GOLD -- Within the next 12 months, the U.S. Treasury will have to deal with refinancing $2
trillion in short-term debt. And that's not counting any additional deficit spending, which is
estimated to be around $1.5 trillion. And remember, there are the expenses of the enlarged war
in Afghanistan.
Study the numbers carefully. Then ask yourself, how in the world the Treasury can possibly
borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire
GDP. And we're the world's biggest economy. Where will the money come from? And my
answer is that the money will have to come from the Fed by way of the "printing press."
The next question is -- how much longer will our creditors be willing to accept "printing press
money" from the US? I honestly don't know, but my thought is that it's not going to be too
much longer. This has led to rumors of an official devaluation of the dollar. We owe a trillion
dollars? Suddenly, the dollar is devalued hugely and every old dollar suddenly becomes two
dollars. Could that happen? It could, but I don't know whether the Bank of Bernanke (as
James Grant calls it) could get away with it without chaos resulting.
Below I've posted a P&F chart of gold. Each box is worth 10 points, and only advances or
declines (reversals) of three boxes are depicted. As of yesterday, gold has corrected down to
the 1150 box. A sell signal will be given if gold hits the 1130 box.
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My thinking is that nothing fundamental has changed in the gold picture. The gold correction
we are experiencing now is a result of gold rising for 21 out of the last 25 days or 84% of the
sessions. Gold was severely overbought and looked as though it was never going to halt its
climb. As such is was an easy profit trade (which no item ever is). The amateurs jumped in and
now they are learning, as gold corrects.
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