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Gold/Mining/Energy : Gold & Gold Stock Analysis

GLD 383.12

+0.8%

Nov 26 4:00 PM EST

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To: pogohere who wrote (15817)	10/26/2008 8:15:17 AM
From: Don Earl	1 Recommendation Read Replies (1) of 29622

RE: "How will we know when there is a change in monetary velocity?" Watch the Fed's currency swaps and movement in the Yen and Euro. The Fed has been doing these swaps in an effort to prop up the USD -- on the order of $1 trillion in the last month. I think it's a fair assumption that it would be unnecessary for the Fed to engage in these swaps if it had any meaningful amount of either currency on hand. The slow death of the USD over the past several years has most likely exhausted any supply of foreign currencies needed to enter the market to defend the dollar. The massive drop against the Yen on Friday would suggest the Fed just used up its latest supply of that currency. At least if one assumes a 10% drop in the stock market, on grim economic news, is something other than a logical reason to load up on the Yen at .5% interest. The USD is still going up against the Euro, which would suggest the Fed still has some Euros left from the recent swaps. I guess the question there is how long the EU will continue to hold and accept the massive influx of dollars. Eventually, the merry-go-round has to stop and the ride comes to an end. When it does, the overhang of dollars is orders of magnitude worse than it was. Resistance is at around .85 dollars for Euros. I may be wrong, but I sincerely doubt it will break out. My take is the big slide will start from there and crash through the .63 support level like a ton of bricks. 2-3 weeks to the failed breakout move and 2 months or so to the break in support. Food riots within 12-18 months.

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