Could The Dollar Be In A New Bull Market?

[flying]

The $USD Index closed above its 50day ma yesterday for the first time since April. The ma has been desloping which is normally a precondition to an advance. If the buck doesn't fall precipitously in the next 8 trading days the 50ma will have gone flat and no longer be resistance. Just an observation and not a prediction of anything. Nothing overtly bullish here save for some positive divergences.

If so one has to wonder if the FED would then start easing up the interest rate & the effect that would have.

[sokal]

Dollar doomed? i don't think so. a dozen or more central banks are buying dollars like mad to prevent their currencies rising too fast. how long will that last? i have no bloody idea

A dozen or more central bankers are clueless and they will wake up one of these days. One day these central bankers will realize that an appreciating currency makes energy and commodities cheaper which is a good thing.

Is gas better at 85 cents a liter or would you prefer to pay $2 ?

Would you rather pay $5 for a loaf of bread then $1.50 ?

[sokal]

on the other hand i also don't believe in a big USD recovery as carry trades are too tempting and there is neither a sign nor a valid reason for the FED to raise interest rates.

The carry trade is what makes an unexpected huge spike in the USD very probable.

If some catalyst, like an unexpected geopolitical event, causes the USD to suddenly add a few % then all carry traders will bail out of their positions. This "bailing out" will be in the form of speculators selling oil, metals, equities, commodities, other currencies etc., basically buying the dollar and selling everything else. It's called a short squeeze.

When these securities start selling off their prices will plummet and other investors/speculators will start selling these securities too and move their money into fixed income funds, aka a flight to safety, further driving up the dollar.

A dollar short squeeze + a flight to safety = spectacular peak in dollar value and spectacular decline in prices of everything else.

It's not a guaranteed thing but very probable, and the more money goes into the carry trade the harder the recoil will be when it ends.

Long term I believe the USD will go the way of the ZWD, but short term a spike is a high probability event.

If you're just concerned about if you will be getting 29 or 36 baht for your dollars a few years from now then this is not all that relevant, but if you have a lot of money invested in equities and future contracts then you'd be well advised to monitor the situation closely and trade with very tight stops. For nimble traders the shorting opportunity of a lifetime might be on the horizon

The carry trade is slightly overrated. Its not that simple. Its not like oil is spiking up, its just hovering around a reasonable price. Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

[sokal]

The $USD Index closed above its 50day ma yesterday for the first time since April. The ma has been desloping which is normally a precondition to an advance. If the buck doesn't fall precipitously in the next 8 trading days the 50ma will have gone flat and no longer be resistance. Just an observation and not a prediction of anything. Nothing overtly bullish here save for some positive divergences.

If so one has to wonder if the FED would then start easing up the interest rate & the effect that would have.

A rate hike will spook the day traders for a week or 2 but the trend will not change. Even if they raise rates to 2%, 2% is still nothing. Say they go with 1%, the AUS central bank is already at 3.75% and will probably always be ahead of the Fed.

[Naam]

The carry trade is slightly overrated. Its not that simple. Its not like oil is spiking up, its just hovering around a reasonable price. Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

gold has been bought by India from the IMF by paying in SDRs.

[flying]

Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

gold has been bought by India from the IMF by paying in SDRs.

That also came to my mind when I read that.

But it made me wonder .....How does one obtain a SDR

Buying and selling SDRs

IMF members often need to buy SDRs to discharge obligations to the IMF, or they may wish to sell SDRs in order to adjust the composition of their reserves. The IMF acts as a broker between members and prescribed holders to ensure that SDRs can be exchanged for freely usable currencies. For more than two decades, the SDR market has functioned through voluntary trading arrangements. Under these arrangements a number of members and one prescribed holder have volunteered to buy or sell SDRs within limits defined by their respective arrangements. In view of the expected increase in the volume of transactions following the 2009 SDR allocations, the number and size of the voluntary arrangements has been expanded to ensure continued liquidity of the voluntary SDR market.

