India Raises Tariffs on Gold to Try to Stop Dollar Rise
The Rupee has fallen sharply against the US dollar as volatility rises. The current account deficit jumped largely because India’s gold purchases rose from 90 tons to 300 tons as the price collapsed. But this led to India imposing more tariffs on the important of gold stopping the buying and contributing to the collapse in gold prices. The goldbugs still are yelling about manipulations and paper gold sales, but the largest cash buying is having a massive impact upon the currency. It does not matter that they are buying an asset that can be resold compared to importing consumer goods.
The US dollar is in a bull market that may last until October 2015.The max target would be 68.5 rupee up from the current level of about 59. Short-term, we are lining up with the ECM target for the week of 8/05.
Dow Jones – To Be or Not to Be
We wrote on June 20th:
“The Daily Bearish Reversals are 14670 and 14392 with the Weekly Bearish at 14390 and 14360/ The key support starts with the Monthly Bearish at 13139 and 12940, with the critical support at the Monthly Bearish at 12220.”
We elected the minor Daily Bearish on the 24th but that was also the directional change. The key support is the 14390 level on both the weekly and daily. That is the vital area to watch. The rally that has unfolded so far is just a reaction. The Daily Bullish stands at 15363. Watch out for tomorrow as a turning point and then volatility will rise in July.
The dollar is rising rather sharply around the globe. The rise in India has impacted gold sharply and this is putting tremendous pressure on Switzerland where the central bank stands to lose a fortune between gold and the Euro. Meanwhile Europe is starting to move back away from centralized government and nations are legally now allowed to even raise their borders.
The dollar rally that is brewing will provide underlying support for the Dow. But it would be good if we can decline into July rather than make new highs. A low with the ECM will increase the chances for a Phase Transition in the Dow going into a major high for 2015.
German Unemployment hits 12%
The unemployment in Germany is rising hitting 12%. This in indicating what we have been warning about – European economic growth will turn negative in 2013. Germany turning down marks the confirmation we have been warning that deflation is the major risk not inflation, which is reflected in gold prices. This has impacted the Swiss central bank which has lost a fortune with the decline in gold. Switzerland stands to loss big time for its balance sheet has been full of gold and euros.
Merkel Becoming Euro-Skeptic
Last year, the German chancellor Merkel was calling for “more Europe, not less.” She was behind the idea of federalizing Europe handing more power to Brussels. But as the economy turns down, European Integration is rapidly fading and now even Merkel is bending to the political trend of the rising EU-skeptic movement.
Metals & Phase Transition
QUESTION:
Hi Martin,
Thanks for all of your reports, they are very informative. I am an institutional portfolio manager here in Canada. I know you mentioned that the gold correction will go on until all the Bulls have thrown in the towel. I have never been a gold bug. I am only employed to make money for clients. But it is interesting over the past couple of months. All of the gold bugs I know, have completely given up on gold and in particular gold producers. They are actually anti-gold now. I can count on one hand the number of sales calls I have received on anything to do with gold over the last two months. I guess with that long-winded preamble, I was interested to know if a gold cycle has ever ended without entering a phase transition?
Thanks.
Peter
ANSWER: NEVER. You require the Phase Transition for it to be a bubble. We have NOT accomplished that in the metals. Gold adjusted for inflation has not exceeded the 1980 high.Here is silver in cash. We also have a double top. This is why I have said that there will be the traditional correction that could be up to 5 years under the worse case scenario pushing the low into 2015. But if that were the case, the 2015 low would be a double bottom with 2013 or a new low that is marginal. Always 90% of the decline unfolds within the first 2 to 3 years. That makes the low now possible or extending into June/July 2014 for the finish.
Keep in mind, this is TIME & PRICE sensitive. Meaning it is not just reaching the target in price, it has to come with the cycle to be meaningful.