Thoughts on Markets

Thursday, August 21, 2008

Precious Metals Out of the Grave - Dollar Down

Both gold and silver are showing more life today. The dollar must be under pressure. Gold is 835.80 and silver 13.80. Both are on an up tick. It is a bit early for the fall rally, but both were greatly over sold during the last two weeks. The mining stocks are responding, as well. All on my charts are up. Here are some that I follow: CDY 1.82; CDE 1.93; DROOY 5.73; GFI 9.09; GSS 1.67; HMY 8.25; IAG 6.06; KGC 17.38; KRY .91; NEM 15; PAAS 27.24; SLW 11.87; SSRI 25.86; VGZ 3.34; XRA 3.02. The ETFs CEF 10.94 and GLD 82.40.
The, above, GLD graph reflects the strong upward move in the price of gold this morning. Though early, this looks to be a strong move for which I am thankful. It has been a gut wrenching week for the precious metals. I pray that is behind us and this is the fall rally. It might not be, as this is a bit early.

From the Daily Reckoning Australia today:

"--Yes. It's clear now that Mr. Market has called Henry Paulson's bluff. Fannie Mae (NYSE:FNM) fell 26% yesterday while cousin Freddie Mac (NYSE:FRE) was off 22%. The death/intervention watch is now round the clock. But what does it mean? And what happens next?

--As the Barron's story pointed out this weekend, both companies are effectively insolvent. But the charade continues. One reality check may come very soon. Fannie has nearly US$120 billion in debt that matures by the end of September. Freddie has US$103 billion in debt.

--Can the GSE's roll it over? Who's going to buy it? The Russians? Central banks? Private equity? Anyone. If the GSE's can't fund their operations or roll over there debt, what point is there in having a government sponsored mortgage lender that cannot provide liquidity in the secondary mortgage market? (Shudder at what this means for the U.S. housing market...but the phrase 'lower prices' comes to mind.)"

With this news, the recent strong surge of the dollar should be at an end. How can the dollar bulls ignore such devastating news? Maybe they are playing the Ostrich. Whatever, it does not seem rational. Of course, with the power of intervention by the banks and deep pocket players almost any thing is possible.

Well, once again, I am led to praise the Lord for the way He watches over His people. The really great news is that the Father God sent His Only Begotten Son to die on the cross in His people's place, that they might be reconciled to Him. What a blessing it is to have the Holy Spirit awaken the unbeliever who is lost in trespasses and sins, teach Him through the bible that he is lost, and lead him to the only Savior. We are certainly humbled by this knowledge, but then are led to rejoice in our unearned salvation through the unmerited grace of our Heavenly Father. Praise the Lord! There is always reason to rejoice!

Best to each, Doug


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