US Dollar Collapse: Potential Reversal GDX, HUI, XAU, FXI, TNR.v, CZX.v, GRC.to, GBN.v, EPZ.v, ASM.v, CUU.v, CPG.v, RM.v, LMR.v, GDX, GDL, SLV

Corporate default was exchanged on sovereign one, all bailouts were not more than transferring obligations from failed banks and other Corporations to the public finance. Bonuses were left with bankers, losses were privatised with public. Now we have on outskirts of Europe with less than 4% of EU GDP fireworks which suppose to end Euro legacy in wain. Do not rush to trash the Euro yet. Sovereign default is very different from corporate one. If the debt is issued in local currency it could be always printed more in order to repay it. U.S. Corp. is living in this space for years, UK is there and Europe will have to decide and move in support of Greece to prevent the run on the bank and collapse of the following PIIGS members.

The real drama is here above, It is Long Treasuries daily chart and it looks nervous, nobody even talks here about cuts, fiscal discipline and austerity measures. Once Europe is engaged in QE and ECB starts buying sovereign bonds from banks, attention will come back home. Recent spike in prices can be very short lived in a big picture frame.

Nothing is for certain in these days, but that candle on the chart above can mean reversal and that Green Buck Party is over. Less bad in the end is still bad. Market is ready to forget the Greece and remember California. With all investment banks discounting euro and providing parity forecast, counter rally can be very sharp. Euro below 1.2 means Europe disintegration, there are means to prevent it and intervention is already in the cards.

On the weekly chart US Dollar looks tired as well and with intervention in Japan and Europe reversal can easily tip the scales - remember in the end it is game to debase all FIAT currencies.

"It was second Deflationary Test with sudden drop in liquidity this time driven by sovereign debt crisis. Call it Run On The Bank among Big Guys. Fifteen minutes made no mistake about the state of the market and economy in deflationary environment - we have seen the future and it is ugly. Deflation spiral means death of financial market by thousand cuts - financial system is insolvent and the only way to run it is to keep liquidity high enough that nobody is testing it to deliver. QE will provide flood of money, debt will be rolled over and by destroying the value of FIAT currencies Debt will be Inflated out in the end. This time it is different - it is not only our theory, but confirmed market action. This time the most important here is that Gold was at almost all time high at the moment of test, Gold was moving up against all currencies and this time in a sharp contrast to the events of 2008 it was sharply up and over 1200 on the day of Market Crash. This new round of QE (when Europe has not even started!) will be going already from this very high base in Gold value and rising Inflation in Commodity and Growth driven economies. We will not go into the debt issue today in details and will only point out that it is a notch under 13 Trillion and in dangerously close proximity to 100% of GDP of U.S.
After pictures from Greece we do not think that anybody will go there in U.S. Corp. Deflation will be prevented by any means, it is easy and price to pay is not so obvious. Newly printed US Dollars are "free", but price to drop them is not: you need Oil to keep you helicopters flying and here will be our first conundrum: At what point price of Oil becomes prohibitive to use Helicopters by Ben Bernanke in his open market operations?"

Gold is at All Time High 1232.80 USD/oz TNR.v, GRC.to, GBN.v, BBT.v, EPZ.v, KTN.v, CPG.v, MGN, ASM.v, GG, AUY, AEM, NEM, RGLD, ABX, GDX, SLV

