Some market participants may be treating 3 November, next Wednesday, as if it will just be another day. However, that day will reveal the results of the U.S. election, and may be the first day of a new era. For the first time in 78 years U.S. voters may, one, declare Keynesian economics a complete and utter failure, and, two, repudiate further mismanagement of the U.S. economy by Keynesian ideologues. Should that happen, some cause for celebration may be in order.

Much discussion has taken place on the subject of QE II. The advent of that discussion accelerated the decline of the U.S. dollar. As is readily evident in the chart below, the U.S. dollar has developed an inverted parabolic curve. Potential appreciation for the U.S. dollar out of this formation is, one, far greater than many may expect, and, two, may have serious negative ramifications for the value of $Gold.

The horrible implications of QE II, should it be implemented, are widely understood. Market participants, as a consequence of Bernanke possibly making another of his massive mistakes, have sent the dollar down in a parabolic formation, as highlighted in the chart. However, two forces are now at work. First, control of the U.S. House of Representatives will likely change on 2 November. That development means the Obama Regime's Reign of Financial & Wealth Terror is over, finished, done, a historical foot note. That reality is extremely bullish for the dollar.

Second, with political drama unfolding in Washington on 3 November the Federal Reserve is not likely to unleash a massive QE II. They may announce a modest program, but not one that will destroy the dollar. Betting on QE II and a collapsing U.S. dollar is not now wise.

As the dollar in the above chart is moving through the parabolic curve, a new question arises. How high will the U.S. dollargo? When a parabolic formation corrects, that correction is usually dramatic and for greater than any expect. Also, given the propensity of today's market traders to push markets to an extreme, we can expect the dollar to be pushed up more than it should.

Risk now is not how low will U.S. dollar fall, but how high will it rise. Bernanke and his Keynesian hooligans have created another asset price distortion. This Gold bubble may go the way of all predecessor bubbles, into pain and agony.

Parabolic formation in $Gold in the above chart is easy to discern. It is simply the mirror image of the inverted parabolic curve for the U.S. dollar. That parabolic formation has all the frailties of those that went before it. For a good example of the potential damage that can occur, take a look at a five year chart of POT. That is a picture of what we may be facing in $Gold.

When the dollar rally begins, not if, $Gold will join in the move. Downside risk is to US$675. Dollar denominated investors should not be buying Gold at this time. Euro based investors may be the only ones facing an opportunity, given the massive over valuation of the Euro. Could we see the Euro at US$1.30 or less by Christmas? Possibly.

An element that contributes to the development of a parabolic formation is the conversion of an asset from being an investment to being something of divine nature. Many have converted investing in Gold to the Religion of Gold. That is part of the psychology of such moves. It is the time when we get emails of the "10 Reasons to Buy Gold, NOW", written by someone that shunned $Gold in order to fill their clients' portfolios with internet stocks.

Silver is perhaps far more risky given the $Gold situation. Silver investing has evolved from investing in an under valued asset to a near religious experience. Fantasies over Silver must somehow come to deal with the rising surplus of Silver production. Sometime in 2012 a shortage of U-Store-It storage lockers may develop as producers seek somewhere to put all of the Silver coming out of the ground. Everyone owning a shovel is now digging for Silver.

Extrapolation is a dangerous investment tool. Perhaps though not as dangerous as viewing an investment alternative as a religious icon. $Gold has served well in the political environment in which most of us have lived. To extrapolate that political and investment experience indefinitely into the future might be folly. The 2nd day of November will arrive next week. Will it bring a structural break in the U.S. political continuum? One has occurred in England and in France. Be careful with extrapolations and religious conversions!

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS as part of a joyous mission to save investors from the financial abyss of paper assets. He is publisher of The Value View Gold Report, monthly, and Trading Thoughts, about weekly. To receive these reports, go to: www.valueviewgoldreport.com