It is so refreshing to hear someone speaking the plain truth about the trouble with inflationary policies, artificially low interest rates, federal reserve bailouts and the confiscation of wealth via devaluing the dollar. If you aren’t aware of Ron Paul, he is the only Presidential candidate calling for a return to the gold standard, not to mention abolishing the Fed, the IRS and U.S. policing of the world. He recently set a record by raising $4.2 million dollars in one day. His message is extremely popular and his support has been growing exponentially. Ron Paul to Bernanke: “How in the world can we expect to solve the problems of inflation (increase in the supply of money) with more inflation?”
The only thing the Fed has ever done to solve these problems is to ease. And we fully expect the Fed to keep trying to fight inflation with more inflation. The “stuck between and rock and hard place” analogy is incredibly apt, but all signs point to increased inflation, further weakness in the dollar and much higher prices for gold, silver and energy.
But that being said, I took some profits off the table on Friday and expect to see a mini-rally in the dollar and some weakness in gold over the next few weeks. This will most likely be a much-needed breather and consolidation in order to form a base for the next big move, but we could see a small correction taking gold back to $800 next week. As many readers know, my strategy is to maintain a core position in precious metals and energy stocks and rarely touch that position. It represents over half of my portfolio and will take the punches and keep riding up over time. The remainder of my money is allocated to more speculative trading strategy, investing is smaller companies and attempting to time the market and add to positions on dips. I think we will see one of those dips in the next week or two, so it might be worthwhile to have some powder dry. Consequently, new traders looking to establish positions will likely find a better entry point in the next few weeks. But I don’t expect the consolidation/correction to last long and would not be surprised to see gold above $900 and perhaps pushing towards $1,000 by the end of the year.
Outside of gold and energy, we recently reduced our exposure to emerging market ETFs and shorted the U.S. market in Housing and Financials. And while we might be a little premature in discussing the ProShares UltraShort FTSE/Xinhua China 25 ETF (FXP), we fully plan to take advantage of both sides of the China boom and expect the U.S. market decline to trigger a significant sell-off in China in the near future.