Looking Backward and Forward to Welcome 2009

Even with all of the manipulation, gold is up for the year as easily seen on the gold graph. Both silver and gold have had a decent year. The volatility of the prices have provided an excellent opportunity to trading in the mining stocks which have been in a rather narrow trading range for much of the year.

It is interesting that the mining stocks are holding a good bit higher now even as gold has backed off from its highs of the past week. Gold is down to 860.40 and silver is down to 10.85. Both are on a down tick. However, the mining stocks are trading at a higher plateau than a couple of weeks ago. Here are some examples: AGXM 0.32; CDY 1.08; CEF (ETF) 10.84; CDE 0.85; DROOY 5.359; GDX 32.59; GFI 9.63; GG 84.71; GLD (ETF) 84.70; GSS 0.9999; HMY 10.40; IAG 5.80; KGC 17.74; KRY 0.16; NEM 39.70; PAAS 16.49; SLW 6.27; SSRI 15.33; VGZ 1.19; XRA 1.90.

This represents a change, as most of the year, the mining stocks have been lagging behind the upward moves on the metal prices. Perhaps, the interest in the stocks has broadened. They do offer leverage against the metals. This is particularly true as the metals rise in price.

I have great respect for Dr. Williams, because he is a sound thinker and has a great respect for the Constitution and free market (Austrian School) Economics which reflects the lessons on money, markets, property, and law consistent with that of the Bible. I urge you to read the following lesson in Economics by Walter E. Williams:

Wednesday, December 31, 2008 Walter E. Williams
Teaching Economics

by Walter E. Williams

Many professors, mostly on the liberal side of the political spectrum, use their classrooms to proselytize students. I have taught economics for the past 40 years and challenge anyone to find even one student, among the thousands who went through my classes, who can say, "Professor Williams used his class to proselytize students." While acceptable at most universities, it is nothing less than academic dishonesty to do so. Like others I have my own values and opinions, such as those expressed in some of my nationally syndicated columns, but they never become a part of classroom discussion.

Learning how to think straight, as opposed to what values and opinions to hold, is the crucial part of education. Part of that learning is to be able to understand the distinction between subjective statements, for which there are no commonly accepted standards of proof, and positive statements for which there are.
Get the whole lesson HERE.

From Casey's Daily Resource Plus:

"Although trading was thin once again yesterday, there was obviously someone not interested in seeing the gold price do well. Twice in early trading (at least to us here in North America)...the first occurring shortly before Hong Kong closed and London opened (4:30 p.m. in Hong Kong...8:30 a.m. in London); and the second time was at 7:45 a.m. in New York, just before the Comex opened...which would be 12:45 p.m. in London...lunchtime for them. Both times gold got hit for about US$8 in a matter of minutes. Not a lot, but enough to make sure that gold finished down on the day. Whether these two smack-downs were local traders, or traders from New York entering the market on the Globex system, is unknown. But both had the stench of JP 'not-for-profit' Morgan all over them.

Silver suffered at precisely the same times. Funny how that works, isn't it? But silver really took off once its bottom was in at 7:45 in N.Y. However, JPMorgan showed up shortly after the price passed through $11.00, and that was it for the day. In the last three or four months, it has become common knowledge that JPMorgan (with the Federal Reserve in tow) has become the biggest short in both gold and silver. More evidence to that effect is posted further down."

Interesting report on China from Reuters:

China's great migration wrenched back by crisis

Tue Dec 30, 2008 8:04am EST

By Simon Rabinovitch

CHENGDU, China, Dec 30 (Reuters) - The biggest migration in human history has gone into reverse.

China's ocean of blue-collar workers is streaming back to the country's farming hinterland, bringing thwarted aspirations and rising discontent in tow as their city jobs, their paths out of poverty, fall victim to the global economic crisis.

The article is available HERE.

More on slowing silver productions by Ted Butler:

TIGHTENING PRODUCTION
By Theodore Butler

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

There is no question that the financial scene has turned ominous in the past two months. I’d like to follow-up on an article I wrote two months ago, "A Shock To The System?" It is HERE.

In that article, I wrote how the unprecedented collapse in the price of base metals, to levels below the cost of production, would bring about a significant reduction in mine production. The decline in base metal production would then result in a major decline in silver mine production. Almost 70% of silver production derives as a byproduct from the mining of other metals. A falloff in zinc mining means less silver produced. I wrote how this was the first time that this development had occurred, and how it could be the perfect storm for the price of silver.

