As you know I've always been wary of the big hedge funds positions in gold and anti-USD trades. But, the fact is that in the more transparent futures market (OTC market should be similar)they have reduced what is likely two-thirds of their longs in gold, and anti-USD Fx trades. Amazingly the USD doesn't have much to show for it despite this. Risk has been substantially reduced in gold and the better gold junior plays, especially once the Fed abandons it's post Dec 8th printing press hiatus, and that will be easy to watch and ascertain. Key on a billion plus in coupon passes in a week, combined with maybe a two billion securities purchased (debt monetization) week. I don't think it will be long.
I no longer think the USD index is a good proxy anyway. The rigged, manipulated Yen and Chinese RMB are going to collapse too, and maybe even at a faster pace than the USD. The MoP will use this to point to evidence of USD stabilization. It is anything but, as the Japanese are going lose their money printing license, and thus their ability to manipulate global markets, and engage in tawdry vendor financing for the benefit of a group of plutocrats (the Japan branch of Bully), and at the expense of their people. It will be interesting to watch what the lemmings in their captive postal savings program do (which in turn subsidize one percent JGB yields, and completely out of control govt borrowing and debt), when talk swings to Yen weakness and then collapse. Japan's economic policy ought to be compared with the Soviet Union when it's all said and done. It has no business being an investment grade credit. I think a long gold, short JGB (not currency hedged) will be the trade of the decade.
Unless one wishes to fall prey to false MoP cognoscenti playbooks (Mish are you listening?), it's going to be necessary to come up with a new USD index (should be a basket of foreign currencies-Yen primarily). So long gold should be played against the USD, and the Yen, and perhaps some strategy that plays it againt the Chinese. I think gold is going to bust loose againt the Euro too, as they've been forced to be soft defending their money, because of the irresponsible behaviors of the symbiotic trio. Just as emerging inflation was my big theme of 2004, now we get even more inflation, and US-Japan-China currency collapse (to gold and real assets). Interesting formula for a flucht in die sachwerte. |
