Guru Insight; U.S. Dollar collapse?

In his latest remarks on the state of the dollar, gold and silver, precious metals guru James Turk of goldmoney.com has come out with one of his most dramatic and dire outlooks for the U.S. currency.

As a regular guest on King World News with Eric King, Turk said the chart of the U.S. Dollar Index (USDX) looks ominous to him.

�The dollar right now is hanging on the precipice. If we break below 77 on the Dollar Index, look out below,� said Turk.� �I don�t think people really appreciate how scary the dollar chart is here, or how ominous the implications really are.� There�s no predicting how far the dollar could plunge if confidence breaks.�

The dollar’s health against six major competing currencies offers insight to safe-haven buying during periods of uncertainty.� During the meltdown of global financial markets in 2009, the dollar was the go-to currency, while gold, silver and oil plunged.

During the sovereign debt crisis involving EU member nation, Greece, the dollar and gold shared safe haven status through the March-June 2010 period.

Today, Turk senses a shift in the dollar’s role as the �risk-off� trade, noting the USDX failed attempt at decisively breaking above the 78.50 level in the USDX as the crisis in Egypt showed clear signs of spreading to the oil-producing nation of Libya.

�You�ve got civil war breaking out in North Africa and you have rebellions happening in the Middle East,� Turk continues. �In this kind of geopolitical situation, in the past the U.S. dollar would always rally, but this time it can�t even bounce.�

A month earlier, in a Jan. 25 missive to subscribers, the author of the Dow Theory Letters, Richard Russell, warned that a USDX move below a key support level for the greenback at 78.50 while also trading below its 50-day and 200-day moving averages spells trouble for dollar denominated assets. Russell recommended fleeing U.S. Dollar assets.

� � the Dollar Index is now trading below its blue 50-day moving average. The 50-day, in turn, is below the red 200-day MA,� the octogenarian and longest-running financial newsletter writer stated.� �Thus, the dollar is in the classic bearish configuration as long as it trades below its 50-day MA.�

�Note also that the dollar has now broken below three preceding lows, a bearish situation,� Russell added. Gold has jumped nearly $85 per ounce since Russell’s Jan. 25 comments.

Once vital to dollar strength, Asian buyers of U.S. Treasuries have not kept pace with bloated increases in budget deficits in Washington.� Without China and other creditor nations of Asia filling in the additional $1.0 trillion in fresh U.S. deficit spending each year (and growing), the U.S. Federal Reserve must pick up the needed purchases to maintain a low-interest rate environment�one of the goals of Ben Bernanke and the FOMC to encourage higher-risk asset purchases.

On Feb. 22, John Embry, chief investment strategist at Sprott Asset Management, told King World News that demand for gold is massive from Asia, leaving little doubt in his mind that the sudden explosion in demand for gold from Asian buyers is a response of no confidence in the Obama administration working with Congress to make the drastic cuts necessary to reduce federal spending, therefore, leaving the Fed no choice but to monetize a portion of weekly Treasuries issuances.

�The Asians are looking at the new budget proposal from the U.S. and saying, �Get me out of the dollar,� Embry said.

In early afternoon London trading, the USDX trades under pressure at 76.84, down 0.36. Gold and silver trade higher at $1413.28 and $33.52 per troy ounce, respectively.