Stocks and gold rallied sharply Thursday, moving in opposition to the dollar as is so often the case these days.

The inverse correlation between financial assets and the dollar won't change but the trend is about to reverse in a major way, according to Robert Prechter, president of Elliott Wave International and author of Conquer the Crash.

"I think stocks are topping out, commodities are topping out and the dollar is making a bottom," says Prechter, who calls the dollar "one of the most despised" assets in the world.

Ever the contrarian, Prechter cited the heavy bearish sentiment on the dollar when he made similar predictions here in August. Since then, the Dollar Index has made new lows but the dollar has shown intermittent signs of life; in addition, Nouriel Roubini, Martin Wolf and others have made similar forecasts about the potential for a dollar rally.

In the accompanying clip, Prechter also makes the seemingly counterintuitive argument that the dollar will rally because there's so much debt...

Click "more" to view the rest of the post and embed the video.» More

From The Business Insider, Nov. 2, 2009:

Prior to the bust, the Japanese yen was the favored currency behind the so-called "carry trade." Traders would borrow a cheap currency, buy risky assets, and then profit. It was basically that easy.

But the cheap yen has been replaced by the cheap dollar, so that everything priced in dollars has soared like crazy.

And just as the dollar is showing some signs of life, and just as the market shows an inlking of a breakdown, here comes Roubini warning about the coming bust of the carry trade.

FT: The reckless US policy that is feeding these carry trades is forcing other countries to follow its easy monetary policy. Near-zero policy rates and quantitative easing were already in place in the UK, eurozone, Japan, Sweden and other advanced economies, but the dollar weakness is making this global monetary easing worse. Central banks in Asia and Latin America are worried about dollar weakness and are aggressively intervening to stop excessive currency appreciation. This is keeping short-term rates lower than is desirable. Central banks may also be forced to lower interest rates through domestic open market operations. Some central banks, concerned about the hot money driving up their currencies, as in Brazil, are imposing controls on capital inflows. Either way, the carry trade bubble will get worse: if there is no forex intervention and foreign currencies appreciate, the negative borrowing cost of the carry trade becomes more negative. If intervention or open market operations control currency appreciation, the ensuing domestic monetary easing feeds an asset bubble in these economies. So the perfectly correlated bubble across all global asset classes gets bigger by the day.

Click here for the full post from the Financial Times.

More coverage from The Business Insider:

• Roubini: A dollar rally, not a crash, could slam markets
• Here's more dollar strengthening and more bad news for stocks and gold

"Odds favor we'll get a correction in oil," says Frank Holmes, CEO and CIO of U.S. Global Investors, which has about $2.5 billion of assets under management, including the Global Resources Fund. "Usually when it's coldest in NY is when oil prices are actually making their bottom. "

That's good news for consumers in the near term, but long-term "there's a real [trend] toward stronger oil prices," Holmes says, citing the high correlation between money supply growth and crude prices. With the Fed's foot on the monetary gas pedal and other central bankers also keeping the printing presses on overdrive, most notably in China.

That should give oil an upside basis but Holmes believes oil will likely trade in the $60-$85 range for the foreseeable future, given the offsetting factors of high inventories and rising costs of production.

Holmes favorite pick in the sector right now is San Juan Basin Royalty Trust, which sports a 7% dividend yield, thus providing investors a hedge against falling energy prices.

Looking beyond oil...

Click "more" to view the rest of the post and embed the video.» More

"The dollar was up this morning and markets were looking down. Now, the dollar is down, markets are up, gold is up, oil is up," notes Frank Holmes, who oversees about $2.5 billion of assets as chief investment officer at U.S. Global Investors.

Indeed, the dollar resumed its losing ways Thursday - notably vs. the euro. That sent the Dow up more than 2% heading into the close, while gold futures rose 1.6% to $1047 per ounce and oil climbed 3% to $78.10 per barrel.

Unlike many others, Holmes is fairly sanguine about the dollar's weakness, noting it provides a major boost for U.S. multinationals...

Click "more" to view the rest of the post and embed the video.» More

The Dow Jones Industrial Average is back below 10,000. That doesn't mean finding value in the market is any easier, says Mark Travis, who oversees $750 million as senior portfolio manager at Intrepid Capital, including the Morningstar five-star rated Interpid Capital Fund and Intrepid Small Cap Fund.

Travis' strategy is simple: find a "discounted dollar." But finding discounts – in both stocks and corporate bonds - is harder that it was late last year and earlier this year, when Travis says you could "throw a dart" and find cheap stocks. As a result, the fund has been a "net liquidator" in the third quarter.

