August 28, 2003

It Has Begun

Let’s put the pieces together. 1.) Dollar disinvestment has begun (see below). 2.) Budget deficits are rising (see below). 3.) Gold is rising- especially the unhedged majors. The Amex Gold Bugs Index (HUI) was up 11 points and over 6%. Remember what I mentioned yesterday that large-scale speculators both added to their long positions and reduced their shorts. The financial world is de-leveraging from the dollar. It starts with the government not being able to sell all its two-year bonds. It starts with $400 billion annual Federal deficits. And it starts with one last blow-off rally in tech speculation as the old paradigm breathes its last breath. It ends with an ounce of gold buying you a share of the Dow. If you’re worried that the HUI is overbought near term, you MAY be right. But take a look at this long-term HUI chart. The HUI is just now reaching the levels it was at when the tech boom started--when investors had written off gold for dead. Gold, however, has risen from its 6-year grave on the HUI. It has begun.


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