What a week!

There is a great deal of turmoil in the market these days. The volatility is very exciting. The general market both here and abroad, typified by the Dow Jones Industrials, may have entered the early days of the third wave of the bull market. Virtually all of the markets are indicating a strong upward move. The gut wrenching pull backs may be simply temporary corrections on the upward move. Each must be examined to determine if is to extend or just a temporary blip on the way to higher prices.

The third wave culminates in an extreme blow off where "everyone" crowds to get in on the perceived profits. Then there is a crash which is very real and billions are lost over a relatively short span of time. That is when brokers receive call after call with investors saying, "Cash me in for whatever you can get." This could be, but not necessarily is the third wave. The market will tell us over time. Such waves provide opportunity for great profit during the early stages.

The DJI were up well over 100 points early, but as of now, the Dow is up only 72.43. Gold has followed the general market and is up 672.50 now. Silver is up to 11.98. It seems somewhat unusual for the precious metals to move in concert with the general market. However, we must remember that when there is a significant correction in the general market, those trading on margin accounts must liquidate to cover actual and potential margin calls. Thus, they begin to sell everything. The mining stocks generally are the first to be sold and the prices are depressed. They will rebound as the market moves up and investors see the "bargain" prices of the mining stocks.

The Exchange Traded Fund (ETF) for gold trading under the symbol GLD is a convenient way to own the metal. The Canadian Central Fund (CEF) holds both gold and silver. Next to owning and possessing the metals themselves these are two of my favorites. I also like www.Everbank.com Metal Select Accounts and www.goldmoney.com accounts which enable you to own either gold or silver without taking physical possession.

I have been buying more of the CEF as the cost was less just over $9.00. I am continuing to hold the mining stocks even though the prices are somewhat depressed. You might want to place trailing stops on some of your mining stocks. I use these from time to time, but not on all my holdings.

Any escalation of the mid-East war situation would cause the price of precious metals and oil to jump significantly. The Iran confrontation appears to have cooled some, but could explode over night. In fact, it seems a bit too quiet at present making one wonder what is cooking. Also, it seems strange that there have not been more attacks outside of the mid-East area in recent times. That also seems strange.

I am just so pleased that all is in the hands of a Sovereign God Who loves and cares for His people and their eventual well being. If you are resting in His hands and working for the spread of His kingdom, you are one of His and under His protection.

Best to each, Doug

Gold Struggles toward 700, but Seems to be Held Back!

Yes, we have seen gold push to the higher 660s and then fall back again over the weekend and this week. It is a struggle and there likely to be some more talk of gold sales by central banks.

The housing situation is not much better with the prices of homes falling for the first time in 60 years according to www.NewsMax.com. The foreclosures are growing and workers in the industries associated with mortgages, construction, and sales are losing jobs once again. This is in spite of the government reported unemployment reports.

The sub-prime fiasco has spread abroad. The Chinese national bank and Hong Kong subsidiary have an exposure of $11.25 Billion according to Reuters. The German Landerbank Baden-Wuerttenberg took over Sachsen LB and spent $342 Million to bolster losses due to sub-prime loans.

The dollar is under some pressure again and has moved lower. Gold is at $665.50 as this is written. Remember this is higher than last week. The mining stocks are holding fairly well. Harmony (HMY) is at 9.08 up 0.12 in spite of the accounting problems which it is moving to mend. Silver is still under pressure and languishing around 11.72. Silver will follow gold on its way upward, so we must be patient.

The Fed is likely to lower interest rates at its September meeting which should give the market another temporary band aid. There must be some panic at the Fed as the sub-prime unfolds and as the markets are under downward pressure.

Long term the dollar looks ever weaker and the precious metals look ever stronger. There will be set backs along the way.

Keep your faith upwards toward our Sovereign Lord of all. He is in control and we must rest in His care.

Best to each, Doug

The Tourniquet on the Market

The action of the Fed is similar to the action of putting a band aid on an artery leak. It may help for a while, but ever more are required and will, without doubt, be applied. Realize that this is still pushing on a string. Eventually, the string gets too long for successful pushing. However, it seems to have worked again this time.

Chuck Butler in the Daily Pfennig from Everbank.com reported today that Bank of America, Citi Bank, JP Morgan Chase, and Wachovia backed the armored cars up to the trough and borrowed $500 Million each at the new rate.

It seems that these were the banks with very heavy exposure to sub-prime lending and each needed a transfusion. Wonder how much more each needs.

