Race To The Bottom: Worldwide Debasement Of Fiat Currencies

In the interest of full disclosure, I am long gold/silver mining shares and short the S&P 500 Index. The gold/silver mining share position has been accumulated over the last two weeks, while the short S&P 500 position was first initiated last Monday, October 27th. While it may be an understatement to write that this "hedge" was less than ideal late last week, I remain convinced that the next major move in precious metals prices will be sharply higher, and the next major move in U.S. equity prices will be sharply lower.

As of 8:00 PM Central Time Sunday night, when this latest column is being written, Gold is trading at $1,165/oz, while Silver is trading at $15.85/oz. Both prices are modestly lower than Friday afternoon's close.

On Friday, October 31, the Bank of Japan fired the latest cannon with respect to the debasement of worldwide currencies. The BOJ said it will increase its purchases of government bonds and other assets by between 10 trillion yen and 20 trillion yen ($91 billion to $181 billion) to about 80 trillion yen ($725 billion) annually. The European Central Bank will clearly be next with its own massive QE program, and China is the largest culprit of all, of course, with its ongoing stealth program of currency debasement.

With the U.S. Federal Reserve effectively "on hold" with no QE program currently in force, the U.S. Dollar has been exceptionally strong in foreign exchange dealings recently. The U.S. Treasury will soon have to halt this advance with intervention against the Dollar to prevent the complete collapse of U.S. exports and the related importation of less-than-desirable deflationary pressure on domestic prices for goods and services.

The race to the bottom for fiat currencies has accelerated, and the winner will soon be Gold/Silver prices!
 

Gold ETF (GLD) with 3-Std Deviation Bollinger Bands and Fibonacci Retracement Lines