Gold Is Entering Its Liquidation Phase
8. Strong U.S. dollar. Whether you believe the U.S. economy will accelerate or slow, one thing is virtually certain: The U.S. economy, in relative terms, will be stronger than that of virtually all other developed nations. This means the U.S. dollar will tend to strengthen relative to virtually all major currencies, including the euro and yen. This is clearly a major negative for gold prices.
The only real hope for gold prices would be a massive economic collapse in Europe or the U.S. coupled with hyperinflationary monetary policy. Such a scenario is unlikely to manifest in the next 12 months. To the contrary, the global macroeconomic picture is likely to remain mired between slow growth and mild recession in most developed nations, with a concomitant tendency toward disinflation. This is the worst of all worlds for gold: not enough crisis intensity to trigger a flight to gold as a safe haven; not enough growth intensity to trigger inflation.
In sum, if you have not sold your gold and gold stocks already, sell now while prices are still absurdly high. The secular bull market in gold may not necessarily be over; however, the current cyclical bear market in gold still has another major leg down to go.The writer holds no securities mentioned in the article. This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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