Gold is in a Strong Breakout

The 60 Day Gold graph, above, clearly shows a upside breakout from the pennant triangle which was formed during the consolidation phase from late October through about December 24th. Gold has climbed to records against many major currencies confirming the breakout. It almost reached an all time high against the dollar before dropping slightly. Thus, it may yet make it to more new records.

The under reporting of price inflation by the Federal government paints a rosy picture on the economy. It is not rosy at all! The fact that the central banks of the world are pumping in billions and trillion of dollars and dollar equivalents into the markets emphasize their dire concern. Of course, the inflation of the supply of currencies (true inflation) via the printing presses and expansion of credit is the root cause of the world financial problems.

No nation can continue forever to borrow and not pay back debts. The Bible tells us, "The wicked borroweth, and payeth not again. . ." (Psa. 37:21) America has been and continues doing just that now. We have enjoyed a prosperity from borrowing from the world to buy their less expensive products to the extent that our governmental, business, and personal debts far exceed that ever seen in the world since the creation of Adam and Eve.

America has also enjoyed the benefit of controlling the reserve currency of the world. Coupled with the gigantic debt and the devaluation of the dollar, we are reaching a crisis point when the world will no longer support our borrowing and will change to other reserve currency or currencies. I believe this point in history is on the horizon, but we will have to await the timing under control of the Sovereign God of all.

At this time, gold is bid at $835.60 and silver at $14.80. The DJI is off some 44+ at 13321.83 and the S&P 500 is off almost 6 at 1472.71. The mining stocks are yet to catch up with the upward move of gold prices. They are mixed today with most still in a reasonable buying range.

The gold miners index (GDX) is at 46.60 with the number of sellers greatly exceeding the number of buyers. The street tracks gold ETF (GLD) is at 82.58; the Canadian gold & silver Trust (CEF) is at 10.81.

This is the last day of 2007 which has been an eventful year. It has certainly been good for the precious metals. Gold is up about 199.40 or 31.35% over the year. Silver is up 1.98 or 15.415 for the year. Yes, it has been a good year for both. Silver has lagged behind while in the past it has generally led gold to higher levels. I believe it will catch up over time. Remember, that both should be at much higher levels given the true rate of currency inflation throughout the world during the past years.

Our God has given us seasons, times, and particularly, the New Year. It is an encouraging time for renewal. We have the opportunity to review and learn from our mistakes of the past and correct them or avoid then in the New Year. He knows us better than we know ourselves and He realizes our frailty which we are want to ignore. It is very important for us to read and study His word for answers to all of present temporal life and, most certainly, eternal life. Let us all commit to a deeper and more diligent study of the God's word and to being obedient in every aspect of our lives 24/7.

Best to each for a great 2008, Doug
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Assassination Beats on Dollar and Pushes Gold Up

Above is the www.kitco.com 24 hour Gold graph which clearly shows the increase in bid price of gold. The assassination in Pakistan has pushed the dollar lower at the same time. The Euro is 1.46 to the dollar at present. It is nice to see gold respond to the perceived dangerous situation as it should.

On gold, "da-boyz" whoever they are must have great financial backing, because they have jumped in to increase their shorting of gold as it increases in price. Could it be that the gigantic Sovereign Wealth Funds are playing in this game? This are big resources for playing in this arena. Some day, but not now, the manipulators will run out of steam. Then their power will be gone. When is the big question we all have.

Meanwhile almost all mining stocks are up in price. Look for corrections to add to your portfolios if you want more, as do I.

The general market is showing some signs of life with the DJI up 28.28 now. The drop yesterday was significant, so a bounce should be expected today. However, the upward move today is lack luster. Likely, many traders are still enjoying the holidays.

Crude has moved to above $96, so we should expect higher pump prices to fill our SUVs. Any unrest in the mid east will send the price higher.

The New Year is almost on us. The time for selling of dogs for tax advantage is rapidly going away.

The Lord in His wisdom gives us seasons for rededication and hope. The New Year is one which presents a significant opportunity. Look toward it with renewed anticipation of learning more of the Lord's will for each of us in our lives. His written word in the Bible gives us all the knowledge we need for every area of life. As James says, "If any of you lack wisdom, let him ask of God that giveth to all men liberally, and upbraideth not; and it shall be given him. But let him ask in faith nothing wavering."

Best to each, Doug

Banks to the rescue, maybe!

Gold has made a substantial upward move over the last 24 hours as shown in the first www.Kitco.com/ graph. It is not as noticeable on the 1 Year graph. However, it does seem to be breaking out upward from the triangle (Pennant). It will be interesting to see if the price is allowed to continue upward or is manipulated downward.