We are still not out of the woods on the sub-prime fiasco. There is more to come as foreclosures and late payment notices are increasing in virtually ever area of America. I do not believe we are any where near getting out of the woods on this.

The SA mining workers union recommended that members accept the latest offer to avoid a strike. This will help our South African mining stocks when the members vote their acceptance. We will see DROOY and HMY move again. Both are good companies, but have been hurt a bit by the threat of the strike.

Gold is at 664 and silver at 11.74. Both are beginning to show more life. The selling of gold by Swiss and other banks recently may have impacted upon the price of gold. Perhaps, this was a bit more of the war on gold. Remember, central banks and governments would rather have the paper currency which they control in the hands of the citizens. It is a matter of control as are most taxes.

You might consider Ron Paul running for president. He is the one man in Congress who has consistently spoken AND VOTED for the Constitution and stable money. None of the main stream candidates have. In fact, most are solidly against these issues, because both limit their power. Think about it!

The DJI are up about 48 already this morning and the mining stocks are moving in the same direction. Maybe we should be bottom fishing before the real move comes. If you do, do so very cautiously. Also, I will be selling the general market except for natural resource, energy, and our mining stocks.

Remember that our Sovereign God is in complete control of all. Therefore, it is extremely important for us to be in concert with Him at all times. This can only be done by prayerful study of His Word: the bible.

Best to each, Doug

With Bugles Blowing the Fed "Resqued" Us

My, how our God must be having a laughing binge! As Shakespeare said, "What fools we mortals be." Virtually all of the central banks moved to rescue the mortgage companies and sub-prime mortgage holders. Of course, our Federal Reserve dropped interest 1/2%, too. Certainly, this increases the supply of dollars to chase after goods and services or to the next asset balloon. The stock markets have voted their approval. Even the dollar is enjoying a brief upward move against most other currencies.

Though our markets have responded, it is a bit early to tell which way they will go in the immediate future. The rallies have not been very impressive in volume and breadth. Gold is recovering, but silver is languishing. Silver is down, but I believe far from out. Even oil is down a bit. Hopefully, that will be reflected at the pumps.

I used a little over 42 gallons of gasoline to drive about 750 miles last week. Before the ethanol fiasco, it would have only taken about 35.7 gallons. I really wonder how great this ethanol is. I understand that it takes over one gallon of gasoline energy equivalent to produce one gallon of ethanol, and ethanol gives about 80% of the energy of gasoline. Thus, we use more energy to produce ethanol and it gives us less bang for the buck. Add to that, the subsidies the Federal Government gives to support the fiasco and we are losers all the way! Welcome once again to the efficiency of government.

Back to the mining stocks. Note, that DRD Gold has now gone back to DROOY as its symbol. The mining stocks are responding along with the general market. Gold is currently at 659.90 and silver 11.66. Silver seems to be held back for some reason.

With the volatility of markets for the past few days and today, it may be well to simply stand aside and keep our powder dry for better times to jump in. I would suggest that you use rallies to do some selling of losers you have in your portfolio. That has been my bent for the last week or so. I believe we will see higher prices for the immediate future, but suggest it is a time for caution.

We'll be watching to see the market action for the rest of the week. The market will reveal its direction soon. The DJI is up about 120 today. A possible indication of higher moves this week barring any significant event.

All is in the hands of our Sovereign God. Let us rest securely in His love and care.

Best to each, Doug

What a Week!

Everything down, so the Federal Reserve stepped in "to save the day." They gave us an interest cut of 1/2%. What does that mean? It means that there was great "official" concern about the housing market and the financial markets. But there is another side to this which is somewhat below the radar of most people.

Yes, the interest rate was lowered to increase liquidity. That results in an increase in the supply of paper dollars. This is the definition of true inflation which results in the price inflation which is followed by the mainline media and governments. Governments would much prefer to have price inflation than recession. So they take this action which is like pushing on a string. They with the central banks increase the currency supply. There will come a time when people will recognize what has happened and the ploy will no longer be "successful."

International banks will read this action for what it is. They will see that the dollar will lose more purchasing power. The initial trends away from the dollar are beginning to show in Russia and Asia. China, in particular, has moved to "invest" a growing portion of its trillion plus dollar reserve into other assets. They have been investing in natural resource companies in Canada and Africa. Also, they have created in conjunction with "professional" money managers to invest world wide in other assets. Other nations are joining a similar strategy of their own.

