Will the war against ISIS create even larger budget deficits?
*Dow Theory Letters, by Richard Russell, September 11, 2014
”It appears that we’re in an aerial war against ISIS. This will be extremely expensive and will create even larger budget deficits. Washington has an election coming up shortly and every conceivable effort is being made by the administration to show that the economy is humming.
Europe is in a deflationary recession and as a result, money is pouring into the US. The US is seen as the only island of growth in the world, plus it is seen as a safe haven.
Below, we see the US dollar rocketing higher as money from around the world pours into the dollar as a safe haven and a source of income.
Note on the chart that the dollar is now heavily overbought (RSI).
Despite the surging dollar, gold today is well over $1200, suggesting internal strength of the yellow metal. GDX is up 0.17 and GDXJ is up 0.89 to 38.49. Thus I think that the gold universe is strong and that we are building a massive base in gold. By the way, the chatter against gold has been almost deafening of late — no doubt inspired by the Fed’s denigration of gold.”
”Over the next few months, I expect a resumption of the gold bull market that started in the early 1930s. From a price of $20/ounce in 1930, gold has constructed an enormous bull market that has taken the yellow metal, despite a three year long correction, to a price above $1200 today. Remember, every currency that has sent gold packing has either lost its purchasing power or has disappeared. Thus it is only a matter of time before the US dollar meets its demise. RIP.”
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