So, what does Larry say?

Larry Edelson is back to forecasting doom and gloom (and later boom). He reasons that like in 2008, people will sell everything they can just to be in cash, so the value of the US Dollar will continue to rise and gold and silver will drop. He forecasts that by the end of July gold will be down to maybe 1,300 and the DOW to 11,500.

Larry should read the numbers. People are not short of cash as they were in 2008, so they do not need to sell everything. Sure, they are selling stocks, but they are still buying bonds (mostly treasuries) and gold is holding above 1,620 as I write this. Something else that has not reached Larry in Thailand is the fact that Friday's massive rise in gold was due to short covering. If people believed as Larry does, that the EU will disintegrate (causing the US Dollar to rise and gold to drop) why would they cover their shorts now?

Something else Larry ignores: the desire of Europeans to hang on to the European Union. The EU is a guarantee that Europe will not have a war (at least not internally). This is very important to Europe. Sure, there is a lot of bickering on how to save the EU and the Euro, but abandoning it is unthinkable. There are a lot of smart people working on it. They kick the can down the road till they eventually do something. Will it work? Only time will tell.

I am not like Larry. I do not have the experience in commodities like he does, but I know one thing. Unless gold prices bounce off the 200 DMA, the correction is over. The Central Banks (including the FED) have to print money to stave off disaster and that expectation will fuel the rise in gold. Socialism has to be abandoned, but that can not be done immediately. Retirements must be privatized so people can earn a chunk of economic growth and the government's role is to be reduced. Socialism simply does not work.