Dollar Up & Gold Down

The drop in the price of gold began at almost exactly the same time as yesterday. Today, we are seeing the impact of misguided euphoria over the dollar. The dollar is up strongly today against the Euro and other major currencies. One would wonder why in view of the dismal to drastic drop in employment. The Labor Department reported that jobs declined in December by some 525K (72K jobs were added for the death, etc. fudge factor which made the figure look a bit better). Note too that the November loss of 533K jobs was revised to 589K. One would wonder how the December figure will be revised.

Nevertheless, this is providing another opportunity to increase our portfolios of mining stocks and physical precious metals as many are doing around the world. More people are climbing aboard the gold and silver train. Is it about to leave the station now? I believe we may have a few more months, but remember early is better than late. The late comers will pay dearly for their tickets if they can find them.

Thus, I have started adding to my trading stock of Harmony Gold (HMY) at prices below $10. It is now trading at about 9.57. My last purchase was at $9.56. I will likely go for more if the price drops further. I also have some HMYEA (May 2009 5.00 Calls) which are currently bid @ 4.80 and Ask @ 5.20. The last trade of 2 looks like my purchase of a few days back at 5.60. If you have risk tolerance, you might want to look into options. Of course, I am telling you what I am doing and what I do may not be correct for you. Make your own decisions.

Here is the Stockcharts graph of GLD (Gold Trust Shares ETF) the share price has just broken below a trading range (82.5-87.5) which was established over the past month. Today, the price has broken down to 81.65. That is why I am interested in replacing some of my sold trading stock of mining shares. DROOY is down to 5.45 and VGZ to 1.53. Both of these are resisting substantial drops in prices, so I am thankful to have shares of both remaining in my portfolio, but do not intent to add to them at current levels.

I have recommended my daughters to move the grandchildren's natural resource and commodity mutual funds to gold funds which invest in the metals and mining stocks as I believe that gold and silver and the miners will be better as the vast amount of dollars available flow into these areas for security.

From Market Watch:

Gold falls to one-month low on dollar, tumbling oil

By Morning Zhou, Market Watch

Last update: 9:01 a.m. EST Jan. 12, 2009

NEW YORK (MarketWatch) -- Gold futures fell more than 3% Monday to the lowest in nearly one month, pacing sharp losses in crude oil and other commodities, with a stronger U.S. dollar also reducing the metal's investment appeal.

Gold for February delivery was last down $30, or 3.5%, at $825 an ounce on the Comex division of the New York Mercantile Exchange. It dropped to $823 earlier, the lowest since Dec. 15. The metal ended last week's trading down for the first week in five, falling 2.8%.

Monday's losses in gold paced sharp declines in other commodities and global equities. Crude oil tumbled more than 6% to below $39 a barrel on demand worries, while European and Asian stocks moved broadly lower. Read the article HERE.

From Commodity Online:

London remains the global hub for gold trading

2009-01-12 17:25:00

LONDON: When gold and silver trading posted record activity in 2008, credit must go to London’s OTC market where bulk of the trading in both the commodities take place. Although the physical market for gold and silver is distributed globally, most whole sale OTC trades are cleared through London, according to a report by International Financial Services Ltd( IFSL), London. The article is HERE.

From Energy Risk:

News 12 January 2009 : London

Gold and silver trading hits record levels in 2008

Trading in gold and silver reached record levels in 2008, spurred on by the perception of precious metals as a "safe haven" from the credit crisis, according to International Financial Services London (IFSL) Bullion Markets 2009 report.

Gold turnover increased 58% in 2008 to a record $20.2 trillion, while silver trading increased 39% during the year to a record $2.6 trillion. IFSL says the growth in turnover was partly due to an increase in prices of precious metals during the year with gold posting an all time high in March of $1011 per ounce.

The OTC market accounted for nearly three-quarters of gold trading and 56% of silver trading. Most of this activity was transacted through the LBMA (London Bullion Market Association). Daily reported net trading in gold on the LBMA averaged $20 billion in the first 11 months of 2008, up 45% on the same period last year. Daily trading in silver on the LBMA increased 32% to $2bn. The article is HERE.

From Bloomberg:

U.S. Stocks Retreat on Earnings Concern; Alcoa, Conoco Decline

By Eric Martin

Jan. 12 (Bloomberg) -- U.S. stocks fell, extending losses from the market’s worst week since November, as a slump in oil prices dragged energy producers lower and investors speculated Alcoa Inc. will kick off another disappointing earnings season.Read the article HERE.

From Yahoo News:

Israel pounds new Hamas targets, enlists reserves

By IBRAHIM BARZAK and JOSEF FEDERMAN, Associated Press Writers Ibrahim Barzak And Josef Federman, Associated Press Writers

GAZA CITY, Gaza Strip – Israeli warplanes pounded the homes of Hamas leaders and ground troops edged closer to the Gaza Strip's densely populated urban center Monday, as Israel weighed whether to escalate its devastating offensive.

Despite the tightening Israeli cordon, militants managed to fire off at least four rockets Monday morning. There were no reports of injuries, though one rocket hit a house in the southern city of Ashkelon.

Black smoke rose over Gaza City's suburbs, where the two sides skirmished throughout the night. At least six Palestinians died in the new airstrikes or of wounds on Monday, Gaza health officials said. One of the dead was a militant killed in a northern Gaza battle. Read the article HERE.

The general market is not a pleased with the dismal unemployment report as the dollar bulls are. Going down is the DJI which is presently down about 71 to 8516. One must use extreme caution in the markets of today. The immediate direction of the market is yet to be revealed, though we should expect some Obama bounce during the early "Honeymoon" period. After that, I believe the precious metals will accelerate in upward speed.

The Congressional Budget Office announced a $1.186 Trillion with a "T" 2009 federal deficit. Compare that to $698 Billion for the Viet Nam War and $454 Billion for the Korean War (Police Action). Ours is the largest in the history of any nation. Wow, what wonderful records we are setting! Let's do it again, again, and again. Oops, I got carried away. Our public servants need no more encouragement. They are going for higher records on their own.

Many of our citizens are beginning to pay down credit for a change. That is a very good thing! Of course, our Keynesian leaders push us to spend, spend, and spend. Then we are encouraged to go out and borrow more dollars to continue spending. Thankfully, some of us are gaining Biblical wisdom to "Owe No Man Anything, but love." The Bible warns us that debt is a form of slavery which we must avoid.

After God's people were bought with the very precious death of Jesus on the cross, we are told not become enslaved to any other. We belong to King Jesus. He is our Lord and Savior. Remember, if He is not our Lord, He is not our Savior. We must obey Him 24-7 or suffer the consequences of His eternal wrath. Of course, His people are called to repentance daily by the in working of the Holy Spirit for which we must be eternally grateful. Praise Him daily.

Best to each, Doug