Yellow Fever

"We're gonna bring this party up to a nice respectable level. Don't worry, we're not gonna hurt anyone. We're not even gonna touch 'em. We're just gonna make 'em cry a little, just by lookin' at 'em."
--Duncan (Some Kind of Wonderful)

Folks are eyeing the action in gold as it crossed $1000/oz intraday. The chart indicates a picturesque multiyear inverse head and shoulders pattern which, all else equal, is bullish. As of yet, however, the yellow metal has yet to break out when resistance is drawn w/ a crayon.

Despite the pretty technicals, it's been difficult for me to get worked into a lather on this particular move. I suppose it's because my favored scenario for the upcoming period is deflation and my view is that a general asset price decline will not spare the yellow metal this time around.

Meanwhile, the dollar looks like maybe it wants to head another leg lower altho it's pretty oversold in the near term.

Perhaps the USD has a date w/ the 2008 lows of 71ish (about 10% lower from here) before it finds significant traction.

With the TD indicators approaching trend exhaustion for both gold and the dollar on multi time frames, we may experience some nasty head fakes (read: significant trend reversals) in these two over the next coupla months.

How am I positioned? No paper gold, but a healthy chunk of physical bullion which will keep me exposed if the yellow dog rips higher. I have no desire to sell this physical position, however, as it constitutes a form of wealth to pass on to the future.

Am also building cash, with minor exposure to securities betting on a higher USD. My sense is that I'll be adding to my USD position in upcoming months.

positions in gold, USD