Thoughts on Markets

Tuesday, June 23, 2009

Long Term Precious Metals Trends in Graphs

The emphasis of the world's central banks, under Keynesian Economic Theory, are flooding the world with unbacked paper currencies. This will result in inflation which they and their governments prefer to depression. The flood is not working, but will eventually. In fact, the flood is so great that the whole FIAT system could collapse.

Here in America with over 11 Trillion national debt, soon to exceed 14 Trillion, there is no way for America to pay this debt except with greatly depreciated dollars. Taxation to the extent necessary to pay it would result in more than peaceful tea parties. Of course there is always the possibility that we will cancel the debt to the world and kill the dollar completely. It will be interesting to watch the Treasury auction, I believe it is this week, to see if there are any buyers other than the Federal Reserve. The foreigners are beginning to back away from our auctions.

The boyz are still at it. See the comment from Ed Steer below. Both silver and gold are at prices that I did not think we would see again, but there is virtually no limit to what the manipulators can do since they have very deep pockets. We must become more adept at playing the game with them, not against them. Theirs is the trend.

Gold has been pushed below its 50 day moving average. On the graph, below, see the left shoulder red line, head black line, and right should black line. Also, I have added a down trend channel outlined in red. Yesterday, the last price was at about the middle of the channel. The price of gold is now 918.50 off 4+.
The 5 year graph of gold puts it in a better perspective. The bull trend is still intact with higher lows long term. However, we are trading in a range with high near 1000 and low just above 700. For this year, the range has been just below 1000 to about 850++.

On the 24 hour silver, similar to the gold, we see the activity of the boyz rather clearly. This is not free market activity. Thus, we do not a free market, only intervention which punishes all but those in control.

From Ed Steer of Casey's Daily Resource Plus today: "Yesterday, the bullion banks managed to get both gold and silver to both close below their respective 50-day moving averages. I doubt that is a coincidence. Ted Butler feels that we are about halfway through the liquidation process, but 'da boyz' still have lots of firepower left to take both metals down considerably lower than they are now...as they are totally in control of the precious metals market at the moment."

Thus, we are at the mercy of or lack thereof "da boyz." These bullion banks, backed by the Federal Reserve and the Federal Government are in control. As this has become much more obvious in the recent manipulation of the precious metals, I have decided to engage in cautious trading of the mining stocks, again. I always have the concern that any significant rise in the price may be a prelude to the eventual gold rush. I have seen time and time again that I have sold too early in rallies even though they were not the final gold rush. However, I now believe it prudent to get back into trading and I will be selling a small portion of mining stocks when the prices push to profit levels. Also, I will be buying as price begin to rise. I will try to inform you about each of my sales and purchases. We may have to be very patient and wait for escalation of the mid east wars or other economic disasters before the prices will rise. I do not long to have such disasters, but know that such would move the prices of the metals.

From MineWeb.com:

Gold stocks can add returns with no extra volatility

The judicious use of gold stocks as part of an investment portfolio can add to returns without significantly adding to risk.

Author: Frank Holmes
Posted: Tuesday , 23 Jun 2009
SAN ANTONIO, (U.S. Global Investors) Read it HERE.

From IMF:

"IMF says dollar adjustment might be needed"

Read the short & concise report HERE.

The idea is that the dollar must be lower to encourage exports. Hidden is, of course, the inertia of restarting defunct manufacturing capability which has been largely exported. Why was it exported? Because of excessive government regulation, taxation, and unions, it was too expensive to manufacture here.

From MineWeb.com:

"Gold slips to $920 as dollar pares its losses

The gold price slipped to below $920 on a stronger dollar, but with the global economy still seen as very weak its safe haven position is seen as remaining intact."

Read it HERE.

That is very interesting, but must be taken with a liberal helping of salt. About two weeks ago gold was pushing toward 1000 at about 990 when the dollar was at about 79.5. The "stronger" dollar is now at only 80.5 which is about 1% increase while gold fell from the 990 to 920 for a drop of about 7%. The precious metals are not directly coupled with the dollar. Neither are the mining stocks directly coupled with the general stock market.

From Ron Paul:

"International Bailout Brings Us Closer to Economic Collapse

Last week Congress passed the war supplemental appropriations bill. In an affront to all those who thought they voted for a peace candidate, the current president will be sending another $106 billion we don’t have to continue the bloodshed in Afghanistan and Iraq, without a hint of a plan to bring our troops home." Read it HERE.

Ron Paul is the one man in Congress who has consistently pushed for hard money against the FIAT paper currencies of the world. I trust that none of you believe that politics can be separated from finances, economics, and even life. Politics shapes all aspects of our temporal lives. It impacts significantly; therefore, it is important for us to understand the political environment as it exists, and more important to interpret its impact through the wisdom of God's word. The bible is the standard light for illumination of all thought. Facts must be interpreted under this light.

From the Guardian.co.uk:

"Goldman to make record bonus payout

Surviving banks accused of undermining stability" Read the article HERE.

These geniuses certainly deserve the bonuses. After all, they were instrumental in bringing down the world economies and then were among the first and foremost beneficiaries of the massive bail outs. Of course, the bail outs were designed, not to heal the economies, but to save the banking and financial industries. Then to save inefficient auto manufacturers and foolish insurance businesses. Never were the bail outs for the slaves, oops, I mean citizens.

While the non-faithful unbeliever is afraid to go outside lest the lion devour him, the Christian is bold as a lion knowing that His Savior is in control. We must heed this proverb and hold to a long term view. Each of us is preparing a spiritual heritage for our descendants and a financial heritage to help finance their continuance of the kingdom work of bringing all into the realization that King Jesus rules in all the affairs of men.

Best to each, Doug

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