Thoughts on Markets

Tuesday, December 16, 2008

Gold Ahead of Platinum! Wow!

Both silver and gold are having a hay day! They are off and running again. They are carrying most of the mining stocks with them. The leverage of the mining stocks to the price of gold is beginning to exhibit itself. Gold is up to 840 and silver to 10.82.
Platinum closed below gold yesterday for the first time in over two decades. It is now 842 only two dollars above the price of gold. That is amazing!

From Casey's Daily Resource Plus:

"Gold rose right from the beginning of trading in the Far East on Monday morning, but began to sell off around 1:30 p.m. in Hong Kong. From there it drifted lower right up until the London p.m. fix was in...3:00 p.m. London/10:00 a.m. New York. Then the price tacked on $16 in the space of less than twenty minutes. The price was obviously capped from there, and any further rally attempts over $840 were squashed. The action in silver was similar, and it had an even more impressive rally after the London p.m. gold fix was in. But it too was capped at precisely the same moment as gold...probably JPMorgan in both metals. I often wonder how high these precious metals prices would go if JPMorgan and HSBC USA weren't around."

I, too, wonder how high gold would go. The big question is when are the cappers going to put down their hammers and let the precious metals go the way of the market?

The dollar dropped significantly against almost all currencies, in particular, the Euro and Yen. By the way, China the number one holder of U.S. debt has almost $653 Billion and Japan in second place has about $586 Billion. Both of those are with a "B." Our debt continues to grow. We are the number one debtor nation. Shame on us.

From The Market Oracle:"How Deflation Creates Hyper-inflation" Read it HERE.

PETER BRIMELOW in Market Watch:

Dollar's decline to drive gold?

Commentary: Recent sharp drop may trigger price increase in gold

Read the article HERE:

James Turk from the Commentators Corner at Kitco:

Dec 12 2008 12:39PM
More on Gold Backwardation

Over the last few weeks, there have been a lot of articles on the Internet about backwardation, i.e., when the price of commodities for delivery today is higher than the price of commodities for delivery in the future. Like nearly all the things on the Internet, most of what was written is useful, but some of it is total rubbish, and it takes time to sort through to find the gems from the rest. I offer the following in the hope that it clears up some of the confusion that has arisen about backwardation as well as to provide some insight into today’s gold market.

Backwardations are no big deal in most commodities, but they are indeed a very big deal for gold. Since I started following gold in the 1970s, I can recall seeing a gold backwardation against the US dollar only three times. Fortunately, we can pinpoint the exact dates from data made available by the London Bullion Market Association, which regularly posts the “GoFo” (gold forward) interest rate at its website.

Read the article HERE:

From Investment Cards from Cape Town:

The Blob on Wall Street

Posted By Prieur du Plessis On December 16, 2008 @ 7:25 am In Guest Bloggers, Money, Markets, Investment |

This post is a guest contribution by Bennet Sedacca, President of Atlantic Advisors Asset Management

The Blob is a morass of financial intervention that has eaten every bad financial deal too large to let die on its own. To understand the Blob, we must first understand how and why the Blob was formed in the first place.

The evolution of the Credit Crisis began in the mid 1990’s when the money supply began to grow at unprecedented rates. As the money supply grew dramatically, stock prices then began their ascent to the bubble highs of 2000.

Once the stock market bubble was popped in 2000 and stocks began to plummet, it seems that the Greenspan-led Federal Reserve became a serial bubble blower. The Fed lowered rates dramatically into the 2003 low of 1%, a rate that was not only likely too low given the actual economic statistics, but was also left at 1% for too long.

Because of this, another bubble formed, much at the urging of Fed Chairman Greenspan. With 30 year mortgage rates near all-time low rates, homeowners were enticed to bypass fixed rate mortgages and were openly encouraged to take on adjustable rate mortgages. And the housing bubble was born.

Lending standards fell as money flooded the system, courtesy of a too-easy Fed. Individuals and institutions that were burned by a busted bubble in stocks became infatuated with the real estate market and prices were bid up to ridiculous levels. Real estate was not only bid up in the residential space but in commercial real estate, hotels, and raw land around the globe. The combination of easy money and rising prices enticed even the most conservative investors to embrace real estate as stories were told that real estate, unlike stocks, was something tangible that you could touch and feel.

Read the article HERE:

Since I was stopped out of most of my trading stock of DROOY, HMY, and VGZ, I have started trading in some of the more speculative Canadian mining stocks. These have been severely depressed and will join with the other mining stocks as the precious metal prices rise. They are truly speculative, but have a low cost per share which allows most of us to load up on several of them for a low investment of cash. This provides diversification and should reduce the overall risk. They are not for everyone, though.

The Bible tells us to "Be thou diligent to know the state of our flocks, and look well to thy herds." (Pr. 27:23) This is an important message explicitly for the ranchers and herders. However, it has much broader application to all of us. The message is that we must monitor, know, and protect our source of income, regardless of the source. If you have a business of your own, you are told to watch over it well and manage it to the best of your ability. It is equally applicable to your portfolio of savings and investments.

We must prayerfully watch our investments. For us to be able to manage them well, we must not only watch them, but study, seek wisdom from God and wise men. Then we must plan ahead, commit the plans to the Lord, act in accordance with the plans, and depend upon God for the success or redirection. Remember, the person most interested in the success of your investments is you. Others can help from time to time, but you must make your own decisions.

The Bible, also tells us that "The fear of the Lord is the beginning of wisdom." We must never fear men who can only damage the body or physical property, but must fear the Lord Who can destroy both body and soul. Seek the wisdom of God and His understanding for success in this and the after life. Jesus Christ, Whose birth we celebrate, is the way, the truth, and the life. All other is death.

Best to each, Doug


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