Thoughts on Markets

Tuesday, July 21, 2009

Dollar Down - Metals Still Strong

From any angle you observe, this dollar chart is a mess. Unless the Federal Reserve begins buying dollars in a big way, the dollar will continue on the downward path. The only thing good about the chart is that the dollar index has been in a narrow trading range from about 78 to 81 for the last few days. However, yesterday was a strong downward move.

Silver is on a run now after being capped a bit on the NY opening.
Gold is still above 950, but is showing early signs of a downward move. The boyz have been letting the metals run this week. Will they continue? They have a very large short position in the metals, as well as in the long position.
In the meantime our miners are holding well. Here are some: AUY 9.79; DROOY 8.19; GLD 83.27; HL 3.11; HMY 9.45; SLW 9.13; SSRI 19.653; VGZ 1.87. The prices are mixed today, and it very early in NY trading. We will have to see what unfolds as the day moves on.

From Global Investor:

Gold rallies above $950

Weaker dollar, better U.S. corporate earnings boost metal's appeal

Frank Tang

New York Reuters

Gold (GC-FT949.901.100.12%) futures rallied above $950 (U.S.) an ounce Monday, reaching the highest level in more than a month, as a sharp dollar decline and better U.S. corporate earnings boosted bullion's inflation-hedge appeal.

Commodities in general benefited from a sharper appetite for risk, dealers said, with world stocks rallying as investors were tempted back into higher-yielding assets.

A brighter outlook for the financial sector amid economic optimism has underpinned the gold market this week. The metal, viewed as an inflation hedge, has been weighed down by the prospect of deflation, or a downward spiral in prices. Read it HERE.

Inflation is on the way, but I wonder if we will see it before next year. Of course, we may be having some inflation in the stock markets. The loose currencies need to find a home. Though it seems to be creeping into general prices, we are not seeing a vast increase. Thankfully, gasoline has dropped a bit, too.

From Bloomberg:

India Gold Traders Stockpiling Bullion as Prices Rise

y Thomas Kutty Abraham

July 20 (Bloomberg) -- Gold traders in India, the world’s biggest consumer, are stockpiling bullion to meet festival and wedding demand amid the highest price in more than six weeks, the World Gold Council said today.

Traders expect prices to stay buoyant before Diwali, the Festival of Light, and the wedding season, Ajay Mitra, managing director at the producer-funded group in India, said in an e- mailed statement today.Read it HERE.

Do they see higher prices in the offing? It would certainly be wise for them to stockpile when the prices are favorable.

From Bloomberg:

U.S. Rescue May Reach $23.7 Trillion, Barofsky Says

July 20 (Bloomberg) -- U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today. Read it HERE.

That is not encouraging news. More debt to cover bad debt. How does that help the economy? A fire will not die if treated with gasoline. This is virtually the same action, and the trillions of gallons of gasoline is frightening.

From Telegraph.co.uk:

Fiscal ruin of the Western world beckons

For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.

Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year. Read it HERE.

The dismantling of the socialistic, welfare state could be a great blessing in the long run.

From TheNation.com:

Dismantling the Temple

By William Greider

This article appeared in the August 3, 2009 edition of The Nation.

July 15, 2009

The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion. Read it HERE.

There seems to be more emphasis on auditing and curtailing the power of the Federal Reserve. It is a private organization owned for profit by the member banks, not the government. Perhaps, Ron Paul is acquiring some reinforcements. That would be great!

Make your day a great one in concert with the Lord.

Best to each, Doug

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