Edited December 5, 2009 by flying

[Naam]

But it made me wonder .....How does one obtain a SDR. Wondered if any country can buy SDR's with proper currencies once exchanged?

IMF member countries don't necessarily have to buy SDRs but are entitled to a certain allocation of SDRs as loan. otherwise SDRs can be acquired by any country using the ratio of currencies which an SDR contains. but countries cannot deal in SDRs directly with each other. the only way is via the IMF. then again, anybody can replicate his/her own SDRs if buying the proportionate currencies.

in the case on India it was not revealed how much cash and how much entitlement (or other loan facility) was used to buy the lion share of the IMF's gold.

[flying]

But it made me wonder .....How does one obtain a SDR. Wondered if any country can buy SDR's with proper currencies once exchanged?

IMF member countries don't necessarily have to buy SDRs but are entitled to a certain allocation of SDRs as loan. otherwise SDRs can be acquired by any country using the ratio of currencies which an SDR contains. but countries cannot deal in SDRs directly with each other. the only way is via the IMF. then again, anybody can replicate his/her own SDRs if buying the proportionate currencies.

in the case on India it was not revealed how much cash and how much entitlement (or other loan facility) was used to buy the lion share of the IMF's gold.

Thanks

Yes I was reading a bit more at their site.

Interesting actually both the current & their history.

Pretty amazing how much it has grown recently too

October 31, 2009

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on August 28 and a special allocation on September 9, 2009, the amount of SDRs increased from SDR 21.4 billion to SDR 204.1 billion (currently equivalent to about $324 billion).

[Beardog]

With unemployment hovering around 10&1/2 % I don't think the dollar is going towards an increase in interest rates . as much as I think the guys that pull the strings are jokers, I don't think they are apt to shoot themselves in the foot yet. And the minor lowering this week in unemployment might just as well be benefits are exhausted soon to return. To yesterdays status. I am from the U.S. they are getting killed back home, that & I think the democrats know if they do something stupid it will be a change of guard quickly for the senate in 2010. I am indeed no expert, but it would seem according to history interest rates go up when the economy is going strong or else it stagnates.I am not factoring in inflation just observing how the U.S. has dealt with rate increases. They need to sell sell sell & by raising rates will just exasperate the scrooge dilemma!

I forgot the original question: The dollar is definitely In a bull <deleted> market. It is great for exports- but is killing the country as no one is getting to reap the rewards except corporations that are getting more business from exporting.

They raise interest rates UHHH can you say Lynch mob!

Edited December 6, 2009 by Beardog

[Orion76]

The carry trade is slightly overrated. Its not that simple. Its not like oil is spiking up, its just hovering around a reasonable price. Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

Have a look at the intraday chart of the USD, Gold and Crude for last Friday.

Losing 3% on a GC or CL contract in one afternoon really hurts, ouch. Why such dramatic moves in one day, what happened Friday?

What's the maximum % you think a black swan event can move the markets in one day? How many % would you let GC or CL or ES move against you before you start selling?

[sokal]

The carry trade is slightly overrated. Its not that simple. Its not like oil is spiking up, its just hovering around a reasonable price. Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

Have a look at the intraday chart of the USD, Gold and Crude for last Friday.

Losing 3% on a GC or CL contract in one afternoon really hurts, ouch. Why such dramatic moves in one day, what happened Friday?

What's the maximum % you think a black swan event can move the markets in one day? How many % would you let GC or CL or ES move against you before you start selling?

It only hurts if you went 100% in the day before. How many people did that ?

Black swan events are the reason you want to own gold.

[VegasVic]

Mabey this is wishful thinking but some economists interviewed on Bloomberg have said there is going to be a substantial increase in U.S. interests rates in 2010.

So this would cause dollar appreciation, right ?

