Thoughts on Markets

Wednesday, August 27, 2008

Bad Economic News - Precious Metals are Looking Up a Bit

Both GLD (Gold Trust) and Gold have moved to higher ground over the last 24 hours. We still have the closing of options to face tomorrow, but gold is looking a good bit better now. I would suspect that we will see this higher trading range for the rest of this week. With the Labor Day weekend looming ahead, traders will want to make their adjustments earlier than usual.

There is considerable demand for gold in India in spite of the extra high premiums that are being charged. So even with the premium gold is still a bargain. What will happen to prices after the Labor Day?

The mining stocks have responded nicely to the higher trading range of gold. Virtually all of them are up. Here are a few: CDY 1.99; CDE 1.77; DROOY 5.75; GFI 9.35; GSS 1.58; HMY 8.65; IAG 6.37; KGC 16.81; Kry 0.96; NEM 45.07; PAAS 26.95; SLW 11.80; SSRI 25.54; VGZ 3.70; XRA 2.91. The trusts, follow: CEF 10.70; GLD 81.54.

Silver is lagging a bit behind. With the severe shortage of physical gold and silver, we would expect prices to be much higher. Perhaps, the jump will come after tomorrow. However, don't forget about the long weekend ahead. By the way, there seems to be little shortage of the 1000 Troy Ounce bars, but there are long waits of up to 14 weeks for any of the small silver items. Also, the mint is rationing minted silver coins.

Consumer Confidence rose from 51.9 to 56.1 for July. Likely caused by those with their head in the sand, but rejoicing over the welcomed lower prices at the gas pumps. Still does not give any recognition to the widening recession the world is experiencing today.

It is rumored that Alabama County is in a debt crisis. Could it be a bankruptcy? Time will reveal the severity of the problem there.

Hurricane Gustav may be the cause of the higher oil prices. Weakness in the German economy is having a softening effect on the Euro in relation to the dollar. The dollar is showing some signs of temporary strength. Also, impacting the dollar is the FOMC August report showing concern over our economy weakness rather than the "hawkish" fighting of inflation.

On the US Housing Market, many were thrilled to see that July sales were up by 2.4%. Of course, the big reason was that the June sales had been revised downward from 530K to 503K. More examples of how statistics can be shaped to report whatever outcome is desired. Note that the 503K is the lowest since 1991. Big Deal!

Home prices fell 1.4% in 2nd Quarter after falling 1.7% in the 1st Quarter. That is down some 4.8% year on year. S&P price index based on the 2nd quarter shows an annualized drop of 15.4% in home prices.

We seem to be headed into a world wide recession. Never before in the history of man had the debt mountain been as high as it is today. Just think of the cost of bailing out some $5.2 Trillion of the mortgages of Freddie Mac and Fannie Mae. Notice, that is dollars with a "T." If allowed to fail, it would destroy the dollar. It will have a devastating impact upon the dollar with a bail out. How can the government do it? Only with more dollars and greater debt. Talk about a whirlpool sucking us farther down! Maybe, it is a cesspool. The situation stinks at any rate.

The good news is that our Sovereign Lord is still in control and working all things for the eventual good of His people. His people will suffer in the mean time along with the other inhabitants of the world. But there will be a light at the end of the tunnel, so we must keep the faith and hold firmly to His promises.

Best to each, Doug


  • At 2:48 PM, Anonymous Anonymous said…

    Doug, Just a comment from an anonymous viewer of your blog. I have nearly 200 feeds and always read the ones from you! you are extremely perceptive, reasoned and obviously clever. Thanks for sharing your strengths.

    As for gold, i speak regularly to gold traders at big houses and frankly they are clueless.


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