USD v. PM

Today the USD showed strength @ 82.09 (and the Euro weakness). This means that gold and silver may be in for a serious correction from even the current low levels. The inverse correlations of dollar v. PM is currently about .75 meaning each move up in the dollar value potentially has the effect of pushing PM down about .75 basis points. This may be lessened by fear buying of gold in the EU, but seasonality is now against PM prices. I suspect the dollar rise is the dominate affect on Gold and Silver.

I have purchased puts on my silver holdings thinking that Greece and company may (if they exit the Euro) put a great of pressure on the Euro and drive the dollar up, my estimates of what is possible are as high as 120 USD (I know, just insane but possible).

The good news is it will lead to an opportunity to buy PM at greatly lower prices maybe 1000/Oz. I have calls far out of the money which may be timely. These are worst case estimates, but even an approach to them will be breathtaking. See my little study suggesting the estimators.

http://stockcharts.com/h-sc/ui?s=$USD...id=p36559166225

Best, Islander.

Edited by Islander, 24 May 2012 - 05:36 PM.

Tiffany, Signet Outlooks Signal Shine Off Luxury

anything is possible but the USD is up against 10 year falling resistance here and sentiment is overwhelmingly too bullish if that resistance gets taken out and the retest holds, deflation will gather steam in a real hurry you are right

anything is possible but the USD is up against 10 year falling resistance here and sentiment is overwhelmingly too bullish
if that resistance gets taken out and the retest holds, deflation will gather steam in a real hurry you are right

Ye stole me thunder, dougie Here is an end of day PNF chart of the dollar index. With that triple top breakout it looks like it could go either way.

I think Germany will concede in the coming weeks BEFORE the Greek elections. The reason I say this is that any eurobond or debt-sharing agreement are purely for the benefit of the big banks who have purchased debt of Greece/Spain. I've read that the proceeds from any bailout money never even reached the Greek citizens. They all went directly to banks. I think this is similar to AIG. The government bailed out AIG, so that big banks wouldn't get shafted with massive writeoffs. If Merkel waits until after the Greek elections, there might not be an avenue of printing money and giving the money to the banks under the guise of helping Greece. Greece might basically be out of the euro which would mean total default. Euro should rebound accordingly. Precious metals will be a significant beneficiary when the money printing announcement arrives.