In the face of a looming government shutdown the dollar continues to sell off. Is it that the Central Banks of the world do not trust the US government to make the necessary cuts, or is inflation so big that the dollar is at the peril of a market that is over liquid? Either way, things look bad for the greenback.
The assets backing the dollar are those that the Fed owns and operates. These are the "gold" reserves it houses, MBS it owns, and all that the President's Working Group on Financial Markets has in its lock box. These are the reasons that the dollar is failing. Them and the fact that Congress will never slow its spending.
The US government is in a catch-22. If they cut spending it will derail what they call a recovery. If they stop the bond monetization, then the interest on the debt will collapse the government. They have no good answers.
They only thing to do would be to move to a precious metal standard, to bring back sound monie. This is not in the cards, so the result will be bad or worse. The rest of the world looks on, but they already have their ducks lined up. They will continue to spend their dollars accordingly, and the pace will pick up now that the US has bluffed its way to the top of the debt ceiling.
Precious metals have now tested support, and they may skim at this level tomorrow. Gold is about at the bottom of its support, and silver is close. Platinum is at the bottom of its range. Finding gold's support is simple; its old resistance is its new support. Old resistance was $1440, so that number could be tested. It will not be long until we find out what the next resistance level for gold is. It could be as high as $1500.