Bottom line is that we can expect higher prices on imported products, because the dollar is worth less than it was. It will cost more to pursue the war on terrorism and finance the nations welfare programs. In spite of the TEMPORARY relief at the gas pumps, we are already seeing prices increase for food, medicine, clothing, and other necessities of life. There will be further increases now.

While this is happening, we as worker - consumers are being squeezed by our wages not increasing in proportion to the price inflation. Regardless of what is reported, income for the vast majority of Americans has not been significantly increasing since 9-11. The drop in income is now having a large impact on the recent "fancy easy financing" for homes. Many can no longer afford the payments on their home loans and foreclosures are increasing. The Federal Reserve's action of last week could give some minor relief, but the damage to the dollar will likely have a greater impact upon us.

While gold rebounded fairly well, the mining stocks were slow to recover and then the recovery was not as significant, for the most part, as the drop. It is important to understand that the mining stocks were sold off during the drop in the general markets, due to investor selling to cover margin calls and increase personal liquidity. Investors sought cash where ever they could find it. So the mining stocks were sold along with the rest of the financial instruments.

Gold still has a long way to go in spite of this temporary set back. Thus, the precious metals are still a realistic store of value. The paper currencies have no real backing and will continue to lose purchasing power over time. The mining stocks provide the leverage for the blow out of precious metals as the late comers, lemmings climb aboard at the last minute. When we hear the benefits of gold being discussed over cocktails, bars, dinner parties, and the media picks up on it, we will be well into the third and final wave which comes to the end with a bang and bust. We must try to sell our mining stocks to take advantage of the final party. Then we can use our dollars to eliminate the final bit of debt and to acquire other valuable assets.

There will be a third wave in the general markets, as well. When? This is always the question. We do not know until after it has come into full bloom. We have had a bull market in the financial markets for some years now. Most of the bull markets, except for the dollar remain intact, but for how long? There are still a lot of dollars on the side line and being invested by the rich in a variety of collectibles, antiques, and other high cost items. The real pressure has been upon the middle income people here in America. The middle class in China, on the other hand, has been on the increase with the growing effluence. Figure that, the land of the totalitarian government is more benevolent to capitalism than this land of the free.

Regardless of the circumstances with which we are faced, we must seek the truth which is found in the bible. There is great comfort in knowing the Sovereign Ruler of all. Yes, Jesus Christ is the creator of every one and thing that has ever existed, exists now, and will exist in the future. While He is the Creator, He does not leave after creating, but sustains us on a moment by moment basis. Our next heart beat and breath come from Him. He is our all in all. To know Him is to rest in the surety of His love and caring for each of His people. Accept this truth, rest in Him, and life is much more satisfactory even in times of trouble when He does not leave His people. Nothing can separate us from His love and support.

Best to each, Doug

Central Banks Moved to "Save" the Markets

By now, you should have read that the central banks of the world moved in with billions of dollars to "stabilize" world markets. This, of course increased the supply of currencies throughout the world. As the supply of currencies increases, they lose purchasing power.

The resultant loss of value increases prices. There was an article today on the internet in which "White Gold" was discussed. The author said that the price of milk was greater than the price of gasoline. He suggested, with tongue in cheek, that we should drink gasoline rather than milk. Remember, that such increases in price is not due to an increase in the value of the product, but rather a decrease in purchasing power of the unbacked currency. Always keep in mine that there are no currencies in the world which are redeemable in precious metals. Thus, all are unbacked with other than the full faith and credit of the issuing entity.

The prices of the precious metals (gold @ 669.20 and silver @ 12.72) do not reflect this loss in purchasing power of the dollar. The prices of the mining stocks are under pressure now, as well. The dollar has regained some strength against the other currencies and precious metals presently. However, this is very likely to be temporary. The long term trend of the dollar remains downward. You can be certain of this.

What is one to do in these markets? I am examining the financial markets, consulting with others, reading many newsletters, and am to visit with my son this week to gain more insight. From what I see, Asia and, particularly, China is the place for further investment, but now is the time to stand aside and wait for better buying opportunities.

I believe the precious metals will be much higher later this year, but they may go lower during the next few weeks or so. These will retain value over time as has been proven over centuries. More of them is not being made, and by the way, less is being mined at present.

Study, make your plans, commit them to the Lord, and patiently wait for His results. Praise Him for the results!

