Griffiths:  “In the period when the dollar is weak, gold tends to be strong.  But there is a caveat here:  If the dollar is now super-oversold and has a relief rally within a downtrend, at that moment you will probably get a small setback in the price of gold.  But my take is that the secular uptrend in gold has not been broken....

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“This is the case, even though gold has been weak for roughly 2 years since hitting its high of over $1,900.  The downdraft to $1,180 was simply a retracement within a secular uptrend, and very similar to what was witnessed in gold during the 1970s bull market.  That low should hold, and I’m long gold because of that.

Likewise, on the next surge higher I strongly believe we are going to take out $1,900, and gold will go on up to a new all-time high of $2,400.  The reality is that we’re moving into a world where it matters a lot what Chinese and Indian people think, and they both love gold.

If we in the West regard it as a barbarous relic, well, we’re the losers -- it’s real money.  So far many people believe this rally in gold is simply a bear market rally, but as soon as gold goes above $1,450 they will have to technically call that a new bull market as gold will be surging well above its 200-day moving average.  But in my view the secular trend has always been positive for gold anyway.

I would like to add that even talk of ‘tapering’ causes people to go into panic mode, and the Fed damn well knows this.  I’m pretty sure that the Fed has given up on the idea that QE achieved what they wanted it to achieve.  They would love to stop it, but they know that if they do they will crash world markets.

So, the markets are prone to panic if Yellen or Bernanke says the wrong thing.  For the moment they have to say they will keep interest rates low for an extended period of time, or at least until March (laughter ensues).  But before March you will see savvy professionals taking ‘risk’ off the table.  The following chart is from Bloomberg and it basically overlays the recent market action on top of the 1929 period (see chart below).

What it shows is a broadening top in the markets back then (1928/1929) and today.  The prediction is that you break out through the top of the broadening top, which we are doing right now.  You then have one more run-up that might last 2-to-3 months -- and then you crash.

This scenario fits with the cycle call.  So, even though QE has dragged this catastrophe out a bit into the future, it will still end in disaster.  It is extremely important for KWN readers around the world to understand that no government in all of history has ever been able to alter the long-term secular trends.

Eventually, if you’ve created a debt mountain, the debt mountain will have its revenge.  The bottom line here is this will be incredibly painful and destructive for investors who do not understand, or who are not prepared for the carnage that is to come.”

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Eric King

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