The world is awash with financial liquidity pumped in by central banks all over the world. This, of course is produced out of "thin air" in the form of computer blips. It is totally un-backed and is simply counterfeit money. Further adding to the inflation of American assets are the purchases made and contemplated by the vast amount of dollar instruments held by the Sovereign Wealth Funds (SWF) of many governments of the world. With the lower value of the dollar, our assets are increasingly seen as bargains.

All of this extra paper currency is designed to avoid deflation at all costs. It is aimed at bailing out the banks hit by the sub-prime crisis. All governments prefer inflation over deflation. Therefore, they are on a paper money creation binge. This, also, supports the creation of more debt and government spending. Thus, we are very likely headed for inflation or, possibly simply stagflation which is a combination of price inflation (the result of currency inflation) which exceeds the inflation of wages. This will present consumers with higher costs facing incomes of lower value in the market place. Seldom, if ever, do wages keep up with the rate of price inflation.

The potential of a 2008 recession or worsening of the current pseudo-recession is the threat against which the central banks have acted. Their answer is always, more liquidity which actually created the problem. They continue to "push on the string." It has worked so many times in the past, that I hesitate to say that it will not work this time. The massive amount of added liquidity is testimony to their fears.

I trust that you spent a wonderful Christmas day praising the Lord for all His grace and the best gift of all times: Immanuel (God with us!). What a wonderful joy to be reconciled with the Father as a joint-heir with King Jesus. Continue to praise Him on a daily basis with voice and actions in concert with His written word.

Best to each of you in the coming year, Doug

America on Sale - Stagflation Ahead

From the Pfennig@everbank.com: "China's state run investment arm, China Investment Corp. announced it was investing $5 billion into Morgan Stanley.  This caps a year in which Chinese companies and the government bought more overseas than foreign buyers have invested into China.  In Chucks words: "Soon... Nothing will belong to U.S. stockholders... China and the Oil countries will own it all... They'll own it all I tell you!"

The Sovereign Wealth Funds (SWFs) which I wrote about again yesterday are buying all of America and the rest of the world natural resources. Interestingly, the Chinese are buying the troubled financial institutions at,possibly, bargain prices. The infusion of funds may well be the medicine needed to make them solvent again, but the long term impact is yet to be seen.

More on Ron Paul from http://caseyresearch.com/displayDrp.php?e=true:  Responding to the federal government’s seizure of Liberty dollars Paul recently introduced into the House a bill to repeal two sections of the
US Code that were used to justify the seizures. Paul’s bill is called the “Free Competition in Currency Act,” and in his accompanying statement, he hit several points that reflect our thinking as well as his own. They are worth quoting at length:

“Due to nearly a century of inflationary monetary policy on the part of the Federal Reserve, the US dollar stands at historically low levels.Investors around the world are shunning the dollar, and millions of Americans see their salaries, savings accounts, and pensions eroded away by rising inflation. We stand on the precipice of an unprecedented monetary collapse, and as a result many people have begun to look for alternatives to the dollar.

“As a proponent of competition in currencies, I believe that the American people should be free to choose the type of currency they prefer to use. The ability of consumers to adopt alternative currencies can help to keep the government and the Federal Reserve honest, as the threat that further inflation will cause more and more people to opt out of using the dollar may restrain the government from debasing the currency.

“As monopolists, however, the Federal Reserve and the Mint fear competition, and would rather force competitors out using the federal court system and the threat of asset forfeiture than compete in the market.

“A free society should shun this type of strong-arm action, and the Free Competition in Currency Act would take the necessary first steps to freeing the market for competing currencies.”

The Federal Reserve and the Federal Government want an exclusive monopoly to counterfeit currencies in the America. Thus, they will go to any length of pseuo-legal means to protect this.

"Da-Boyz" seem to be back at it again. Gold goes up just over $800 and then is smacked down. It is now at $797.70! Silver, too, which is now $14.22. I always ask, as did David, "How long O Lord?" Of course, he was seeking answers to his prayer when under pressure from attacking armies or treason within his own home. However, I am looking to the Lord for answers in the markets. He, of course, provides answers to prayer in His own way and in His time. We are much too impatient.

As gold climbed to its present level and beyond, it was always shoved back from time to time by the cartel. However, over time, it has continued to climb. At this particular point in time of the market, we are approaching the Christmas and New Years celebration time. There are many folks taking vacation time off from the markets; therefore, all trading tends to be very light. Thus, much of the market remains in a narrow trading range.