We will leave the situation on how technically stock like P&G could drop 50% in fifteen minutes to be investigated by the mass media, but will confirm here one more time: it was second Deflationary Test with sudden drop in liquidity this time driven by sovereign debt crisis. Call it Run On The Bank among Big Guys. (Next Bull Lithium: Crash of the Markets, Gold and the Price of Oil for Helicopters) Fifteen minutes made no mistake about the state of the market and economy in deflationary environment - we have seen the future and it is ugly. Deflation spiral means death of financial market by thousand cuts - financial system is insolvent and the only way to run it is to keep liquidity high enough that nobody is testing it to deliver. QE will provide flood of money, debt will be rolled over and by destroying the value of FIAT currencies Debt will be Inflated out in the end. This time it is different - it is not only our theory, but confirmed market action. This time the most important here is that Gold was at almost all time high at the moment of test, Gold was moving up against all currencies and this time in a sharp contrast to the events of 2008 it was sharply up and over 1200 on the day of Market Crash. This new round of QE (when Europe has not even started!) will be going already from this very high base in Gold value and rising Inflation in Commodity and Growth driven economies. We will not go into the debt issue today in details and will only point out that it is a notch under 13 Trillion and in dangerously close proximity to 100% of GDP of U.S.
After pictures from Greece we do not think that anybody will go there in U.S. Corp. Deflation will be prevented by any means, it is easy and price to pay is not so obvious. Newly printed US Dollars are "free", but price to drop them is not: you need Oil to keep you helicopters flying and here will be our first conundrum: At what point price of Oil becomes prohibitive to use Helicopters by Ben Bernanke in his open market operations?
Here is time to move to practical implications of the new Inflation round to fight Deflation Scare this time created by sovereign default. How Lithium, Gold and price of Oil are connected and what it means to be grounded? We will start with Gold and will give you few observations:
1. We are in a new Bull market territory with Gold moving up against all FIAT currencies.
2. Corporate default was exchanged on sovereign one, all bailouts were not more than transferring obligations from failed banks and other Corporations to the public finance. Bonuses were left with bankers, losses were privatised with public. Now we have on outskirts of Europe with less than 4% of EU GDP fireworks which suppose to end Euro legacy in wain. Do not rush to trash the Euro yet. Sovereign default is very different from corporate one. If the debt is issued in local currency it could be always printed more in order to repay it. U.S. Corp. is living in this space for years, UK is there and Europe will have to decide and move in support of Greece to prevent the run on the bank and collapse of the following PIIGS members.
3. Expect shakeouts, but the direction in Gold market is clear: further Up - driven by run from all FIAT currencies, rising interest rates, generational Bear market in Treasuries, negative real rates and expansion in monetary base (QE) with inevitable by definition Inflation. And we have to pray for it - we do not know how to survive in Deflation Spiral should anybody made a crucial mistake.
4. First Gold will make new all time high, second will be M&A play: Majors will shop for Juniors with resources in the ground. Here is the double game - Gold is moving up and Majors' production and Reserve Base is going down. If you like more leverage you are welcome to Silver market. Place to be is in stories will strong management, growing resources and stable political situations. markets will be volatile by all means and political tensions will be driving this Gold Bull as well.
We are running Gold Bull for nearly ten years now: Gold first, than Majors and follow up on Junior side. We were always wondering about Future of Energy and have collected some great memories on Uranium Run, Solar and Water plays. Gold Bull has years to run, but we are searching constantly for new Macro trends - it is very interesting to find out what will be the next Bull which will come out of these rubbles in case we are right and Inflation will be the answer to deflation war scenario. It is time for Lithium to come into picture.

WHOA: NYP Says Federal Agents Have Launched Civil And Criminal Probes Into JPMorgan For Silver Manipulation ASM.v, KTN.v, MGN, RVM.to, EPZ.v, SGC.v,

We have a giant Bullish Cup and handle formation in Silver now, Gold move to the new high must be confirmed by new high in Silver.

"First Gold will make new all time high, second will be M&A play: Majors will shop for Juniors with resources in the ground. Here is the double game - Gold is moving up and Majors' production and Reserve Base is going down. If you like more leverage you are welcome to Silver market. Place to be is in stories will strong management, growing resources and stable political situations. markets will be volatile by all means and political tensions will be driving this Gold Bull as well."

SAI:

"WHOA: NYP Says Federal Agents Have Launched Civil And Criminal Probes Into JPMorgan For Silver Manipulation

Joe Weisenthal May. 9, 2010, 4:43 PM 2,920 19
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The New York Post has an explosive exclusive, if true:
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
That JPMorgan (JPM) has somehow been involved in silver market manipulation has been the source of rumor and speculation for a long time.
Things really heated up on this front in March, when a whistleblower was due to speak in Congress about commodity market manipulation, but was scrubbed from the list at the last second. That sent of all kinds of red flags. The New York Post was on the story then too, citing an outspoken trader named Andrew Maguire who claimed that JPMorgan and HSBC were doing the Fed's work in ceaselessly selling silver (nakedly) on behalf of the Fed in order to keep prices down.
If today's report is true, it would clearly indicate that at least at the regulatory level (if not the political level, where any financial reform is bound to be toothless), there's been a major shift in attitude. Add this to the civil charges against Goldman Sachs (GS), and the Moody's (MCO) Wells notice, and you're starting to see a trend."

EU Readies Emergency Fund Said to Be $645 Billion to Fight Off `Wolfpack' ABX, TNR.v, GG, AEM, AUY, GRC.to, EPZ.v, ASM.v, MGN, KTN.v, GBN.v, MAX.to,

"Corporate default was exchanged on sovereign one, all bailouts were not more than transferring obligations from failed banks and other Corporations to the public finance. Bonuses were left with bankers, losses were privatised with public. Now we have on outskirts of Europe with less than 4% of EU GDP fireworks which suppose to end Euro legacy in wain. Do not rush to trash the Euro yet. Sovereign default is very different from corporate one. If the debt is issued in local currency it could be always printed more in order to repay it. U.S. Corp. is living in this space for years, UK is there and Europe will have to decide and move in support of Greece to prevent the run on the bank and collapse of the following PIIGS members."