That's not to say there are no opportunities. Intrepid Capital Funds are deeply entrenched in a couple of mining companies - Pan American Silver and Newmont Mining. Travis is betting on precious metals because of concern "over our chronic budget deficits and what could happen to the dollar." Plus, he says, Newmont "was an opportunity to buy gold at a discount."

Overall, Travis says he still favors...

Click "more" to read the rest of the post and embed the video. » More

From The Business Insider, Oct, 23, 2009:

Nouriel Roubini believes that a "wall of liquidity" is chasing all kinds of assets, yet once the economy disappoints expectations, it will all come crashing down.

Yet for Dr. Doom, gold isn't the answer.

According to him, despite the temporarily asset bubbles right now, we're still in a deflationary world and we'll realize it soon enough once growth stagnates and all kinds of inflated asset categories come falling down.

IndexUniverse: Roubini: I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

More coverage from The Business Insider:

• How to get in the gold market
• Eleven ways to cash in on gold

Crude oil prices surged to a 12-month high above $80/barrel Wednesday as the U.S. dollar tumbled to a 14-month low, prompting investors to embrace hard assets such as oil and gold. (Oil prices slipped under $80/barrel Thursday as the dollar enjoyed a reprieve from its recent rout.)

In addition to the dollar's demise, demand from recovering global economies is also spurring oil's rise. In China, for example, the economy grew 8.9 percent in the third quarter versus a year ago. 

We've come a long way since March, when oil fell to $30/barrel -- well off the highs of $147/barrel and $4/gallon retail gasoline in July 2008. So, how far will oil rise this time around?

Bad winter for gasoline, heating fuel prices? Some analysts already forecast $100/barrel by early 2010. There's concern about higher winter heating bills for heating oil and natural gas. Gasoline is edging toward a yearly high, now averaging $2.62/gallon retail, according to AAA.

But there is a key difference between the current oil run up vs. the spike in 2007 and into the first half of 2008...

Click "more" to view the full post and embed the video.

Just as U.S. policymakers are too sanguine about China's military power, Harvard Professor Niall Ferguson says Washington D.C. is too complacent about China's ability to wean itself off the dollar.

With about 1.7 trillion of dollar-denominated assets (mainly Treasuries) in its foreign currency reserves, conventional wisdom goes something like this: If China were to diversify away from the dollar or merely allow the renminbi to float, much less dump its greenbacks wholesale, they would be shooting themselves in the proverbial foot. That's both as investors and because further dollar weakness would put a damper on their biggest export market. (A weaker dollar makes foreign goods more expensive for Americans, meaning Chinese imports would become less "cheap.")

This view is "slightly naive," according to Ferguson, author of The Ascent of Money.

"The idea they don't have anywhere else to go or would shoot themselves in the foot if there were a steep decline in the dollar or appreciation of their currency reassures many people in Washington ‘we can relax'," he says. "An appreciation of the renminbi may reduce value of their international reserves but increases the value of every other asset the Chinese own," most notably the commodity assets they have been buying all over the world.

China's "current strategy is to diversify out of dollars and into commodities," Ferguson says. Furthermore, China's recent pact with Brazil to conduct trade in their local currencies is a "sign of the times."

Perhaps most importantly...

Click "more" to view the rest of the post and embed the video.

Gold will hit at least $3000 per ounce before the current rally ends says Tice, Federated's chief portfolio strategist for bear markets. The forecast falls roughly in between Peter Schiff's $5000 per ounce call and Jimmy Rogers' forecast of $2000.

With gold hitting yet another new high of $1064 Tuesday and bullish sentiment for the metal soaring, Tice is wary about the potential for a short-term reversal in the dollar down-gold up trend.

"We certainly could have a pullback," he says. "However, we believe this rally in gold is going to on for a long time."

As with Schiff, Rogers and pretty much everyone else these days, Tice is concerned about the "debasing" of the U.S. dollar and our reliance on foreigners to fund the deficit.

Unlike others of the Austrian School of economics, however, he does believe the government was right to spend money last year because "we were going through a meltdown."

But Tice is frustrated that policymakers appear to be trying to prop up a "dysfunctional system" rather than...

Click "more" to view the rest of the post and embed the video.» More

Rogers' confidence gold will continue to rally stems from a view the U.S. dollar is on its way to losing status as the world's reserve currency.

"Is it going to happen? Yes," Rogers says. "I don't like saying it [and] I'm extremely worried about it but we have to deal with the facts. America is not getting better [and] the dollar is going to be replaced just like pound sterling [was]."

Rogers didn't offer a timetable, and it's likely gold would exceed $2000 per ounce if the dollar were to lose its reserve status.

Still, "I wouldn't buy gold today," Rogers says. "I think I'll make more money in other commodities, which are cheaper,"...

Click "more" to view the rest of the post and embed the video.» More