As noted below, the USD just fell through major support that has been in place since the Fall 2010. Since the PPT may force it up tomorrow, it is still to early to confirm a definite breakdown. However, we just may be on the verge of gold and silver's next leg up.

Something to monitor - VHF

-

Gold Will Seize The Day

Anthony Stills

January 19, 2011

With that said I want to look at the markets, and in particular I want to look at the US dollar because it epitomizes what’s wrong with the US. You have a very small group of very powerful unelected officials who are allowed to create unknown amounts of wealth out of nothing and give it to friends and supporters. They answer to no one and they are not held accountable for their actions. The Chairman of the Federal Reserve has gone so far as to say that the American people don’t have a need to know. Over the long run it is very difficult to fool the market, especially with the Internet and the fact that we now have a global market that trades twenty-four hours a day. That’s why the US dollar has been declining for months even as the Fed insists it has a strong dollar policy. Take a look at the following chart and you’ll see what I mean:

The decline from 88.50 began months ago and recently went through a period of distribution as it danced on both sides of a neckline at 80.16 formed by a large head-and-shoulders formation.1

Late last week the spot US dollar broke back below that neckline and today is down another .45 at 78.88 and it has now fallen below the range it was distributing in. This was to be expected and I now look for the dollar to test support from the trend line I have drawn in below:

As timing goes it couldn’t be worse since the break down corresponds with the visit of the Chinese Prime Minister to the United States and the dollar will be a hot topic of conversation. The Chinese hold more US debt than anyone else and I have maintained for months that when this trend line is broken, the Chinese will begin to dump that debt regardless of the consequences. Then all bets are off.

The fact that the United States has chosen to destroy their own currency instead of living within their means is the main reason why I remain so bullish on gold. There are only three things that can act as a store on value in today’s world: gold, silver and the Swiss Franc in that order. You have the Europeans going down the same road as the United States so the rest of the world will push gold’s price higher:

That’s why gold’s secondary trend has been methodically working its way higher for twenty-six months as you can see in the previous chart, and that’s why it will continue to work higher. You can see occasional periods of sideways movement where gold is accumulated in anticipation of the next move higher. That’s what’s happening now as gold is being accumulated on each and every dip in anticipation of a move up to 1,596.90. Silver will follow and so will the Franc, and I might add that the latter just happens to be rallying in every major currency.

There is a lot of talk about bubbles but gold is a long, long way from being in a bubble. Go out for a walk and knock on ten peoples door and ask if they own gold. They won’t have a clue as to what you’re talking about! In a bubble you’re neighbors will go out of their way to tell you that they own gold. The other thing you need to know is that gold is a manipulated market and that makes for some difficult days. Last week we saw the metal behave in an uncharacteristic fashion as it was pressured down in spite of a declining dollar and rising commodities prices, and we can see them try to cap the price today. Most traders find that discouraging but I look at it differently. I see it as the manipulators putting money in my pocket because sooner or later the primary trend will fully express itself, and it will include a bonus due to the manipulation. My best advice is not to hang on every dip and rise. Take your position and just stick with it. You will win in the end.