Morrobay, A substantial increase in interest rates in the U.S. in mid to late 2010 is basically a given at this point in time, the rate increases will however only be the second leg in the Dollar bull run in 2010. The primary reason for the Dollars surge next year will be the unwinding of the Dollar carry trade (perhaps the most underreported story in the business media). The Dollar carry trade is poised to begin unwinding any time now, my best guess is that it will begin in earnesrt by mid Febuary. By April Oil will be heading back to $50/bbl and gold will be back below $900/ounce. As far as gold goes there could very likely be one more quick pop to $1300-$1350, this will be the final sucker rally in gold and the traders at GS and elsewhere begin to unwind there gold positions. Look for a lot of media hype in gold in January, you will likely see a multitude of analysts predictions of $2000 gold at that time, this will signal the top of the gold bubble. The easiest way to make money in 2010 will be to short gold and go long the dollar. GLTY!

[flying]

Whoa Vegas Vic !

How are you? Have not seen you since last Thanksgivings

Glad to see ya back.

PS: but your still blind to gold

You remember when I asked about it at 735?

You told me thats crazy wait for 400

Edited December 7, 2009 by flying

[VegasVic]

Whoa Vegas Vic !

How are you? Have not seen you since last Thanksgivings

Glad to see ya back.

PS: but your still blind to gold

You remember when I asked about it at 735?

You told me thats crazy wait for 400

Flying, I don't think it has been quite that long since I have been here nor do I remember telling you to wait for gold to go to $400/ounce before you buy. I made a windfall in the financial sector stocks this year and have been enjoying life to the fullest. BTW I also made some nice coin trading gold shares both on the long and short side for the past 14 months as well, but the gold bubble is in full swing at this time, hopefully you will be able to see the light beofre the bubble bursts and the Dollar carry trade unwinds. GLTY, and may you and your family enjoy a safe holiday season

[flying]

Flying, I don't think it has been quite that long since I have been here nor do I remember telling you to wait for gold to go to $400/ounce before you buy. I made a windfall in the financial sector stocks this year and have been enjoying life to the fullest. BTW I also made some nice coin trading gold shares both on the long and short side for the past 14 months as well, but the gold bubble is in full swing at this time, hopefully you will be able to see the light beofre the bubble bursts and the Dollar carry trade unwinds. GLTY, and may you and your family enjoy a safe holiday season

Well anyway I remember not this thanksgiving but last because I think you were buying some GLD?

As for your price prediction....

What does the chart readers here think is a good buy spot for gold?

Is support at or around 650-700? Technically speaking

Yes, there should be strong support in the $640-$670 level, once that level falls then a good "buy spot" for gold would be in the upper $300's (wait for about $365-$370 if possible). Then hold on tight to that gold and wait for about ten years and the next great gold run should begin

But it is all good.

Glad to hear you did well this year.

As for the gold bubble...well who knows eh? Remember I am not a gold investor.

Just didn't like having so much USD

My kids can have the metals someday who knows.

Personally I think the dollar is toast & even a corpse sits up a few times after dying & during cremation

Edited December 7, 2009 by flying

[cognos]

I don't hate the dollar, but I like the gold stocks to keep rising

[sokal]

Mabey this is wishful thinking but some economists interviewed on Bloomberg have said there is going to be a substantial increase in U.S. interests rates in 2010.

So this would cause dollar appreciation, right ?

Morrobay, A substantial increase in interest rates in the U.S. in mid to late 2010 is basically a given at this point in time, the rate increases will however only be the second leg in the Dollar bull run in 2010. The primary reason for the Dollars surge next year will be the unwinding of the Dollar carry trade (perhaps the most underreported story in the business media). The Dollar carry trade is poised to begin unwinding any time now, my best guess is that it will begin in earnesrt by mid Febuary. By April Oil will be heading back to $50/bbl and gold will be back below $900/ounce. As far as gold goes there could very likely be one more quick pop to $1300-$1350, this will be the final sucker rally in gold and the traders at GS and elsewhere begin to unwind there gold positions. Look for a lot of media hype in gold in January, you will likely see a multitude of analysts predictions of $2000 gold at that time, this will signal the top of the gold bubble. The easiest way to make money in 2010 will be to short gold and go long the dollar. GLTY!