Best to each, Doug

Dangerous Markets

Last week the Mr. Market strutted his confusion. He was severely down several times and then recovered some. The DJI seems to be struggling back a bit, but is now at 13287.91 up almost 47.
On the precious metals, we see gold at 669.30 down 1.18 and silver at 12.74 down 0.05. That is not too bad all things considered. I saw Harmony Gold (HMY) at 9.88 (down from recent 13-14), so I scarfed up a few shares. I continue to like Harmony even with the threat of South African miners strikes. Some of the strikes have been averted for the time being.

There seems to be a growing liquidity problem in the world markets over the last few days. The central banks have increased the interest on loans between banks. This is likely to spill over into lending across the board.

Several investment funds here and worldwide have stopped allowing clients to sell their shares. This is due, in the most part, to the funds exposure to the sub-prime mortgage fiasco. The resulting damage of the housing debacle is spreading across our globe putting pressure on all debt. Here in America foreclosures are accelerating at an alarming rate. Any increase in interest rates would worsen this situation. I believe the results will be far reaching and will be felt for many months, if not years into the future.

The pressure on the dollar is growing, as well. Russia and several other central banks have reduced their dependence upon dollars by lowering the percentage of dollars held in reserve. As more join in this trend, the supply of dollars in the world will increase causing further loss in purchasing power. As each bank evaluates its position, several could consider it is time to quit the dollar. No central bank wants to be left holding a vast amount of dollars after the bail out. The result will be higher prices across the board here at home. It is wise to lower our personal and public debt before this happens.

On the political scene, we are seeing our great liberal elected officials threatening China with sanctions and quotas on exports to the United States. Remember, China holds almost 1 trillion dollar instruments. Should these be dropped on the open market, the dollar would crash over night. Of course, this would not be to the interest of China as their dollars would be losing value as well. Thus, we would hope for a long term slow dumping of dollars.

However, it is not to our interest to antagonize the Chinese and force them to retaliate by dumping a large sum of dollars. Our politicians, in their ignorance, seem determined to play with fire in this situation.

I am so thankful that we all have a God who is in absolute control of everything. It is He who made us and sustains us and the rest of creation by the power of His Son >> who is LORD over all whether one believes it or not. He is King of everything and what a great king He is. I daily praise Him that I am not in control, else all would be lost.

Best to each, Doug

Wicked Market Struggles to Gain

Mr. Market is acting a bit on the scary side. The breadth of the market is rather narrow. Also, the new highs and lows are mostly in favor of lows. Today, the DJI are struggling at 13244+ up 62+. We have the whole week to follow, but there is little excitement in the market.

Gold traded over the week end in the 670 - 672 range reaching a high this morning at about 674.50. It is now at 668.70 down 4 pm the day. With the day over half gone, it should languish in that range for the rest of the day unless strong buying comes in late in the day

Silver went up to almost 13.15, but has backed off to 12.93 off 0.16 thus far today.

The mining stocks are down some for the most part. DROOD is trading around 5.50 which I believe is a good buy. It appears to be a good company, but may be facing a strike and the way gold is bouncing around, it is little wonder at the lower price. A good shopping season!

I trust you had a great time of worship of the Sovereign God of all yesterday. What a wonderful time it is when people of the faith of Abraham get together to worship King Jesus under the power of the Holy Spirit. It is truly a foretaste of heaven which helps us enjoy the abundant life we are promised.

I will be out of pocket for most of the week.

Best to each, Doug

DRD Gold Takes Nose Dive

DRD Gold (DROOD) has traded as low as $6.00 today. That is equivalent to about $0.75 in the old DROOY. This seems to be a good price. Will it go lower? Possibly, as the threatened strike materializes. The following article from www.MineWeb.com is the latest on the strike:

"DECLARED DISPUTE

Gold workers set to strike

Major mine worker union NUM is seeking a short cut to industrial action at gold mines in South Africa.

Author: Tessa Kruger
Posted: Thursday , 02 Aug 2007

JOHANNESBURG -

South Africa's National Union of Mineworkers (NUM) are threatening strike action in the local gold sector as they couldn't reach an agreement with major gold companies in the final round of negotiations.

NUM spokesperson Lesiba Seshoka told Mineweb today the union was looking for short cuts to declare strike action at gold mines. This is despite the fact that it declared a dispute with the gold sector at the Commission for Conciliation Mediation and Arbitration (CCMA) yesterday and has to follow the official mediation process.

"If there are any short cuts to strike action we will take it. We believe that gold employers are taking us for granted as they have only raised their wage offer to 7,75%."

