Silver Jumps To $ 35.6/oz, Next Stop $41/oz

The Debasement Of The USD Is propelling Precious Metals Into A New Orbit

Silver gains 30 per cent in one month; Gold gains 10 per cent; Platinum gains 8 per cent

 

Take a look at a weekly chart of the US Dollar index…The dollar is currently trading at a very important technical support area (the green line).  As you can see, the trendline extends back to April of 2008.  Notice how the dollar index has bounced off this technical support in the past.Now the dollar is getting dangerously close to breaking this trendline.

In addition, the trading action in the dollar has been a little unusual in recent weeks.  You see, in times of market uncertainty, the dollar is usually a safe haven.  As equity markets go down, investors typically move into the dollar in a “flight to safety”.

But not recently…

The unrest in Libya, along with the 3.5% pullback in the S&P 500 last week, has done nothing for the dollar.  The lack of interest in the world’s reserve currency is worrisome.

The dollar must hold the green trendline or risk seeing a significant drop in the near future. If the dollar breaks lower, it will add more fuel to the commodities fire. Oil, gold, and silver will all likely see more strength due to their inverse relationship with the dollar.  You see, when the dollar falls, these precious commodities usually rise.

Of course, upward pressure on oil prices is bad news for consumers. Rising oil prices mean rising prices at the pump.  In fact, some estimate every $0.01 rise in gas prices takes $600 million out of US consumers’ disposable income.  Money otherwise spent on goods to fuel the economy is instead spent filling up gas tanks.

The bottom line is this…

If the US Dollar breaks lower and political unrest continues overseas, we could see higher prices in a number of important commodities… including oil. Obviously, it’s not what the US economy needs right now.