In the past two months, the data concerning inventories and price seems to confirm that the storm is firmly in place. In spite of cutbacks in base metal mining, there has been a large increase in base metal inventories and a further fall in price. That should accelerate additional base metal mine closings. For example, London Metal Exchange (LME) inventories, measured from the low points of the past six months, have increased in copper by 165%, in zinc by 65%, nickel 70%, and aluminum by 100%. These are important economic indicators of industrial demand. In addition, COMEX copper inventories have also tripled in the past few months. LME lead inventories are still down for the year, but have grown in the past month by 10%.

The whole article is a worth a read HERE. It is the second article on the site.

From GATA is a reference to an article with graphs at Gold Seek:

Rob Kirby: Morgan Chase's gold derivatives soared as gold was floored

Submitted by cpowell on Wed, 2008-12-31 02:28.

9:19p ET Tuesday, December 30, 3008

Dear Friend of GATA and Gold:

Correlation isn't necessarily causation, but anyone who believes that JPMorgan Chase does anything that isn't encouraged by the U.S. Treasury Department and Federal Reserve should pursue getting a conservator, as is suggested by GATA consultant Rob Kirby's review tonight of the U.S. Comptroller of the Currency's quarterly report on gold derivatives. Kirby, proprietor of Kirby Analytics in Toronto, finds that a huge increase in JPMorgan Chase's gold derivatives book in the third quarter this year just happened to coincide with a hammering of the gold price.

Of course as long as the U.S. government can contrive money into existence at will, without any oversight, and pass that money along to its favored agents in the markets, and as long as participants in the gold market accept paper promises of metal instead of taking delivery, the price of gold will be heavily weighed down by the price of imaginary gold.

Kirby's analysis is headlined "Government-Sanctioned Theft" and you can find it at Gold Seek here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Folks, the outlook for 2009 is not a great as we would like. I believe that we will have what many are calling an "Obama Bounce" in the general stock market. This may well carry over into many of the world markets. It seems that the recession would continue for the first quarter of the year and even into the second quarter.

However, the flood of cash slouching about the world is going to result in price inflation. More is on the way as Obama's plans are implemented. This is mostly in the hands of the big money banks, sovereign funds, and hedge funds. Therefore, it could flow into the stock markets. As it does, we should expect price inflation upon us as consumers. There are just too many dollars out there and they must go some where. We could see price inflation as early as the third or fourth quarter of 2009. This would be more of the stagflation we have experienced until the price of oil dropped giving us some relief.

As I have mentioned before, the two greatest dangers to America are continued or escalation of the current wars and a loss of the international reserve status of the dollar. Either will bring more stagflation to us prices with rising faster than income or depression with significant increase in unemployment.

The inflation of the unbacked currencies of the world will result in price inflation in the not too distant future.

2008 was a devastating year for most retirement funds. It was a bad hair year for most of Americas manufacturing capability, real estate, and retailers. It was a devastating year for banks, but most of the larger ones were bailed out compliments to the tax payers. We are very likely to see much of this into early 2009.

I am wondering about the Treasury bubble that is being inflated by funds seeking safety in spite of the virtually zero interest available from them. How high can that bubble be inflated until there is a vast run from it? What will be the impact of that? Where will that cash rush for safety? Could it be to precious metals? If it is, we will see the gold rush in full force. That will be the time to sell mining stocks as precious metals and mining stocks become the follow on bubble.

Our safest course in the near future is to be in precious metals, ETFs & Trusts holding the precious metals, mining stocks, and cash. The cash is for emergencies that come upon us. The mining stocks are to sell into any bubble in them. And the precious metals are from preservation of wealth. The bullion coins are becoming more available, but at high premiums. Hey, that is not all bad, one can once again obtain delivery on the coins in a reasonable length of time.

At year end, it is time to study the failures of the past year. Not to worry and fret over them, but to learn from our mistakes. By reviewing these and finding the errors made, we can plan to avoid them in the future. The Lord in His wisdom has given us each New Year as a new beginning. This is a great encouragement. With His help, we can do better in 2009.

It is a time for each of us to plan to read and study His word as a guide for all of life. The Bible speaks to every aspect of temporal and eternal life. The Creator God has not only created, but is also the sustainer of our lives. He has given us His word which He virtually dictated to selected men He trained for the purpose of writing it down for us. The Bible reveals the Father, Son, and Holy Spirit to us and shows us the way to live in concert with Their law.

It reveals our sinful nature and shows us the way to Jesus Christ who is our only way to be reconciled to the Father. Jesus Christ is THE way, THE truth, and THE light. There is no other.

Let us daily praise Him for His amazing grace toward His people. Let us live lives of obedience to Him that we may enjoy Him forever. He is the source of all joy and perfect gifts.

Best to each, Doug