Thoughts on Markets

Monday, July 13, 2009

The Good Old Summer Time Not Looking Good!

Gold has been hammered again just into the NY trading today. This is typical of the bullion bank activity. It is now trading at 908.40. Perhaps, they will cover a number of shorts in this price range. It would be a blessing if they would unload, go away, and leave the markets alone. Only the Lord knows the exact timing on this.

VGZ seems to have a narrow trading range of late. The range between about 2.00 and 1.50 is clear on the graph, below. VGZ is now 1.59.
Silver appears to be ignored by the bullion banks this morning. It is still under 13 and trading at 12.47.
Hecla mining is trading in a range from about 3.00 to around 2.30, but over the last week a narrower range from 2.60 to 2.30. Hecla is primarily in silver. Hecla is now at 2.34.
Gold has taken it in the nose, so looks to be going down even more in the near future. I want to emphasize again that buy and hold should work for the longer term, but there are many trading opportunities along the way. One can use limit buy orders and trailing stops to limit loss once the buys are executed.

From MineWeb.com:

World's top 100 gold stocks: a little shabby, but strong enough

Gold bullion has taken a bit of a beating, allowing investors to show which listed gold stocks get the most votes during a tough patch.

Author: Barry Sergeant
Posted: Friday , 10 Jul 2009

JOHANNESBURG -

Gold bullion, apparently now targeting USD 900 an ounce, traded briefly just above USD 980 an ounce early in June; on 3 June, global listed gold stocks, seen as a group, made multi month highs, and then retreated quite heavily. Mining stocks across all classes also made multi month highs on 3 June, and have recovered somewhat from lows seen on 23 June, dragging gold stocks upwards from those lows, for now at least. Read it HERE.

From MineWeb.com:

Emerging gold producers favoured in deflationary environment - Jay Taylor

In this interview with The Gold Report, Jay Taylor talks about what economic insights he's gleaned from guests on his radio show," Turning Hard Times Into Good Times," and how owning gold shares can be advantageous in a deflationary period.

Author: The Gold Report
Posted: Monday , 13 Jul 2009

VANCOUVER, BC -

The Gold Report: Jay, since your radio program, "Turning Hard Times Into Good Times," started 13 weeks ago, you've had lots of very interesting guests. Care to share some of their perspectives on the state of the world economies?

Jay Taylor: Yes, we've have had a lot of very interesting guests who have provided some great insights into the markets, and I believe, profit-making guidance going forward. Most of the people that I've had on my show really believe that America's economy is in big trouble and will remain in big trouble for some time to come because of two factors. First, as a country we have lived beyond our means for many, many years. Second, there is a general belief that the massive bailout programs of the Bush and Obama administrations are ill advised because they foster the survival of inefficient, sick companies, financial and otherwise. I would say if there has been a theme among my guests it is that the U.S. is in deep trouble financially because of those factors. Read it HERE.

Gold stocks provide the leverage over the precious metals, but are often very volatile, much more so than the metals. For me, they are still good investments.

From Bloomberg.com:

DPJ’s Nakagawa Says Japan Should Diversify Reserves

July 13 (Bloomberg) -- Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds. Read it HERE.

Another jab at the dollar reported in The Daily Pfennig today: "So! Did you hear that Russian President Medvedev, showed off the "new world currency coin" at the G-8 meeting last week? He said.. "We are discussing both the use of other national currencies, including the ruble, as a reserve currency, as well as supranational currencies. So... Here it is! This is a symbol of our unity and our desire to settle such issues jointly."

I believe these are just jabs at the dollar reserve status; however, they are becoming more frequent. Unless America changes its print dollars, borrow from everyone, and spend, spend, spend, the time will come when the attacks will become real and not just rhetoric.

From Reuters.com:

Obama says stimulus plan to kick in later this year

WASHINGTON (Reuters) - President Barack Obama said Saturday more time was needed for his $787 billion stimulus package to work, predicting the spending would have a bigger impact on the economy later this year.

In an advanced text of his weekly radio speech, Obama said the stimulus plan approved by Congress and signed into law in mid-February "was not designed to work in four months -- it was designed to work over two years." Read it HERE.

From Bloomberg.com:

Obama Stimulus Money to Flow as Jobless Await Results

July 13 (Bloomberg) -- David Oneglia was looking at the likelihood of layoffs at his construction company. Then he landed a contract funded by the federal stimulus program to repair roads and bridges on Connecticut’s Merritt Parkway. Read it HERE.

The only thing preventing current across the board price inflation is the fact that the velocity of dollars is very low. This is the result of the banks holding the stimuli dollars in reserve and not lending them into the economy. The businesses and citizens are all about maxed out on debt and are not in a mood to rush out and borrow more. Foreclosures and bankruptcies are growing in obscene numbers daily. Thus, there is little spending.

From Reuters.com:

Economic crisis far from over, WTO chief says

GENEVA (Reuters) - The global economic downturn is far from over, and few countries have dismantled the dangerous protectionist barriers they imposed in response to it, World Trade Organization Director-General Pascal Lamy said on Monday.

In remarks to the WTO's 153 members, Lamy said that import penalties and other border restrictions are closing off markets and causing more difficulty in a time of depressed demand. Read it HERE.

More gloomy news on the world wide economies. Protectionist barriers slow world wide trade and in the past have lead to wars. These also tend to increase the cost of products to consumers which is another unintended consequence. Let's get rid of the barriers.

Though most of our miners are in good buying ranges, I would be very careful in making purchases as the prices of the metals may be manipulated down even further until the bullion banks decide against such activity. The hot, dry days of summer are crashing upon the markets. Even the DOW is barely above even this morning at +10 and change.

Best to each, Doug



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