The gold stock indexes have not come close to their 2008 highs and gold is over $1000 shy of its inflation adjusted high yet you think there is a gold bubble. You have it all wrong, the bubble is in fiat money. It seems as though you have been burned by the previous bubbles just like the rest of the sheeple and now you think you have a good grasp of identifying bubbles.

GS will unwind what ? GS and JPM are the only two participants shorting gold on the COMEX. The big banks are short gold, always have been.

[sokal]

Whoa Vegas Vic !

How are you? Have not seen you since last Thanksgivings

Glad to see ya back.

PS: but your still blind to gold

You remember when I asked about it at 735?

You told me thats crazy wait for 400

Flying, I don't think it has been quite that long since I have been here nor do I remember telling you to wait for gold to go to $400/ounce before you buy. I made a windfall in the financial sector stocks this year and have been enjoying life to the fullest. BTW I also made some nice coin trading gold shares both on the long and short side for the past 14 months as well, but the gold bubble is in full swing at this time, hopefully you will be able to see the light beofre the bubble bursts and the Dollar carry trade unwinds. GLTY, and may you and your family enjoy a safe holiday season

oooohhhhh, the 5 month long "dollar carry trade"

What did the central bank of India's purchase of 200 tons of gold have to do with this carry trade you keep talking about ? India did not borrow dollars from itself to buy gold.

BTW, your right, you did not tell anyone to wait for gold to go to 400, you said 300.

Edited December 7, 2009 by sokal

[Naam]

The Dollar carry trade is poised to begin unwinding any time now, my best guess is that it will begin in earnesrt by mid Febuary. By April Oil will be heading back to $50/bbl and gold will be back below $900/ounce. As far as gold goes there could very likely be one more quick pop to $1300-$1350, this will be the final sucker rally in gold and the traders at GS and elsewhere begin to unwind there gold positions.

thank you LORD for sending us prophets like VegasVic who's guidance will let us live happily ever after

[Orion76]

The carry trade is slightly overrated. Its not that simple. Its not like oil is spiking up, its just hovering around a reasonable price. Gold is being bought by central banks like India with USD,and never to be converted to USD in the near future.

Have a look at the intraday chart of the USD, Gold and Crude for last Friday.

Losing 3% on a GC or CL contract in one afternoon really hurts, ouch. Why such dramatic moves in one day, what happened Friday?

What's the maximum % you think a black swan event can move the markets in one day? How many % would you let GC or CL or ES move against you before you start selling?

It only hurts if you went 100% in the day before. How many people did that ?

Not many people would have, that is exactly my point.

Black swan events are the reason you want to own gold.

You want to own gold as an inflation hedge, if there is a flight to safety and the USD starts rallying and speculators start selling gold futures contracts then a lot of people may not feel the need to be hedged anymore all of a sudden.

But gold is a special case and by focusing on this commodity alone you are side stepping the issue.

Why do both the US and EU equity markets rally when the Euro appreciates, and why do both the US and EU equity markets sell off when the USD appreciates?

[sokal]

You want to own gold as an inflation hedge, if there is a flight to safety and the USD starts rallying and speculators start selling gold futures contracts then a lot of people may not feel the need to be hedged anymore all of a sudden.

But gold is a special case and by focusing on this commodity alone you are side stepping the issue.

Why do both the US and EU equity markets rally when the Euro appreciates, and why do both the US and EU equity markets sell off when the USD appreciates?

"if there is a flight to safety and the USD starts rallying"

That quote from you right there is the biggest assumption going on right now, its the most crowded trade there is. One of these times all of these people are going to be wrong.

[gregb]

By April Oil will be heading back to $50/bbl and gold will be back below $900/ounce. As far as gold goes there could very likely be one more quick pop to $1300-$1350, this will be the final sucker rally in gold and the traders at GS and elsewhere begin to unwind there gold positions. Look for a lot of media hype in gold in January, you will likely see a multitude of analysts predictions of $2000 gold at that time, this will signal the top of the gold bubble. The easiest way to make money in 2010 will be to short gold and go long the dollar. GLTY!

