The G20 script caste against present circumstances.
1. EC members terrified by the power of OTC derivatives to destroy national bond markets are running scared. The strategy is twofold. Intervention at $1.19 to $1.20 in the euro and massive PR concerning strong currency initiatives weakened the dollar from its highs and took the euro so far into its $1.24-$1.25 key resistance.
2. Bernanke as a student of the Great Depression organizes a strong argument for continued coordinated monetary expansion with the US Treasury.
3. Monetarism fails miserably when applied in an open system. That is its major weakness. Bernanke’s thesis demands the entire Western World be on the same page of Monetarism for without it new lows in the history of this period will be established. A return to locked credit markets is a reasonable assumption
4. Media seems to have slowed down on its revelations of EU weak states.
5. There seems to be a slight pickup in media discussion of the dire condition of US states heading towards bankruptcy.
Keep in mind that in this new global economy a problem anywhere is a problem everywhere. As any currency in the Western World comes under attack, Gold has become the asset of choice.
Be ready for more violence in the USD/EU equation. Violence regardless of direction will be gold positive. This move is to $1650 and beyond.
- Jim Sinclair