raise prices to control supply and demand,rather than hire more employees and raise a company's overhead costs.

Jan 02 06:19 PM