The market hardly budged yesterday and volume was below average, yet I still remain bullish.

I’m always looking for unique ways to invest in gold, and legendary investor Dennis Gartman recently discussed a way to build a gold position in other currencies…

What do I mean by other currencies? Well, as Mr. Gartman says, “If you buy gold, by definition you have gone short of the U.S. dollar.”

Now, I’m as bearish on the dollar as anyone over the long term, but just like no bull market goes up in a straight line, no bear market drops straight through the floor.

And right now, the dollar is absolutely in the gutter – even relative to other at-least-as-crappy currencies like the Euro or the Yen.

Here’s a one year chart of the dollar index – which plots the exchange rate of the dollar against a basket of other (fiat) currencies.

It’s well known that Japan is among the largest holders of US Treasuries. According to the US Treasury website, the Japanese only come second to China in terms of Treasury ownership, with $885 billion in Treasury holdings as of January 2011.

And almost on cue, my favorite contra-indicator proclaimed to the world just days after the earthquake that the Japanese will be forced to sell Treasury holdings.

You might be familiar with my contra-indicator. I’ve called it many things, but it comes down to this: when Tim Geithner, the Treasury Secretary goes on the record to say one thing, you can be almost guaranteed that the opposite will happen.

And on March 15^th, Geithner gave me my answer when he said he didn’t believe the Japanese would sell Treasuries.

I don’t know for sure if Japan is selling Treasuries at this point. But somebody is, and that’s the opposite of what you’d expect, and what historically happens, after a significant crisis.

Usually, capital flies to Treasuries in these circumstances. But today, people are selling dollars and flooding into gold and alternative currencies like the yen.

In 2001, you could buy an ounce of gold for $250. Today, gold sells for more than $1,400 an ounce. That’s more than 460% gain.

Again, you know this information. You might even be getting sick of hearing it repeated by gold vendors, gold bugs, or talking heads on TV who mention it with the rapt excitement of someone reporting actual news.

So, in an effort to illuminate a different aspect of the gold story that you probably haven’t seen anything about, I’m going to focus on other currencies.

Because I’d be surprised if you’ve heard ANYTHING about gold’s price as expressed in a different currency.

Take a look at the chart below, which shows the percentage gains of gold priced in dollars and six other major currencies.

The market eventually closed negative Monday as the indices settled lower in late day activity. All indices had been higher throughout the morning, but gradually slipped negative in the final hour of

Just to be clear, “lexicon” is a fancy word that means vocabulary – and “food riot” is a phrase that refers to a group of angry, hungry, violent people who destroy property because they feel (among other things) that food prices are too high.

And yes, to answer any questions from the peanut gallery in my office, I do believe we’ll see food riots in these United States of America sometime in the next year and a half.

I’m belaboring this point because I want to be crystal clear with this prediction, not because I especially like making predictions. Quite the opposite, actually – I detest making predictions because it’s so easy to be wrong on the scope, specifics, time-frame, location, etc.

In that vein, if I am wrong about this prediction, it will probably be a matter of my timing rather than anything else.

Today there are two huge trends that are about to benefit one small sector more than any other.

First I’ll tell you the trends so you can connect the dots - and I’ll give you one way to invest.

The first trend is somewhat well-known. It goes like this: when interest rates in the United States begin to rise, the Japanese stock market tends to outperform.

You can see this trend in action in the somewhat complicated table below:

Once again, stocks are advancing today. Commodity prices have been driving the action lately, and that's the case again today. And much of the reason is China.

 

Inflation has picked up China as demand for goods chugs on unabated. China's government has been taking steps to cool inflation, including raising down payment requirements for real estate purchases and raising reserve requirements for banks.

 

In fact, there was speculation that China would raise rates over the weekend. China did not act on interest rates, and that's one reason commodities, and stocks, are rallying today.

Over the long term it doesn’t matter. The dollar can rise, fall, go to zero - or a billion. It won’t matter. Because the dollar index is really just a mirror, reflecting the dollar’s different exchange rates of a basket of other paper currencies: the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swiss Franc, and the Swedish Krona.

So, it’s entirely possible for all of these currencies to fall in tandem over a long period of time, and although the dollar index would remain flat, the price of gold would rise.

All of these currencies are backed by nothing more than their promises to pay back sovereign debt slower than the rate of inflation.

Europe is already having trouble with this promise, which is why Greece bond rates skyrocketed earlier this year, and it’s why Ireland’s bond rates are soaring today. It’s why Portugal recently threatened to abandon the Euro.

Stocks pushed higher again on Friday. The Dow Industrials broke above 11,000 and the S&P 500 moved closer to TradeMaster Jason Cimpl's target set five weeks ago of 1,172.

Still, these indices are below their 52-week highs of 11,309 and 1,219, respectively. That was back in April, after the European debt problems prompted a massive lending program form the EU and 1Q earnings came in very strong.

I'm still miffed at Fed Chief Ben Bernanke for not speaking with confidence about the U.S. economy. For a group to succeed, it must have confidence that it can succeed.

Generals know this. Coaches know this. But for some reason, Ben Bernanke just can't bring himself to give the economy a vote of confidence.

But perhaps he's competing with the Bank of Japan and China's government in the great race to the bottom for currency valuations.

Market sentiment doesn't matter for gold.

That statement flies in the face of commonly held wisdom repeated ad nauseum by investment experts and the investing public alike.

I fully expect to be "taken to school" by any number of readers for this statement, but hear me out...

There are two basic reasons why sentiment doesn't matter for gold, or at least not yet.

The first is that gold's price has very little in common with broad market investor sentiment.

If you look at any number of "sentiment" metrics, you can put together a pretty tight little theory that betting against sentiment is almost always profitable.

Take a look at this chart I cribbed from Pragmatic Capitalist which shows consumer sentiment. I've taken the liberty of plotting the S&P 500 index (in red) directly over the sentiment index (in dark blue):

So far this year, the S&P 500 has dropped 3% or more in one session 3 different times. The two previous times, it clawed back some of the losses over the following week. We’ll have to wait and see of there is any upside after yesterday’s big drop.   

 

The S&P 500 is now testing the lows from the “flash crash” on May 6. This is interesting because it was assumed that trading that day was something of a fluke as computer trading programs went haywire. But now that stocks are back to those levels, we must consider that the drop may not have been a fluke.  

 

The question now is: can stocks find some strength? Or perhaps a better way to ask the question is: are the sellers done?   

Yesterday, commodities, and stocks – and every conceivable asset class you could shake a stick at – all took a dive.  

I heard one talking head on CNBC shell out this wonderful advice: “sell half of all your positions right now!”  

I won’t un-dignify the gentleman by revealing his name – but any long term investors should run far, far away from any advice that tells you to liquidate half of your investments.  That’s just irresponsible.

At the same time, it’s hard to remove personal bias and emotion from the equation when everything is in the red for the day.  It’s exactly this kind of situation when you should take a deep breath, and look at the fundamentals behind all of your holdings.  If the fundamental reasons for owning gold stocks, oil stocks or other securities remain the same – then you should look at any dip as a buying opportunity.

External factors like daily price fluctuation, a bad hair day or even a currency crisis in Europe might slightly change your long-term investment plans – but not over the course of one day.