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Economic Review

11/30/2009

As we near the end of the year, we’d just like to rehash some long term market opinions

Over the past couple of years or so and perhaps even longer, two of the most consistent messages we have communicated regarding market moving potential have been the continued bearish outlook for the US$ and the potential upside for the Gold market.  Back at levels such as 1.20 EURO and the 600s in the gold market, and well before the great fallout of the US economy about a year ago, the market doctor team had sounded the alarm bells over the technical and fundamental outlooks for these markets.  Factors such as near zero interest rate policies, the real estate bubble, the growing leverage of the US consumer and lack of savings rates, increased outsourcing of quality jobs and perhaps industry sectors were ticking time bombs regarding the stability of the US$ and conversely an enhanced potential for flight to quality in Gold.

Well, last week we saw the EURO break through the 1.5000 mark and gold hit a new historic level (although Friday’s market jitters regarding Dubai jostled these markets a bit).  The point to make at this juncture is that despite the significant moves in these markets, reality is that fundamental factors have strengthened even more to support yet a lower US$ and higher Gold over the long term.  It’s a shame that events such as the bursting of the real estate bubble and corresponding economic fallout did not send a loud enough alarm bell to policy makers to promote fiscal and monetary concepts that help establish the underpinnings to creating a long term economic recovery.

Can the US$ go even lower and Gold go even higher ?…of course they can.  But one point to consider given the recent exuberant moves in these markets…a correction from time to time is not out of the question.

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