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MLR - Premarket Pulse September 24, 2012

The market reversed course closing near breakeven at or near the lows of the day. Volume was much higher due to the S&P rebalancing that took place on Friday.

The weakened US dollar and central bank printing en masse has led to a strong rally in gold. QE3 is open-ended and could last 3 years or longer at a cost of over $3 trillion according to the Federal Reserve.

Meanwhile, central bank buying of gold has increased so far in 2012, while the supply of gold has remained level. While this will further boost the price of gold, recessionary economies won't help gold unless there is a simultaneous pickup in inflation, a.k.a., stagflation, as we saw in the 1970s.

Futures are getting pounded as a number of headlines give investors an excuse to take profits, and it remains to be seen whether the sell-off develops into anything more material. Investors should keep a close eye on their stops in individual portfolio holdigs.

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