Thoughts on Markets

Friday, October 17, 2008

Precious Metals in a Down Trend for How Long?

With all the volatility, the DJI seems to be going nowhere. It is still well below both the 50 and 200 day moving averages. This remains a nasty graph.
Speaking of nasty graphs, silver is displaying a very nasty curve these days. I would not have thought that we would see silver at under $10, but here it is and it looks as though it will stay there for a while.
Gold is not doing differently from the above graphs. This is very discouraging, but has given me the opportunity to use some trading stock in DROOY. I have been buying as close to $4 as possible and selling 4.50 and up. This is a rather tight trading range, but in purchases of 1000 shares or so, it is doable with the small Scottrade commission of $7. More on the gold markets below.

From Casey's Daily Resource Plus:

"Bill Murphy, writing on, offers his view of the situation right now: “Demand for physical gold is astonishing and yet the price goes nowhere. The dichotomy between the ‘real’ gold market and the Comex is widening.""

The US Government is petrified of gold rising to any degree because of its importance, in that a sharply rising price will shed light on ‘Dracula’ … or the hideous inflationary forces set in motion by Comrade Paulson’s bailout.

"Ominously, Murphy reports the following: “Several months ago we received reports that bullion dealers in the MidEast were making it much more difficult for buyers over there. Unfortunately similar reports are coming my way on a daily basis from all over the world that this trend is picking up speed. It appears governments and bullion banks are not banning gold, just making it very difficult to purchase.”

"Conspiracy or not, there’s no disputing that there is not much physical gold to be had, as many dealers have stopped even taking orders."

"Never has there been as wide a disconnect between the price of a commodity traded on a licensed exchange and the price of that commodity in the real world. This raises the issue that no true price discovery is occurring, and that paper trading is setting prices. This violates basic commodity law. All that remains is a contract delivery default and/or disorderly pricing to the upside. - Ted Butler, butler, talking about the price of silver - 13 October 2008"

From the The Telegraph UK:

"Fears of Lehman's CDS derivatives haunt markets

It is a full week after bankers gathered in New York to start sorting out the derivatives mess left by the bankruptcy of Lehman Brothers. We still do not know who is on the hook for some $360bn of default insurance, or how much they will have to pay.
By Ambrose Evans-Pritchard Last Updated: 12:18AM BST 17 Oct 2008

Read the whole article HERE

Some alternate views on gold from Mine Web this morning:

Why the fall in the gold price when physical gold remains in huge demand?

Contrasting views on the reasons for yesterday’s gold price fall come from Mineweb’s Barry Sergeant and from Jeff Nichols of American Precious Metals Advisors, and both are almost certainly relevant at the current time.

Author: Lawrence Williams
Posted: Friday , 17 Oct 2008

Read the whole article HERE

Folks, markets never react exactly as we would desire, but we must learn to follow the trends. "The trend is our friend." A good thought to remember.

The precious metals are in a down trend due to manipulation of the market, sales of gold by central banks, and forced selling by hedge and mutual funds. Even some investors are unloading to increase cash. How long, O Lord? How long will this last? The answer the trend will continue until it ends. We must watch and follow the market as it reveals the answers to us over time.

It is always important to rest in the promises of the Lord and to bask in His gracious love for His people. This provides great comfort and peace in every storm of life. Though many do not believe it, God's instruction manual for His creation, the Bible, speaks to every area of life. It provides guidance and challenges to every person past, present, and future. A great beauty of God's word is that it never changes. It is the same yesterday, today, and forever just as the Author is unchanging.

By the way, gold is 779.60 and silver 9.29. Wow! Who would have thought. We must not fight the trend. Perhaps, it is wise just to stand aside until this trend ends.

Best to each, Doug


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