As the market is roaring higher, so is gold and silver. Now they should be diametrically opposed. They should not be going up at the same time.
The normal person feels that gold goes up for protection from inflation. But Bernanke and the FOMC have said there is none. In fact, in their last statement they stated it was so low, they need to create some. But wait a moment, let's look at Starbux's latest headline: Starbucks plans 'targeted' price increases. Starbucks (SBUX) said it will raise the price of "labor-intensive and larger-sized beverages" in response to surging green arabica coffee costs. Now, aren't rising prices what most people think of as inflation? And while food, insurance, car repairs, energy, medical, recreation, education and coffee beans roar higher, our most prominent bankers tell us there is no inflation. Someone's wrong!
Should stocks be rising if gold is going up because people are afraid of inflation? Some people will say yes, because inflation causes the prices of everything, including assets, to rise. Let's put that argument aside for a moment. It's evident that Bernanke is going to unleash havoc via more "quantitative easing", meaning "printing money". What happens when you flood the market with more dollars? It decreases the value of the existing dollars in circulation. The result is, we see the dollar falling against other major currencies. And that is the single biggest reason gold is going up. The dollar is becoming worthless. Gold does not create wealth, it preserves the purchasing power of your currency. People the world over know that our administration and our Federal Reserve is effectively devaluing the dollar and that is the reason gold is going up. They are going to "inflate away our debt burden".
Is a falling dollar really any good for stocks? Those who are supposedly bright, will tell you that "yes", it's good because it helps us export more to other countries. Really? Like what? Just what do we export to other countries nowadays? It's certainly not enough to offset the damage being done here at home to the local economy.
In years gone by when we were a manufacturing powerhouse, when we exported more to the world than we took in, then yes, devaluing the dollar into the peso made tremendous sense. But in the present? It's purely idiotic. Every working person is getting taxed because we don't have a large enough manufacturing base that would benefit from the lower dollar,
Let's suppose you're on a fixed income and were comfortable taking in say, 1200 a month for your bills, but because the dollar erodes, it now takes 1500 dollars. Does that not cut back what you might spend on clothes, RVs, TVs, boats, cars, etc? It most certainly does. There are more people on fixed incomes than businesses that will benefit from being able to export. So, the net net is that "we" lose. The country loses.
Recently, Japan intervened in their currency situation and did their best to lower the Yen. China pegs its currency to just "under" ours, so that no matter how low we let ours drop, theirs will be cheaper. The Chinese are not stupid. This is why Obama and Geithner and everyone else are screaming at the Chinese about "currency manipulation". They cannot stand the fact that no matter how badly we manipulate ours, China still wins. What about the Euro? Do you think Germany and others are going to want the most expensive currency out there? No, they're going to figure out ways to get that little trinket lower too. The real down and dirty currency wars are just really beginning.
This is why gold is going higher and could go parabolic at some point!