Seshoka said the union was standing by its demand for a 15% wage increase for gold mine workers as transformation in this industry has lagged behind other sectors.

Underground workers in the gold sector currently earned an average of R2 850 (US$400) per month.

The SA Chamber of Mines and the unions have come to some agreement that mine workers should earn a minimum of R3 000 (US$421) during discussions, but has not made it formal, said Seshoka.

He said the union was eager to embark on a strike as gold employers said they would make a substantial better offer after the unions first declared a dispute. But then the sector only came up with an offer of 6% that was raised to 7,75% during the various rounds of negotiations.

"We believe that the gold sector has stayed behind, considering working conditions and payment.

"It appears that we first have to wage war and suffer casualties - that gold companies first have to loose profits before they understand our demands."

According to NUM there are 140 000 employees in the South African gold sector of which 80% is represented by this union. The majority of its members are underground and surface workers."

Regardless of the strike, I am trying to buy DROOD at $6.00 today.

Gold is trading higher at 669.70 as this is written. It is a bit early to predict the outcomes for the day, but we see the DJI off 80+ at 13382. This is Friday, a day which is the last for the week. It is a time when traders buy or sell to have safety over the week end. It is a very interesting trading day and the market will tell us what the traders are thinking as the day unfolds.

Flash! I just bought DROOD @ $6. Now watch it go lower. That is generally what happens when I buy.

Do not neglect corporate worship on the Lord's Day as is the practice of some. This is an important part of the Christian life. We are to meet together for worship of the Living Sovereign God of all.

Best to each, Doug

South Africa

Be careful about purchases of South African mining stocks for the time being. It seems that the mine workers union has threatened a strike for higher wages. This is likely to mean a bump or sandy spot in the road for prices. For example: DRD Gold has traded as low as 6.14 today. Of course, it seems to be getting into a good buying range, but be careful. We could have better prices in the immediate future. I plan to add to my holdings of DROOD, but am carefully following the prices.

Gold since July 25th seems to be establishing a higher trading range of just below 650 to just above 665. That is a little better for the time being. However, we are still in the historically down days for the metal. Silver is below 13 and may be a good buy.

Oil continues to be fairly strong after hitting the all time high of just over 78 recently. Remember, the middle east situation has yet to completely play out. There is still fighting and saber rattling in the area. A major rise in hostilities would move oil much higher. In the background of the oil situation, we are seeing an increase in exploration and active rigs which should add to the supply in the not too distant future putting downward pressure on prices.

The DJI is at 13382.85 up just over 20 for the day. It is early, so who knows where it will go from here. The volatility in the market is exciting and maybe even shocking. The market will reveal the direction over time.

Keep prayerfully reading God's word seeking wisdom and understanding which He abundantly supplies to those who fear Him and are loved by Him.

Best to each, Doug

Markets Down, Oil Up

Crude closed at an all time high yesterday at 78.21. That is nearly a dollar more than the previous high. This is an unusual event as oil is usually down at this time of year. At the same time most markets were down.

The Japanese Yen rose against all of the other major paper currencies. There has been an active carry trade. The folks involved, borrowed Yen at almost no cost exchanged the Yen for bonds in other currencies which paid very high interest. With the Yen increasing in value, more funds will be required to pay back the borrowed Yen. Thus, we should see much of the carry trade dropping by the wayside.

Gold has been staying above 660 for the most part of the last two days. It is now at 663.60 and is still bouncing around quite vigorously. The mining stocks are still offering the courageous an opportunity to buy at bargain prices. If you buy, be sure to us trailing stops for protection.

It seems that we are in a period when caution is very important. The markets remain overpriced, but have "corrected" some. The real question is whether this is the end of the bull market for stocks or just another set back on the way to higher prices. I do not believe we have seen the tremendous serge of buying which is typical of the 3rd phase of most markets in the past. Therefore, it seems that this may well be just a temporary set back. The market will reveal the true direction as time passes. Until then, all is just speculation and guess work.

The housing bubble appears to still have along way to go. The sub-prime loan fiasco has yet to reveal the extent of its impact upon the economy and the markets. It has brought about a large set back for mortgage companies and banks which are heavily involved in the business. Several of the brokerage firms have already been hit with some damage. There is more to come, regardless of what the government people tell us. Bankruptcies and foreclosures are climbing throughout America.

We must rejoice in the Sovereign Ruler of all. He is in control and works all things for the eventual good of His people.

Best to each, Doug