This is, also, the time for tax selling. To take advantage of the last days of 2007, it is wise to shed the dogs in your portfolios. I have been doing a bit of pruning, but have left the mining stocks alone. Gold and silver both remain in a bull market in spite of the manipulation. It is these times when we must hang tough.

I have just read and article which suggests that the central bank's flooding of the market with liquidity has a hidden purpose. It is suggested that the rush is to head off the need for redemption of bonds which come due on December 31st. This is a possible reason in addition to saving the mortgage and financial entities associated with the housing bubble bursting. There seems to be an exorbitant fear among the western central banks to take such action to penalize their paper currencies.

At the same time, the Asian central banks are very pleased with the low value of their currencies which keeps export trade flourishing. These currencies will be the ones which profit from the western bank infusions. It is amazing what games the people play with our wealth.

All of the western countries will be paying ever higher prices for food, energy, and other necessities. By the way, this continues to show up in the retail industry here. The heavy discounting continues. It is hard to imagine how great for consumers will be the after Christmas sales. Hang onto cash and make purchases a in a week or so. By the way, what a great time to give cash rather than purchased gifts.

My prayers are for a blessed Christmas of praising the Lord for His grace and gracious blessing to each of us. Let us pray that He will enable us to work more diligently for His glory and the spread of His kingdom on earth.

Best to each, Doug

Cash Galore to Buy America

This graph (http://ww1.dowtheoryletters.com/) of gold clearly shows the formation of a triangle pattern. These patterns are moderately bullish and could become a longer term pattern of consolidation or of a break out either upward or downward. It is wise to follow the graphs and patiently wait for the decision to be made.

Gold is beginning to show some signs of strength by staying above the $800 level. The mining stocks are reluctantly following the increase in price of the precious metals. "Da-boyz" are still at work and jump in to sock gold and silver when it shows strength above the $800 level. We are amazed at the power that they wield over these markets. Some day, their influence will lessen.

Remember that we are in precious metals and the leverage provided by mining stocks for the long haul. Gold remains in a bull market. We should expect bumps in the road to higher prices and see these as buying opportunities. Mining stocks are mixed today.
The graph (www.agorafinancial.com) above shows an estimate of the foreign government Sovereign Wealth Funds (SWFs). The foreign governments with virtually unlimited funds in the currently billions of dollar equivalent are out shopping. These funds are destined to be in the trillions over time. Rather than purchase low interest T-Bills and other interest bearing financial assets, the SWFs are now purchasing American companies. Recent buys have been in financial entities. these could be bargains as many have been devastated by the bursting housing bubble. On the other hand, the purchasers have taken over investments in questionable mortgages.

New housing starts have dropped substantially. Foreclosures are growing with every passing day. Therefore, we have yet to see the end of the housing bubble problems.

Meanwhile, prices at super markets for food, clothing, and other necessities are increasing as the world have been flooded with paper currencies. The increase in prices we pay has been somewhat masked by the drop in gasoline prices and the substantial discounting by retailers during this heavy shopping season.

The price inflation remains higher than the wage inflation. Therefore, it is an early taste of the Stagflation ahead. We must keep cash readily available for continuing expenses and for unseen contingencies with which we may experience. It is also wise to lower our debt load, as servicing of debt can easily become more of a burden.

Rest in the assurance of a gracious God who gave us His Son to take the punishment that we are due. The Child of Bethlehem was sent to earth by His Father for the express purpose of dying for us. As the wonderful Christmas season continues, let each of us show our gratitude by living lives of worship of King Jesus and by working to bring ourselves, our families, our churches, and our local communities into the Kingdom of God.

Best to each, Doug

Central Banks Pushing on the String!

Last week, we were treated to the evidence that the central banks are very concerned about the future of the banking system and the financial markets worldwide. Billions dollar equivalents in paper currency and computer blips were created out of thin air in an effort to prime the borrowing pumps. Also, the interest rates were artificially lowered, as well. However, banks were reluctant to loan out currencies and borrowers were few. The banks have pushed on the string successfully in the past, but they are not reaching the desired goal at this point in time.

The result of the extra cash has been a rush of the western economies into stagflation. That is, there is price inflation of most prices without an corresponding increase in wages. The temporary lower price of gasoline has served to hide or lessen the price inflation, too.

The retail industry has had some increase in the value of sales. However, much of this has been due to the heavy discounting which impacts negatively on profit margins and the financial ability for these businesses to pay wages.

The mortgage and financial companies have laid off a substantial number of workers over the last few weeks. This is hidden in the government unemployment figures, because of the manipulation of the numbers. The lay offs are bound to be hitting the home construction businesses too.

