Gold is cheaper now than it has been in a while.  I think it's a screaming buy in the $700s.  Forecasters are already indicating with some confidence that the Fed will ease interest rates again (which already seem like negative real interest rates, when inflation is rolled in), flooding the market with an even greater supply of dollars.  Dollars look like they will continue to plunge toward worthlessness, and the only way to hedge against that is gold. 

The main reason the dollar has been stronger, temporarily, is  careful coordination with the ECB, which is not allowed to lower interest rates to boost its economy.  They have a single mandate (unlike the dual mandate of the Fed) and are allowed only to stem inflation (ie raise rates) and turn to boosting the dollar (buying US Treasuries) in order to weaken the Euro and stimulate exports.  That can only go on so long.

In the short term, these actions have made gold and oil "look" cheaper, as they are assets priced in this artificially stronger dollar.  The fundamentals of the US economy have only weakened, and there have been no positive structural changes in the US to support a stronger dollar.

GLD has certainly been moving in the right direction.  Stay posted and I'll provide some important information soon on when to make an interim sale, to then reestablish a position at a lower cost.

Two months ago, 3/19, I suggested GLD would stay about where it was for two months and then resume its upward trend.  On May 20th, it checked in at about $89 and today it's about $89, so the sideways part has held true.  (Of course, its mostly languished below $89 in the interim, but that's less relevant to where it's going.)

Agora's 5 Minute Forecast pointed out that the Baltic Dry Index (BDI) today made a new record high and, as a gauge of shipping goods such as grains, ore, and coal, it may be a leading indicator for gold and commodities as evidenced by the charts above.  If true, we may be returning to the bull gold market I was anticipating in May.

Here's an interesting note from Agora's May 1st "5 Min. Forecast" --

"A study released today by the Boston Consulting Group shows that, post credit crisis, China now controls the world’s largest banks :

1 - Industrial and Commercial Bank of China
2 - China Construction Bank
3 - HSBC
4 - Bank of China
5 - Bank of America
6 - Citigroup

When arranged by current market capitalization, it’s clear that the subprime debacle has altered the world’s monetary swagger…"

This is only more true when you factor in the equity stakes Asian countries have purchased in US banks via sovereign wealth funds.  It's frightening to see how quickly that happened. 

Given that China has already RFID-equipped its national ID card, there's no reason to believe it would not want its financial services industry to follow suit.  China is less worried about individual rights than it is about effective controls (when compared to other more developed countries).

If China chooses to lead the way with electronic-only currency, and it becomes tomorrow's financial powerhouse, other nations may have no other choice than to follow suit.

I know.  It hurts.  But, I believe it will go sideways for two months as it did Nov-Dec 2007 and then will continue its ascent. 

I've gotten some questions about the relevance of the Visa IPO.  So, the following is my explanation.

The Visa IPO will serve to further disrupt the financial markets.  It's supposed to be the biggest IPO *ever* at about $15B.

Visa is owned by its member banks that produce Visa cards, like JP Morgan Chase, Bank of America, etc, and they desperately need the liquidity they will raise in this mega market offering.  If it doesn't go well, the financial services firms involved and the markets as a whole will face  an increasingly challenging environment.

Today, I've gone ahead and sold my very average (and not end times portfolio) holdings in Kraft and Gol, a Brazilian airline.  Kraft was basically even money with a nice dividend and Gol was good for a while as an overall tracker of the Brazil economy, but with oil prices skyrocketing, it has fallen substantially.  Gol is unlikely to stem losses in the near term.  Going forward, most airlines will need to substantially reconfigure business models in light of higher fuel costs.

The rebalanced funds are going right into Gold.  Gold has been strongly under-performing the past month because of the $1k barrier.  But, note how quickly oil went from $100 to $110.   I'm relatively confident that Gold will jump 10% or so as soon it tests and breaks that $1,000 barrier.

The financial markets may recover, of course.  All of my strategies are long term.  For example, the $25B Visa IPO could go well and rally the markets. 

However, I believe a worldwide financial disaster is a required prerequisite for one world currency.  And once that disaster takes place, it will take some time for the cashless currency to develop.  So, that crisis will have to precede the currency by some time, the main question is -- how much time do we have before financial collapse?  And, between that collapse and one currency?

 Today I'm going to start slowly shifting assets into gold and oil.  I'm going to do this by selling some of my other equity positions, even at a loss in the current poor market.

I recommend you consider doing the same.  You will lose money in the sale, but they will begin making money in these alternative asset classes immediately.

Some things to consider:

- Dollar is hitting its record weakest, versus Euro, Yen, and others
- The Fed is going to keep making it worse, by easing monetary policy
- The temporary market rallies are not sticking
- Gold has hit $1,000 in overnight trading, it's past that psychological barrier
- Gold can get to $2,000 easily, in inflation-adjusted dollars it was there in the 1980's
- The $25B VISA IPO could potentially flop disasterously
- Potential continued financial markets failures could precipitate a more rapid fleet to gold/oil

Background articles --

* Bloomberg: Gold Rises to Record on Demand for a Haven

* Businessweek: Gas prices jump, oil hits $110

* Bloomberg: Dollar Falls to 12-Year Low of 100 Yen

This is a project that I've been thinking about and working on for some time, but am finally now getting underway.  My investing style has been focused on commodities, technologies, and key trends that we expect during times of turmoil.