Gold Headed Higher and the New Bubble in the US Treasury Market
Are you watching the dollar? Maybe the unwinding of the dollar- based paper money system is coming sooner than we expected. Yesterday, the dollar fell again - now it costs $1.37 to buy a euro. And if you want an ounce of gold, it will cost you $937.
It looks to us as though gold is headed to $1,000 again...maybe higher. This is not what we expected... Not yet anyway.
What we still expect is a broad, long rally in stock prices. We think the Dow might go back to 10,000 before it is over. This is the rebound we were waiting for. It should boost asset prices generally - including gold, commodities and oil - as well as stocks.
Oil, by the way, rose $2 yesterday too. It's back to $62.
But this trend is probably a fake out. Underlying the positive market news is an economy that continues to decay, degrade and deflate. Remember, this is a depression, not a recession. The bubble era is over. Because the transmission is broken. The financial industry has blown up. It won't be repaired. Instead, it will be bailed out...nursed along...and mollycoddled.
Once a bubble blows up, it is never repaired and reflated. Instead, if new money is added to the system, it goes into a new bubble. Right now, the new bubble is in the US Treasury market. How long that will last, we don't know. But currently, if you put your money into Treasury bills - short-term US paper - your yield will be negative. This does not happen very often. If it ever happens in our lifetimes again, it will be when the moon turns blue. And anyone betting on an indefinite continuation of this bubble is probably a lunatic.
But when it blows...we wish we could tell you.
Bill Bonner
for The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.