Capital is running to the US dollar
NEW YORK (July 28) The reason capital is running to the dollar is because much of the USA Fed QE ended up in the rest of the world as dollar loans (developing world is booming because of these dollar loans but this will come crashing down as explained below). Thus the world is short the dollar. Thus as the rest of the world has reached its debt limit, e.g. in China every new dollar of debt only adds a few pennies to GDP and Europe has even become confiscations and capital controls, the smartest capital had started migrating to the USA earlier in 2013 (and some hedge funds such as Kyle Bass had positioned in 2012 expecting the oversold condition of housing to bounce). This caused the Fed to start considering tapering QE as housing rose (e.g. up 25% in California), which then caused interest rates to rise, which then caused more home buyers to try to rush to lock in a rate, which then caused more international capital to chase yields in the dollar investments, which then caused a pin prick in the developing markets stock markets, which then caused more capital to rush out of emerging markets to the dollar, etc.. Bernanke saw this was moving too fast and causing dislocations in late June, so the Fed has tried to backtrack a bit, which is causing this slide in the dollar and bounce in gold. But this spiral feedback loop trend described above can't be stopped now. Thus this bounce in gold is only temporary.
The DJIA (Dow) will go to 40,000+ by 2015. By that point, the global economy outside the USA will be imploding, and interest rates will have risen so much, that the real economy in the USA will be falling apart again. Also these rising interest rates will set off CDS (credit default
swaps) derivatives time bombs. Thus the global economy will blow up and implode circa 2016. As the global economy blows up, the value of paper will default. Thus demand for gold will skyrocket.
