Mike Krieger: China Will Blink And Gold Will Soar

Submitted by Tyler Durden on 06/07/2012 - 16:58 Beige Book China Corruption Councils Global Economy Housing Bubble M2 Money Supply Reality Testimony

The game continues. Talk up the economy, talk down printing and pray. If the market heads into the Fed meeting at current levels it runs the risk of being disappointed. If this is combined with continued economic weakness then the real set up happens between the June meeting and the August one. It is in that interim period that the market could throw another one of its hissy fits and beg for more liquidity. Money supply growth is extremely sluggish right now all over the world. The velocity never happened and the global economy is rolling over. The Fed is already behind the curve and so when they are forced to act the infusion will have to be huge just to stem the momentum. Mike Krieger suggests people go back and look at different asset classes from the prior two lows in China’s M2 year-over-year growth rate. The first one occurred in late 2004. The M2 growth rate then accelerated until around mid 2006. In that time period gold prices went up around 65% and the S&P 500 went up 20%. In the second period of acceleration from late 2008 to late 2009 gold was up 65% and the S&P500 was up 15%. We are at one of these inflection points and considering the DOW/Gold ratio is still holding gains from its countertrend rally from last August of almost 40%, this is probably one of the best entry points to buy gold and short the Dow of any time in the last decade.