My Blog
Russell - Expect $5,000 as US Has to Back Currency With Gold
With gold trading higher along with silver, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, “Russell Looks ahead -- With inflation heating up as far as American consumers are concerned, the pressure is on the Bernanke Fed to "cool it" on its quantitative easing. I think the stock market (now slumping) and the dollar (now rising) are reflecting this. Thus the Fed might be setting off a temporary slump in the summer economy.
If so, Bernanke could announce, "See, if we ease up, the economy eases up as well." All of which strengthens the case for QE3. Of course, President Obama would love a late pick-up in the US economy as the nation moves into the 2012 election period.”
Russell continues:
“So the Russell crystal ball says, "Prepare for the summer doldrums (maybe even a slump), and then be ready for an economic revival in the fall and into 2012. Also get ready for all-out inflation as the Fed steps on the QE3 accelerator in late 2011.
I think the gold action goes along with the above scenario. Why take profits or sell your gold, when the real move in gold is slated for 2012 and beyond?
Why is China so intent on accumulating gold? My thinking is that China is preparing its renminbi to replace the US dollar as the world's reserve currency. To become the new world power, China needs two items: (1) A military second to none. (2) The world's most trusted and wanted currency.
(1) China is now on an all-out campaign to build up its military. (2) China wants the renminbi to backed with a huge percentage of gold, thereby making the renminbi the world's best and most trusted currency.
To compete, I believe that somewhere head the US will have to back its current irredeemable fiat currency with gold. In order to do that, the US will have to boost the price of its huge gold hoard to a level where the dollar may be backed anywhere from 50% to 100% with gold. That could mean unilaterally raising the price of gold to maybe $5000 and ounce or more...I thought that gold, closing higher, in the face of the stronger dollar, was significant. Gold appears to be advancing against almost all fiat currencies (is this a preview of the future?).
Warning -- I have applied the "fan-line principle" to the NYSE Composite Index. Here we see three consecutive trendlines violated. According to the fan-line principle, three trendlines are drawn from the same base. When the third fan-line is violated the trend has reversed and turned down. Based on this chart (above), I would not be holding stocks at this point.”
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It is interesting that Russell noted gold is advancing vs all fiat currencies. Gold breaking out to new all-time highs in the Euro as well as the Pound will bring in even more buying. Gold has been trading strong and steady for quite some time, let’s see if that trend continues.
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
May 24, 2011
