Thoughts on Markets

Thursday, August 14, 2008

Precious Metals & Commodities Remain in Long Term Bull Trend

The Street Tracks Gold Trust GLD is presented here beginning in August of 2006. It broke below its 50-Day Moving Average during this last correction, but remains well above the 200-Day Moving Average. This shows that gold remains in an overall bull market trend.

Both silver and gold bounded some yesterday, but are being hammered again this morning. It is early, but the prices dropped for both as the NY trading began. Long term, the trend remains intact.

Is the manipulation over? Without a free market, it is always difficult to tell. Have the boyz played this "correction" to their limit? I doubt it, because they seem to have very deep pockets and can play much longer than we. Also, every time they play, the pockets are more likely to get deeper rather than depleted. I still believe there will be an end to their game. However, in the mean time, we are left guessing.

Presently, there is little doubt that the precious metals are oversold to a very great extent. It is also true that there will come a time when the panic run to the safety of precious metals will be center stage. Will it be this fall? I doubt that the final run will be this fall. However, I do believe we will see much higher prices in September and October.

The prices of the mining stocks are very attractive now. Here are some examples: CDY 1.66; CDE 1.88; DROOY 5.46; GDX 36.95; GFI 9.34; GSS 1.61; HMY 8.16; IAG 5.45; KGC 16.24; KRY 0.81; NEM 43.62; PAAS 27.17; SLW 10.91; SSRI 25.81; VGZ 3.10; XRA 3.20, and the EFTs and Trusts: CEF 10.99 and GLD 80.55. I am tempted to add to my portfolio, but am being very cautious about purchases until after the late August expiring date for futures options. The boyz are playing the game in futures contracts. That spells danger for us. Nevertheless, the mining stocks are at bargain levels now. We may not see such bargain levels again for some time, but they may remain in a narrow trading range for a few more days or even weeks.

America is presently moving deeper into recession. The housing/credit melt down continues with foreclosures up some 55% and bank seizures magnified about 3 times during July. Retail sales were off about 0.1% during last month. Consumers must now be maxed out on credit. Even American Express has reported a significant increase in late payments.

Nevertheless, the dollar is flexing whatever muscle it has left. Yes, the dollar remains on a downward trend, but it is showing some temporary strength. Why, because the dollar bulls are buying it? Or, do you think maybe it is because central banks of the world have intervened to make the dollar stronger for a short period of time? History has revealed that the banks do play their games with our dollar.

If you are looking toward the purchase of an automobile, realize that the manufacturers are really hurting now and into the fall. There will be more bargains will no interest loans and all the other incentives that can be conceived. I am not recommending that you do this, but there will be opportunities for those who feel they must have the latest.

There are several wild cards floating around the world today. Iran continues on its own course worrying the rest of the world. It is rumored that the U.S. and some allies are moving warships to the east. Is that for an attack on Iran, a blockade, or just saber rattling? Russia has warned Georgia that it will not tolerate more aggression. By the way, we are sending "humanitarian" aid to Georgia with military to distribute it. There are always interesting things going on it the world. These wild cards could flare up at any time and are simply samples of what could be on the horizon.

Gold is back down to 817.30 and silver to 14.38. Going lower? Likely for the time being.

We continue to rest in the infallible word and promises of King Jesus. These give us a peace that passes all human understanding during challenging time. Would that all men would heed God's word as found in Micah 6:8. "He hath shewed thee, O man, what is good; and what doth the Lord require of thee, but to do justly, and to love mercy, and to walk humble with thy God?" This is calling of all men, families, churches, and governments of the world. Remember, "Blessed is the nation whose God is the Lord." The reverse is also true - The nation which turns its back on the Lord will receive God's wrath. Check out Romans Chapter One to see how God's wrath is played out on ungodly nations. Even His covenantal people suffer, but they have a great peace during suffering and will receive wonderful rewards as God balances the books in the end.

Best to each, Doug


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