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Maybe…. Depending on who you are talking to. Today’s rally took me a little bit by surprise, thanks to Japan. The market totally shrugged off Moody’s potential downgrade of Irish Banks and Ireland.
The recently released report of the causes of the “Flash Crash” showed that derivatives actually was one of the major causes of the crash. Well guess what? Right before the collapse of Lehman, and the ensuing crash and crisis; banks were holding all time record levels of derivatives. Currently once again, banks are holding all time record high levels of derivatives!
So today’s rally can be totally attributed to Japan’s central bank. The Japanese Central Bank while slashing interest rates to basically 0%, also announced that they would be buying Japanese assets (Bonds, Reits, Mortgages, Equities), thereby fueling speculation that the Fed would do the same thru QE2 here in the United States.
However, I think it’s about time for a correction in the GLD, SLV, FXE, SPY, UUP.
Looking at the charts this has all of the appearance of an exhaustion gap. Not that I don’t think that we have a real shot a $1500 Spot Gold by the end of this year.
So even though I was stopped out of my GLD puts this morning I am seriously thinking about jumping back in and buying more GLD and SLV puts. I will let you know on stock talks (Seeking Alpha), when I do.
That being said, I don’t think the correction for GLD and SLV will be more than 5-7% before resuming their march to $1500 (Gold) and $25 (Silver). Another note: I expect Silver to perform even better than Gold. The gold/silver ratio is approximately 60/1, if we see a return to what used to be the norm of 30/1 gold/silver ratio; then Silver could potentially run as high as $35-$50/oz.
Finally, as they do another quantitative easing (QE2) here in the US (currently not official QE), this continues to put pressure on Europe and Japan to devalue their currencies and keep the printing presses running. Long term this is going to create a very hyper inflationary climate long term. So being the Gold and Precious Metals Perma Bull that I am, I think that you should be buying and stockpiling (bullion, rounds, coins; as much as you can get; to lock in the value of your money now. Events are truly starting to line up and set the stage for a potential worldwide collapse and depression.
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