As we've noted several times over the past several weeks, fundamental backdrop of precious metals market remains extremely firm with plethora of global monetary and fiscal issues producing massive tailwinds for both Gold and Silver, and we continue to believe long Precious Metals remains the best bet in all financial markets at this time...what we'd like to add to this thesis now is we believe sometime over the next 6-12 months we will in fact see gold futures become undeliverable as demand for physical gold bullion far outstrips available supply (ie long gold futures holders looking to tak

We continue to believe we are trading in extremely similar fashion to the Feb-April 2010 rally (strong support at 10-day EMA on S&P, depressed VIX, high levels of complacency, widespread overowned sectors, extreme bullishness, etc) which of course ended in a violent sell-off, and as noted yesterday we believe we are now trading at the equivalent of the April 20, 2010 point where equities are rebounding a bit off their first test of the 20-day EMA following an initial break below the 10-day EMA (see charts below).

While housing prices are expected to continue declining near-term due to uptick in foreclosures, we expect the significant amount of investment capital which has been pulled from equities and currently sits in Treasuries and/or money markets will become redeployed into the housing market in 2011 which will therefore begin clearing supply of houses available and put a bottom under housing prices especially at the low-end of the market.
While relatively low liquidity equity and commodity markets are attempting to signal a global recovery (and hence a more inflationary environment), the two most liquid and therefore most efficient financial markets (Treasury and FX) continue to invalidate the claims made by these markets ultimately portraying a much more accurate environment with significant deflationary headwinds.