Global Liquidity and the Golden Shift

Don Kaufman here.

If you've been paying attention to the markets lately, you've probably noticed the noise. The S&P 500 is red, momentum is red, and yet, the headlines are screaming about gold, Bitcoin, and even global ETFs breaking out. What's going on here?

Well, let me tell you—the game isn't being played where you think it is. This isn't about your classic U.S. stocks anymore.

This is about global liquidity, real assets, and a shift in the financial system that's been in the making for decades.

Let's break it down.

Follow the Money: Liquidity Drives Everything

Here's the key takeaway: if you want to understand where the markets are heading, follow the liquidity.

Right now, global liquidity is surging. It's not just coming from the Fed—it's coming from shadow banks, central banks, and international players. These unregulated entities are pumping trillions into the system.

But here's the kicker: this liquidity isn't flowing into U.S. equities. It's moving abroad and into alternative assets like gold and Bitcoin. This is where the game is being played—and it's where I'm focusing my attention.

Gold and Bitcoin: My Take

Let's start with gold.

Gold is the ultimate "real asset," and right now, it's getting a massive bid from central banks. China is buying it. Other countries are buying it. Even retail investors are piling in. Why? Because gold is a hedge against inflation, a weak dollar, and global uncertainty.

How I'm Playing Gold:

I'm looking at gold ETFs like GLD or GDX (gold miners). These ETFs are liquid, easy to trade, and benefiting directly from this trend.
My approach: Buy above the 20-day moving average and set a stop just below it. This keeps my risk tight while letting me ride the momentum.

Now, Bitcoin.

Bitcoin is behaving like "gold for the digital age." The relationship between global liquidity and Bitcoin is undeniable. As liquidity expands, Bitcoin prices rise. It's riding the same wave as gold but with higher volatility and more speculative potential.

How I'm Playing Bitcoin:

I'm watching Bitcoin-related ETFs like BITO or miners like RIOT and MARA. These provide exposure without needing to buy Bitcoin outright.
Strategy: I'm using tight stops and trading around breakouts above key technical levels (20-day moving average). Bitcoin is volatile, so risk management is non-negotiable.

The U.S. Bubble: Why I'm Looking Abroad

Here's the hard truth: the U.S. is no longer the center of the financial universe.

For years, foreign capital flooded into U.S. markets because we had the best returns. But now the tide is turning. The U.S. is tightening credit, while countries like Japan and Germany are pumping liquidity into their economies.

Where I'm Looking Instead:

Europe: Countries like Germany are rebuilding their economies and defense systems. ETFs like EWG (Germany) are seeing strong inflows.
Japan: Rising interest rates and economic recovery make Japan an attractive play. Look at ETFs like EWJ.
Emerging Markets: India and Southeast Asia are also benefiting from global liquidity.

How I'm Playing International ETFs:

I only buy ETFs that are above their 20-day moving average. Why? Because it takes real inflows to sustain a move above that level.
Example: EWG (Germany) recently broke above its 20-day moving average. I'd consider buying here with a stop just below the 20-day, targeting 5–10% upside.

This is about following the money, not fighting the trends.

De-Dollarization: Why It Matters

Let's talk about the elephant in the room: de-dollarization.

The U.S. dollar has dominated global trade for decades, but that dominance is eroding. Central banks are diversifying their reserves, moving away from the dollar, and buying gold instead. This is a structural shift that's driving the current gold rally.

For traders, this trend is an opportunity. As the dollar weakens, real assets like gold and Bitcoin become even more attractive.

How I'm Trading in This Volatile Market

This market is brutal, no doubt about it. Volatility is distorting signals, and momentum seems to shift on a dime. But there are always ways to make money if you stick to a disciplined approach.

Here's my playbook:

Focus on Real Assets:
Gold and Bitcoin are leading the charge. I'm trading ETFs like GLD, GDX, and BITO, using the 20-day moving average as my guide.
Look Abroad:
International ETFs are breaking out as capital flows out of the U.S. I'm watching EWG (Germany) and EWJ (Japan) for opportunities. Buy above the 20-day, set a tight stop, and take profits on strength.
Use Options for Defined Risk:
When trading volatile assets or ETFs, I use call spreads to limit risk.
- Example: On EWG, I'd buy an in-the-money call at $37 and sell an out-of-the-money call at $39. This limits my risk while giving me upside exposure.
Keep Stops Tight:
In this environment, risk management is everything. I'm setting tight stops just below key technical levels (like the 20-day moving average) to protect against sudden reversals.

Adapt or Fall Behind

The financial world is shifting, and the smart money is already ahead of the curve. Gold, Bitcoin, and international markets are where the action is. If you're still stuck chasing U.S. tech stocks, you're living in the past.

Here's the bottom line: follow the liquidity. It's moving into real assets and international markets, and that's where I'm putting my focus.

To your success,
Don Kaufman

P.S. You can start trading with me for as little as $7 for thirty days. If you'd like to learn more, click here to get started.