Bloomberg:

EU Readies Emergency Fund Said to Be $645 Billion to Fight Off `Wolfpack'

European Union finance ministers moved toward agreement on an unprecedented loan package worth at least $645 billion to prevent Greece’s fiscal woes from triggering a broader sovereign-debt crisis and shattering confidence in the euro.

US Dollar collapse, Gold and PIIGS: Swine Flu Finally Strikes the Wall Street TNR.v, GRC.to, SGC.v, NGQ.to, KTN.v, EPZ.v, BVG.v, BVA.v, VTR.v, GBN.v,

Everybody is scared by Greece and rightfully so, but do not miss the big picture with all worries about PIIGS and their health. PIIGS: Portugal, Italy, Ireland, Greece and Spain are on the front pages and everybody is buying Treasuries again, US Dollar has surged to the new highs and Euro has hit the 1.28 Our contrarian soul can not help, but to put a few charts for review. The main message is in the chart above: P&F is not the ultimate Crystal Ball, but works very good defining reversal in trends and recent trend for US Dollar was up. US Dollar destiny now is to be "less bad" - as Jim Puplava has put it. Austerity measures are not very popular as Greece has shown to the world today, US Corp. will not even dare to go there - the only other way out is to inflate your debts out. US Dollar destiny is to go down and Treasury Bubble is unfolding already from late 2008 as shown on the chart below. We have a lower highs and scared public is rushing to the "safety" of Treasuries exactly at the wrong time. And by the way Inflation is already here: China is tightening, Australia is hiking rates, Brazil, Norway...have you noticed - all Commodities and Growth related countries. The irony is that Greece is the prelude of what could come to the US shore: can you imagine to lose California? In Euro zone idea of its breaking up does not work exactly with the opposite reason to Euro move these days: take out PIIGS out and you will get the strongest Euro possible. Competition is now - who will debase its currency faster and everybody are in for orderly decline of US Dollar: Euro below 1.2 is a threat to stability and rising borrowing cost, above 1.5 makes export less competitive - the winner will be Gold, against which all currencies will depreciate. Second best will be commodity based Canadian and Australian dollars. Have you noticed that CAD was on parity with USD again? Canada talks about tightening and rate differentiation will put further pressure onto US Dollar. Financial system was tested with Lehman - it is insolvent, another run on the bank will break it beyond repair. Our take is that Greece will be bailed out, crisis contained and ECB has not even started QE, the fastest move could be to purchase sovereign debt from the banks to provide liquidity and support the prices. Wait until attention will be back to the homeland issues and mention the difference: Europe talks about Austerity, Cuts and Budget deficit before they start to print money by QE, U.S. use helicopters first and talks about deficit later. Regarding Swine Flu we will refer to our older post and will remind ourselves how many worries we had about unavoidable pandemic, which will spare only the Wall Street with inherited immunity. It finally strikes at unexpected location and Goldman Sachs is the first victim. Its omnipresence is understandable, they are doing the "God's job" after all...but who knew that they helped to cook the books even in Greece to get it the ticket into the Euro zone?

Treasury Bubble is still unfolding from late 2008, we have lower highs and recent PIIGS scare has brought more volume.

US Dollar is overbought, particularly after today's trading session, MACD shows lower highs with new highs - points to potential reversal to be confirmed.

Please notice that Gold recently was rising with US Dollar rising as well, Gold was rising against all currencies and it is a very important new development in the Gold bull market. Seasonality is against strong upside move in Gold, but after our signal Sell in December, Gold has perform reversal and has all technical strength to break to the new highs from Cup and Handle formation.

On a longer term chart we can tell that US Dollar is ready to produce Sell signal with counter move in Euro from oversold position with solid bail out news on Greece this week.

This is our Cup and Handle formation, which could propel Gold to the new highs: we have a Buy signal on MACD - the risk is to produce double top instead. Our wave count from recent inverted Head is the wave 5 up.

Political stupidity should not be underestimated, but we have a very good chances for US Dollar to resume its downward trend, helping fragile jobless recovery in U.S. Gold will make new highs in this case this year, another thing to worry will be price of Oil and Commodity prices in general - Jim Puplava talks about buying Electric Car and we better listen!