Gold bubble. I love it. A decade long continuous trend backed by solid fundamentals and people still keep saying bubble. I guess that is because bubbles are all people in the financial services industry understand. Honest economic realities have been absent from the US economy for over a decade.

A few weeks back we were seeing Goldman Sachs advising gold to $1400. GS? These are pawns of the Fed. Why would they be saying this? There was alot of speculation at that time. We also heard China saying it was concerned about the price, indicating they weren't the driving force behind the run. In truth, this looks more and more like the US goobermint artificially driving gold to a peak so that they could knock it back down this week in time for the treasury auction. Next week it should consolidate for a little while as people make sure the manipulations are over, and then within a month return to its relentless trend upward.

My opinion is there will be no repeat of 2008 in 2010. The Fed knows China will sell hard into any sustained dollar rally. The Fed will not raise interest rates. That is the only thing that could unwind the carry trade. They will purchase their own treasuries to keep rates low as they have been doing. Even last year's USD short squeeze on the USD (it was hardly a flight to safety) lasted only a few months before returning to the megatrend, which is USD down, gold up. There will be no recovery for the USD. The US economy is fundamentally bankrupt. It will most likely die in a hyperinflationary spiral sometime within the next 10 years. The only way this can be avoided is a crippling depression and a default on all external debt. Whether hyperinflation or default, the debt can not be repaid, and either way requires issuing a new currency and the loss of the USD reserve currency status.

That is the reality of the US economy. Wishful thinking about strong dollar policies won't make it so. Any attempt of the US economy to recover and return to its previous glory will hit hard against the physical realities of energy depletion. Sustained $50/barrel oil is a fantasy figure by people who don't understand the geological realities of the planet we live on.

Buy gold, diversify into energy and other commodities when they are low, and sit tight. That is the best you can do right now. The rest of your natural life and that of your children and grandchildren will be spent in an era of decline. You've already lived through the peak of industrial civilization. Now is time to look at history as your guide, and prepare for the coming collapse.

Periods of collapse are notoriously hard on an empire's currency.

[flying]

Gold bubble. I love it. A decade long continuous trend backed by solid fundamentals and people still keep saying bubble. I guess that is because bubbles are all people in the financial services industry understand. Honest economic realities have been absent from the US economy for over a decade.

Saw a good interview on CNBC today with Jim Rogers

He said the same when asked if he thought it was a gold bubble he laughed.

Said he gave a speech in Prague last week to a room full of big dollar hedge fund guys.

He said he asked for a show of hands as to how many had invested in gold.

At least 75% had not as yet invested in gold.

He said how can it be a bubble when the big boys have not even started in yet.

He maintains same as you stated it is just solid & it will continue to do very well in the next two years also.

[lannarebirth]

Gold bubble. I love it. A decade long continuous trend backed by solid fundamentals and people still keep saying bubble. I guess that is because bubbles are all people in the financial services industry understand. Honest economic realities have been absent from the US economy for over a decade.

Saw a good interview on CNBC today with Jim Rogers

He said the same when asked if he thought it was a gold bubble he laughed.

Said he gave a speech in Prague last week to a room full of big dollar hedge fund guys.

He said he asked for a show of hands as to how many had invested in gold.

At least 75% had not as yet invested in gold.

He said how can it be a bubble when the big boys have not even started in yet.

He maintains same as you stated it is just solid & it will continue to do very well in the next two years also.

If it does well the next two years that will be an indication it is in a bubble. What it needs to do is tag its LT uptrend line (green). It can do that by making a sharp correction or trading in a range for the next couple of years. It did not test its last breakout or indeed the one at $450, but all things in due time.

[flying]

If it does well the next two years that will be an indication it is in a bubble. What it needs to do is tag its LT uptrend line (green). It can do that by making a sharp correction or trading in a range for the next couple of years. It did not test its last breakout or indeed the one at $450, but all things in due time.

What does the charts of the USD tell you?

[lannarebirth]

If it does well the next two years that will be an indication it is in a bubble. What it needs to do is tag its LT uptrend line (green). It can do that by making a sharp correction or trading in a range for the next couple of years. It did not test its last breakout or indeed the one at $450, but all things in due time.

