Founder - PinnacleDigest.com
Abnormality in the market today - gold and the dollar are moving in the same direction. They’re going up!
One is undervalued still, one isn’t. But I don’t need to tell you which one as it’s quite obvious. So let’s continue.
When you look at the headlines and apply common sense, it’s not that strange to figure out why both gold and the dollar are up on this down day.Greece is unravelling and it is causing the speculators of the world to apply the guilty by association rule to Ireland, Portugal and Spain.
Greece’s credit rating was cut three steps to junk by Standard and Poor’s. This is the first time a European nation has lost its investment grade since 1999 when the currency was introduced.
The Euro is in deep deep trouble. I don’t know where the buck will stop, but I don’t think parity between the Euro and US dollar is out of the question. Does it make fundamental sense? Absolutely not, but fundamentals were thrown out the window over a year ago.
Smart traders, who believe in fundamentals, saw today as just one more reason to buy gold and it is now up $15 an ounce.
Currency traders, whose job I do not envy, are bailing on the Euro and seeking safety in the only place they know, the USD.
Fundamentally I couldn’t disagree more with the the dollar trade, but emotionally it makes complete sense and I’ve bought into the UUP (Powershares US Dollar Index Fund) because of it. Looking like a nice trade thusfar.
I have no need to buy more gold or gold stocks right now because as you know, I’m very plump in that area already - just going to enjoy the ride.
If the markets begin to unravel (still a bit soon for that) and gold can begin moving in its own direction based on worldwide uncertainty of value in other asset classes such as real estate, stocks and currencies, you don’t want to be on the sidelines. Just something to consider for now as there is still plenty of time to buy into gold for cheaper prices I’m sure.
Have a good one,
Disclosure: Long UUP