Speculative Shakeout Triggered
Today’s employment report is a game changer. The move since the first of the year, partly led by the FED and Bernanke, has been a lower dollar and lower interest rates. Now interest rates are turning up and the dollar is now positioned to head towards new 12 month highs and more as a key support level has held the past week and now the news for US employment is outstanding.
What to do then? Be long the dollar first and be short gold. The stock market and basic commodities are a wild card. The markets for the past couple of years have been highly correlated with gold, stocks, and commodities all going up and down together and the spec money is tightly tied to that package. So the stock market may get beat up as the spec’s look for cash to maintain their margin in long gold positions.