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May 28, 2015, 10:57 a.m. EDT

Is the Fed really trying to kill the U.S. dollar?

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About Avi Gilburt

Avi Gilburt is author of ElliottWaveTrader.net, a live trading room and member forum focusing on Elliott Wave market analysis. Avi emphasizes a comprehensive reading of charts and wave counts that is free of personal bias or predisposition. A lawyer and accountant by training, he is also managing member of Gilburt Financial Services, LLC, which provides financial markets analysis and consulting. His Elliott Wave analysis appears frequently on sites such as SeekingAlpha, where he is a certified contributor, and TheTechTrader.com with Harry Boxer.

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By Avi Gilburt

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Since 2008, the United States has engaged in historically unprecedented programs to stimulate the economy. We have experienced quantitative-easing program one (QE1), QE2, Operation Twist, and QE3, all of which has made available significant amounts of credit for the banks to loan out to the public.

During that time, the common belief among many investors was that this intervention had killed the U.S. dollar, so one should be buying precious metals to protect themselves from the dollar’s collapse. Amazingly, I still hear this same mantra. And it is simply not true.

In 2011, I called for a long-term bottom for the U.S. dolla r, saying that the dollar was likely completing a corrective pullback, and stated that "based upon my count, the dollar will now begin a multi-year bull run."

For all who believe in the Fed's omnipotence, I am going to relate a very simple fact. Since engaging in all its "artificial" easing programs, not only has the Fed not been able to kill the dollar, but the dollar has now risen 42% since its 2008 lows. In fact, it has risen 34% since my 2011 column. And it is not done yet.

There is only one way the Fed can truly affect the value of the dollar, and that would be to flood the market with actual printed greenbacks. However, they are far from having the desire to engage in true printing. While they may begin this printing process as the U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.75% exceeds the 110 region, I believe it will only lead to a corrective pullback in the dollar (possibly deep), which can last for several years, and then the dollar will continue its longer-term climb.

I am sure many of you are thinking, "But what about gold?" Well, I have noted that I am a long-term gold bull, but still believe that lower lows will be seen before the bull market resumes. However, I also believe that the dollar can rally concurrently with the metals. I know that is completely counterintuitive to what most believe, but let me tell you why I think that the dollar and the metals may have potentially entered a concurrent long-term bull market.

In 2014, there was a concurrent rise in the dollar and the metals. It was not a small rise either. From November of 2014 through January of 2015, gold rallied strongly, rising 15% during that period. And, yes, the dollar rallied alongside of gold, climbing 9% during that same period of time.

I believe we are entering a new paradigm in financial markets, and the inter-market analysis of old will probably have many on the wrong side of the markets. I suggest looking closely at how markets are reacting over the last several years, and recognize that we may very well be entering into a paradigm shift throughout all markets.

Next week, I will give you a glimpse of my 50-year expectations in the gold market, but I can assure you it will not be for the faint at heart. It is quite extreme, and probably more extreme than you have heard to date. Have a good week.

See chart illustrating the wave count on the DXY.

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