All asset classes but oil, silver, and mining stocks were higher this week.
Bitcoin ended the week up 57.6% at 2,724 mg, after setting another record high almost every day for the last 2 weeks. Interest in the online currency has continued to skyrocket as news spread that the "bail-in" plan that seized up to 80% of large bank deposits in Cyprus has been approved for future use in the US and Canada as well as in the rest of Europe. After this tremendous run-up, a pullback is to be expected. Note that BTC could fall over 80% to 500 mg or so and still be in an exponential uptrend! Expect further volatility.
The government-issued currencies were also higher, led by the EUR which rose 2.3%. The weakest was the JPY, which gained 1.2%. Bold moves to inflate the Japanese money supply were announced at the end of the week; it will be interesting to see how the markets deal with this news. In trading over the weekend, the Yen has already fallen from 209.3 µg to 202.5 µg.
Bonds where also higher, with the short term SHY gaining 1.9% (in line with the USD, as usual), while the long term TLT gained 6.3% to close at 2.44 g. Technically, this puts TLT back above its resistance line; if this holds as support, we may be in the early phases of a new rally in bonds. Keep an eye on this for the coming week.
Stocks were all higher except for the HUI gold miners, which hit a new 12-year low of 6.38 g on Wednesday before recovering to close the week at 6.51 g, down 6.4%. While I would be a buyer of quality gold stocks at these levels, keep in mind that the HUI is still 55% higher than its all-time low of 4.2 g set back in November of 2000. Make volatility your friend by selling put options and buying on the dips.
Commodities were mixed with coffee the biggest gainer, rising 4.1%. Cotton and copper were little changed for the week. Silver fell 4.1% and crude oil declined 2.9%, while platinum dropped 1% to close the week 2.4% below parity with gold.
The USD gained 1.9% to close at 19.8 mg. For the last three days of the week it has been more than 20% above its half-life curve. In 2005 and 2008 this level proved unsustainable, and marked the perfect opportunity to sell dollars (and stocks and bonds) and buy gold, mining stocks and other hard assets with an eye to taking profits in about a year. All the pieces are now in place to make this strategy a winner once again!