America’s Day of Reckoning
from Rick Ackerman's daily commentary
And what of the U.S., which is arguably in worse shape than Europe? Some might say we’ve been whistling by Euroland’s graveyard, but the truth requires a more cynical observation. For in fact, the Fed and the White House have a strong motivation to play up Europe’s problems as much as possible, since greater scrutiny of our own problems will only bring on America’s financial day of reckoning more quickly. To be even more cynical about it, Moody’s increasingly frequent downgrades of sovereign eurodebt seem timed to intercept cycles of weakness in the dollar. If such collusion exists, however, it has barely slowed the rise of gold, the financial system’s polygraph, even on days when the dollar appears to be “strong.” Since the first week in November, the Dollar Index has risen by nearly seven percent while Comex gold has declined by about 4%. While it’s possible that carry-trade unwinds will cause the dollar to rise even more in the days and weeks ahead, we should not mistake this purely technical action for strength. On fundamentals, the dollar can only head lower over time, and we therefore see little reason to fear overweighting in bullion. In assessing the condition of the world’s currency system, and judging the odds of its failure, gold is manifestly incapable of error. No matter how bullion acts on a given day, we shouldn’t doubt that it enjoys enormous support from buyers around the world, especially those with large dollar reserves that are at risk. For that reason, and innumerable others, periods of weakness in gold and silver assets should be regarded as buying opportunities.