What does the charts of the USD Index tell you?

It tells me that it has traded through 3 out of 4 levels of ST resistance. It has stronger resistance at the 78ish level.

edit: I wouldn't take anything that happens this month and early next month to be strongly trend indicative. Huge moves this year and folks need to lock in some gains or roll out.

Edited December 11, 2009 by lannarebirth

[flying]

If it does well the next two years that will be an indication it is in a bubble. What it needs to do is tag its LT uptrend line (green). It can do that by making a sharp correction or trading in a range for the next couple of years. It did not test its last breakout or indeed the one at $450, but all things in due time.

What does the charts of the USD Index tell you?

It tells me that it has traded through 3 out of 4 levels of ST resistance. It has stronger resistance at the 78ish level.

Interesting........

I'm not a movie guy but for some reason when you said...

It did not test its last breakout or indeed the one at $450, but all things in due time.

Scrooge popped in my head with his question to the ghost of Christmas future

something to the effect of......

Are these things that will be or can they be changed if things change...or in the case of gold...if things dont change

I will say if gold went back to that range I would be inclined to go all in save 1 years expenses

I am always interested in charts cycles etc. But never bought or sold based on them

I see their usefulness & possibilities in many ways but when it comes to gold or soy beans for that matter I cannot help but wonder how exact could they be when these things are so dependent on other influences.

I mean by everything I see the US has shot their full clip. When the next big one comes due & it surely will.... I wonder what they have left to shoot at it?

Edited December 11, 2009 by flying

[lannarebirth]

If it does well the next two years that will be an indication it is in a bubble. What it needs to do is tag its LT uptrend line (green). It can do that by making a sharp correction or trading in a range for the next couple of years. It did not test its last breakout or indeed the one at $450, but all things in due time.

What does the charts of the USD Index tell you?

It tells me that it has traded through 3 out of 4 levels of ST resistance. It has stronger resistance at the 78ish level.

Interesting........

I'm not a movie guy but for some reason when you said...

It did not test its last breakout or indeed the one at $450, but all things in due time.

Scrooge popped in my head with his question to the ghost of Christmas future

something to the effect of......

Are these things that will be or can they be changed if things change...or in the case of gold...if things dont change

I will say if gold went back to that range I would be inclined to go all in save 1 years expenses

I am always interested in charts cycles etc. But never bought or sold based on them

I see their usefulness & possibilities in many ways but when it comes to gold or soy beans for that matter I cannot help but wonder how exact could they be when these things are so dependent on other influences.

I mean by everything I see the US has shot their full clip. When the next big one comes due & it surely will.... I wonder what they have left to shoot at it?

I look at policy and actions as separate matters than what charts say. It is not difficult for me to separate the two in my mind.

As someone who once gave a shit about the direction his government was headed I'd have publicly executed hundreds of the bastards who have brought this global finacial calamity down upon eveyones head. As someone who doesn't have the power to live that dream I just play the cards I'm dealt till I'm too disgusted with myself for buying into the whole mess.

[flying]

I look at policy and actions as separate matters than what charts say. It is not difficult for me to separate the two in my mind.

That is interesting...But does one affect the other? Seeing a policy change coming you dont preconceive what the effect may be? You wait for the chart?

As someone who once gave a shit about the direction his government was headed I'd have publicly executed hundreds of the bastards who have brought this global financial calamity down upon eveyones head.

Hey I like this side of you

[lannarebirth]

I look at policy and actions as separate matters than what charts say. It is not difficult for me to separate the two in my mind.

That is interesting...But does one affect the other? Seeing a policy change coming you dont preconceive what the effect may be? You wait for the chart?

Of course one affects the other but seldom in the manner and schedule of our choosing. My greatest difficulty as a trader is that I can see way too far into the future, but I have to shut that side off as it's detrimental to my success.

I don't know of a single soul in my circle that didn't see this recent financial crisis coming. What's important is that it doesn't break you and that you don't break yourself guessing exactly when it will commence.