On the real estate fronts, we are seeing an increase in the inventory of unsold homes on the market and extended period of time until sales. It seems that we have yet to see the full impact of the bursting housing bubble. Keep in the back of your mind that the housing bubble was created by central bank increases of the supply of unbacked currency in circulation and artificial lowering of interest rates. This is now see by them as the way to keep the economy moving. By now, it is obvious that this is not the way to build a sound economy, but the way of creating bubbles which eventually burst causing great financial disruption in markets throughout the world. So the latest actions are bound to increase rather than solve the existing problems.

The Dow is giving us another down day with the DJI down some 133+ at present. The S&P 500 is down 15+, too. The dollar has rebounded a bit, but seems to be backing off again. Gold is at 794.50 up about 1.50 and silver is even at 13.81. The cartel is still working diligently to depress the prices of the precious metals. Over night the Asian markets moved gold up some before it opened here in America. Guess their markets are a bit freer than ours. Perhaps, were the precious metals traded in other than the dollar, we would have a better reflection of the true market prices.

The Exchange Traded Trusts (ETFs) which are into the precious metals continue to purchase more gold and silver. The Canadian Exchange Fund (CEF) and GLD are two of the betters ones available. They provide a means of purchasing the metals without holding and guarding them. Virtually all of the mining stocks are suffering another bad day providing opportunity for additions to our portfolios. The long term trend of gold is strong and a triangle is being formed in the prices on the 1 Year Gold Graph at www.Kitco.com. This is a positive formation, but we will have to see if the price breaks out upward or downward. Remember the cartel is still powerful in limiting the prices of the precious metals. Some day, the non-free market interests will lose their control. Until then, hang tough!

It is wise to keep dollars on hand for current expenses and some extra for emergencies which may arise. It is also wise to limit debt and to pay down long term debt as much as possible. In financial situations; such as, the present, it is good to plan to survive even with the loss of your job. We could well be headed into a recession. The recent central bank actions reveal that they see such coming and they are pulling out the stops in hope of preventing it. Economist are predicting recession for 2008. On the other hand, so much pessimism about the world wide economy could be a detractor and we could once again be spared the hardship thereof.

Rest in the assurance that the Sovereign God of all is fully in control and working His will in the economy and everything else. His people can rejoice in the fact that He is working all things for our eventual good and that nothing can separate us from His love in Jesus Christ. Praise Him daily for His care and love.

Best to each, Doug

Federal Reserve and Other Central Banks Priming the Pump

This from Casey's Resource Plus (www.caseyresearch.com). "I see that Helicopter Ben is getting serious about his infamous "printing press or its electronic equivalent" speech. The story was well covered in the press. So instead, I bring you this offering from Murray Pollitt, of Pollitt and Co. in Toronto, entitled "The Big Shorts in Gold are also the Big Frauds." It’s linked here.

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. - Ben Bernanke, "Deflation: Making Sure ‘It’ Doesn't Happen Here" - November 21, 2002" (Color and emphasis added)

This is exactly what is happening. The Federal Reserve and the U.S. government are devaluing the dollar with the noble goal of saving the mortgage and other financial entities. The cost will be inflation which is, in their minds, much better than recession. These measures are simply putting band aids on the external wounds without healing the cause. The more band aids that are used to delay the market correction, the greater will be the trauma to the markets and to the citizens.

I believe we are headed for stagflation in 2008. There is likely to be rising prices on virtually every good and service we purchase along with wages that do not grow appropriating. We the lay offs being daily reported, there should be a lower number of salaries to be earned.

Free markets can correct themselves. However, intervention cannot correct the problems and result in delaying, at best, the final correction. This time, it is different, because this is a world wide problem. Note, as I wrote yesterday, virtually all governments and central banks are in the medical business of healing hemorrhages with band aids. This is their only tool for "fixing" such financial problems.

Gold and silver are down today providing additional buying opportunity. This is another break for us. At some time, the cartel and such intervention into the precious metals markets will wane and, eventually, cease. The market power, itself, will take charge. We must be patient and see each drop in price, particularly below 800 as a bargain time.

Gold is down to 794.2 and silver to 13.99. The trend was lower over night. Tomorrow is Friday and trading could be different going into the week end. We will have to wait for the market to tell us the direction.

The general market is not pleased with the incremental lowing of interest rates of only 0.25%. I believe we are seeing further displeasure with the tens of billions of dollars being poured infused into the banking system. The move was to encourage more debt and greater opportunity for increasing the debt level of consumers and businesses. It does not seem to be working. Perhaps, businesses are seeing lower profits on the horizon and consumers are maxed out with debt. The level of pre-Christmas discounting and lower sales volume are testimony to the plight of consumers.

