Dollar Under Pressure Again in Asia; Oil and Gold Up; Geithner Tells China Its Dollar Assets Are Safe, Room Erupts in Laughter
June 1st, 2009WARNING: This is not a recommendation to buy, sell or hold any financial instruments.
Disclosure: I own gold. I am a BullionVault client and affiliate.
Gold longs with a short term outlook: Lock stops in here on the strength or take profit now. Resistance is just over head and the dollar is right around support. The Geithner theatrics are likely staged to coincide with a short squeeze on the dollar, which would be a simple matter to pull off with the USDX at a support level.
Personally, I’m not selling one gram of my gold, but I’d like to buy more if a short squeeze on the dollar materializes.
Long term gold longs and dollar bears, let out a big yawn for now.
Spot gold, daily interval
U.S. Dollar Index, daily interval
Via: Reuters:
U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.
A major goal of Geithner’s maiden visit to China as Treasury chief is to allay concerns that Washington’s bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.
China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China’s total U.S. dollar-denominated investments could be twice as high.
“Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.
His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.
The Beijing-based Global Times greeted Geithner by publishing a survey of Chinese economists who called big holdings of U.S. debt “risky.”
Geithner renewed pledges that the Obama administration would cut its huge fiscal deficits and promised “very disciplined” future spending, possibly including reintroduction of pay-as-you-go budget rules instead of nonstop borrowing.
“We have the deepest and most liquid markets for risk-free assets in the world. We’re committed to bring our fiscal deficits down over time to a sustainable level.
“We believe in a strong dollar … and we’re going to make sure that we repair and reform the financial system so that we sustain confidence,” he said.
Geithner also offered strong backing for a bigger Chinese role in international policymaking.
“China is already too important to the global economy not to have a full seat at the international table,” he said.
Yup. Currently in wave b on the 3-hr but wave a on the daily, expect a zig-zag over the next week or two before the sprint. Buy on the osscillator bouncing off the 0 line.
I disagree with you weekly-scale wave count though, based on counting the weekly fractals wave c ended in late Jan around 920 and the push to 1004 was wave 1, you don´t typically have wave Cs pushing far past the start of wave 3, which on the weekly scale was around 950 back in July. If we are in wave 3 on the weekly, and we certainly are on the monthly and yearly scales, then this is very bullish for gold… just not quite yet.
The turkey surprise here is that gold will be making new highs while the dollar is gaining on its wave c, a reprisal of Januaries decoupling of the two. That means anyone using leverage gold derivatives (futures, GLD options ect.) will have some window this summer to take profits and put them into hard assets.
I don´t buy the hyperinflation line but its certainly worth hedging against. Soil is the only asset without counter-party risk.
The turkey surprise here is that gold will be making new highs while the dollar is gaining…
I seriously doubt it, but shine on you wild diamond.
I don´t buy the hyperinflation line…
Neither do the sheep or the corporate press, just yet. But…
U.S. bond auctions failing: Check.
Quadrupling U.S. budget deficit: Check.
Collapsing U.S. tax revenues: Check.
Rising oil prices: Check.
Rising food commodity prices: Check.
Pants shitting increase in printing press activity: Check. (http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS)
Re: Your soil comment: Make sure that you have a way of paying the property tax on it to the state.