Thoughts on Markets

Tuesday, July 07, 2009

I am sellling some CEF - Gold & $ Moving Down

Gold in its proxy GLD looks to be headed lower for now. It has broken below the 50 day moving average, again. This could be a longer, hotter, dryer summer in both weather and the price of gold.

The Central Fund of Canada, one of my favorites, has a double top (purple line) followed by a series of testing of the 50 day moving average and then a break through. Therefore, I am selling a portion of my CEF for two reasons: (1) I want to have more ready cash, and (2) I am going to preserve some profit by the sale. If I held GLD, I would do the same. That is what I am doing. You make your own decisions.
The US Dollar is still on a downward trend. Its 50 day moving average broke below the 200 day early June. The relative value has not broken above the 50 day moving average since well back in May. The price has been in a narrow trading range for just over a month. Not a good looking graph.
Once again, we are treated to the intervention in a way typical of recent times. Toward the middle of London trading, the precious metals are capped and slammed down. Gold has returned to 925.20 since NY opened.
Silver at virtually precisely the same time was slammed, but it is still down 0.08 to 13.17. Remember there are no free markets, only intervention. This forces us to be traders and to leave the buy and hold philosophy. We must discover buying ranges and trade in and out within the ranges. This is extremely difficult, so one must be very cautious about buying and quick to sell as the top of the range is approached. Then get ready to buy again. However, I never want to sell all of a holding under these circumstances. How long O Lord? This, as timing always is, the big question. Of course, David asked the question in regard to his struggle with enemies all about him. Of course, we should see the bullion bank boyz as our enemy.


From Chuck Butler of Daily Pfennig this morning: "Could the nascent bias to sell dollars be a result of the fact that the U.S. will once again depend on the ignorance of strangers (foreigners) and issue $35 Billion in 3-year notes today... But then, with the "new" way the Treasury allocates "who buys" the Treasuries, the Fed could step in, buy up a HUGE Chunk, and make it look like "outsiders" bought them, which would make the "deficits don't matter" flag wavers run into the streets shouting to the tune of Jimmy Crack Corn... We issue Debt, and the foreigners don't care, we issue lots of debt, and the foreigners don't care..."

Why do you think the measurement was changed? Obviously, the Fed does not want the general public to see the fall off of foreigner buying of our debt. The rosier the picture presented to the gullible of our citizens, the better they feel. Emotion drives much of the markets and the economy. Therefore, the White House and the Fed want "everything to be beautiful" or at least seen that way. We know better. Things are not always as they appear, particularly where governments are concerned.

The advantages of owning the world reserve currency Gary North's Reality Check today:
"The United States possesses a unique series of advantages as a result of its reserve currency status. These include the following:

1. The government can rely on the Federal Reserve System to create money out of nothing to buy U.S. Treasury debt, and then repay foreign central banks with this newly created counterfeit money.

2. Americans can buy imported oil in newly created dollars.

3. There is a huge market for its Treasury debt (at about 0% per annum), corporate debt, and even stocks, which foreigners and foreign central banks buy, thereby funding the nation's gigantic trade
deficit.

4. The world's commodity futures markets are priced in dollars, making it more costly to trade in other currencies."
You can get a free subscription HERE.

From WSJ Online:

Dollar's Role Under Debate In Run Up To G8 Summit

AIX EN PROVENCE, France (Dow Jone)--France, Russia and India questioned the role of the dollar as the world's reserve currency during the weekend, indicating its status is likely to be a strong talking point in this week's Group of Eight leading nations' summit in Italy. Read the article HERE.

From TheDailyBell.com:

James Turk on how the elites always destroy the paper money they value - and why gold wins

Read the article HERE.

That reminds me of what Jack Kemp said back in about 1981-1982: "We will either monetize gold or gold will demonetize the dollar."

From EnglishDongA.com:

Bank of Korea Likely to Buy Gold for 1st Time in 11 Years

The Bank of Korea has not purchased gold for 11 years, but is expected to go on a gold buying spree, as the world’s central banks have bought the commodity since the global economic erupted in September last year.

A Bank of Korea official said yesterday, “The bank has begun to set up a plan to manage foreign exchange reserves for next year. It has also closely watched central banks in other nations and trends in the global gold market. Given the changing global financial environment, the bank`s management plan is critical.” Read the article HERE.

From China Economic Net:

China encouraged to further boost gold reserves

Last Updated(Beijing Time):2009-07-06

Read it HERE.

We are being tested again. Remember that the dollar is in a long term down trend and our politicians are not about to bite the bullet and do what is necessary. They have a greater fear of depression than inflation. Because of the larceny in people, all prefer inflation, because they can borrow currency and pay back over time with currency of lesser value. Thus, the do not return or pay back with value equal to that which was borrowed. The debtors win an the creditors lose. We violate the law of God which warns that "the wicked borrow and pay not again." Just as the governments and central banks do this to the citizens, the citizens become addicted to the same larceny. Thus, FIAT currencies encourage a violation of God's Law-Word and generate a citizenry devoted to moral decay. We either follow God's Law or have chaos. Where are we now?

Best to each, Doug



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