Christmas time in the retail markets may not be as joyful, but we will be in celebrating the greatest gift ever so freely given to lost sinners: Jesus Christ. Yes, this is a joyous time for all who are His brothers and sisters, made so by His death, resurrection, and the new life applied by the Holy Spirit. Think about it, how long does a murderer have to be good to no longer be a murderer? Only by being washed in the saving blood of the Savior can a murderer remove the stain of being a murderer. After the washing, the sin of murder and all other sins, he is made whiter than snow. Praise the Lord for this unimaginable gift.

Best to each, Doug

General Market Disappointed - Gold Up

Gold has moved to a higher plateau for the time being. It is currently at $813.10. And is trading in a rather narrow range since November 27th. The range is from about 815 to 785. The last few days have shown an increasing trend. Of course, this is short term, but it does appear to be quite strong. Naturally, we are at the mercy of the cartel which is still manipulating the price of both gold and silver.

The mining stocks are showing some strength in response to the price of gold. Some are as follows: DROOY 8.17; EGO 5.74; GFI 15.83; GSS 3.31; HMY 10.53; IAG 8.68; KGC 18.48; KRY 2.27; MRB 5.05; NEM 50.07; PAAS 34.60; SSRI 38.15, and XRA 5.54. The Canadian Fund CEF is at 10.69 and the ETF GDX is at 46.82. All are up at this point in the day. We must continue to hang tough on precious metals and mining stocks. There will be ups and downs, but the long term bull trend remains steady.

The general market had a knee jerk reaction to the 0.25% lowering of interest by the Fed yesterday. A 0.50% drop was anticipated. The displeasure resounded with a 300+ drop of the Dow. There is a rebound today with the DJI currently up 132 and change. We are really being treated to a see saw market.

Remember, this is the time of tax selling to get rid of dogs in portfolios to offset the capital gains for income tax purposes. By the way, time is running out to max tax advantage. You can increase deductible contributions, give away property to Salvation Army or Good Will, or pay property taxes. All must be done by December 31st for tax benefit. Not a bad idea to do this now!

Let's keep our focus upon the Son of God, King Jesus, Who came to earth to die that we might be reconciled with His Father. He accomplished what we could never do on our own. He died that we might be made free of sin. What joy and peace He brings to His people.

Best to each, Doug

Gold a Bit Higher - Financial Showing More Trouble

From Casey's Daily Resource Plus (www.caseyresearch.com) "I'm watching in morbid fascination as the world's financial system implodes. UBS took a $10 billion hit on sub-prime today, Societe Generale SA, France's second largest bank put $4.3 billion of SIV assets on its books, Bank of America is winding up its $12 billion "Enhanced Cash" "money" market fund....and then there's the Washington Mutual story that was released after the market closed yesterday. Let's see how 'da boyz' spin the futures market overnight. I forgot one!!! MBIA found a sucker to the tune of $1.0 billion!!!"

Washington Mutual, the nation's largest S & L took a big loss and is closing offices and laying off some 3,000 workers. Yet, the government spokesmen continue to say that the sub-prime and financial woes are over. Bet you are a bit skeptical as am I.

Meanwhile, gold is moving toward the top of its recent trading range and is at $802.40 as this is written. Silver is likewise at $14.51. At some time the cartel ('da boyz') will lose control and then we will see the precious metals jump like a compressed coil spring suddenly released. When? Anybody's guess!

All of the paper currencies are temporary. Though they hang around and operate for even centuries, historically, none last forever. They are backed by nothing except faith and trust in the issuing authority. When that wanes, as is now the plight of the dollar, there is no support and they drop in value. The demise is slow and painful at first, then accelerates with increased pain, and finally, precipitously drops with significant pain as unsuspecting folks realize losses.

Now is when one must have precious metals, mining stocks, and stronger currencies. We must always keep in mind that there are no backed paper currencies. They are simply used as a poor substitute for real money: silver and gold. Thus, we must move into real money for security of whatever wealth we possess. This is the rational high priority for such times.

For some colorful writing on the financial fiasco we are facing try the Mogambo Guru at
http://www.dailyreckoning.com/Writers/MogamboGuru.html. You will find it entertaining and and accurate in economics. For reading on "inflationomics" (Name coined by Sennholz) check out http://inflationomics.com/. It is wise to read to stay ahead of things economic.

We must always remember that the Lord Jesus Christ is in absolute control and moving all things according to His will for the eventual good of His people. Be one of His. Seek wisdom from His word as recorded under the power of the Holy Spirit in the Bible. It speaks to all subjects and points toward our Lord and Savior, King Jesus.

Best to each, Doug