Thoughts on Markets

Monday, June 28, 2010

Gold & Silver Breakout Capped - Planning

Both silver and gold have moved to higher levels early. However, both have been pushed back some. For gold, the cap seems to be about 1260; for silver just above 19. The caps will be broken, but the real question is "When?"

I believe it will be soon, but that is only a guess. I hope it is an educated one.


Changing Central Bank attitudes: gold to be strongest asset class

Poll of Central Bankers suggests they expect gold to outperform equities, bonds, currencies - and oil. If they aren't selling gold it's probably a good job that no-one wants to borrow it either.
Author: Rhona O'Connell
Posted:  Friday , 25 Jun 2010
At its recent annual seminar for reserve management, investment bank UBS polled over 80 reserve managers from the official sector as to their views on different reserve assets.  One outcome was that gold was expected to be the strongest asset class in the second half of this year, while 22% of those polled thought that gold would be the most important reserve asset over the next 25 years. More gold in the news is a prelude to more interest in the precious metal. HERE.


UPDATE: Now China sources newly mined gold from the USA

The latest news from Coeur d'Alene Mines on its sale of gold concentrates on a long term contract to the Chinese has to be seen as yet another positive for the gold price.
Author: Lawrence Williams
Posted:  Friday , 25 Jun 2010
We are now used to China sourcing huge volumes of metals from external sources to drive its industrial machine forwards, but the latest announcement from Coeur d'Alene Mines on its deal to have its gold concentrates purchased and processed by China's largest gold producer suggests that precious metals are on China's vast shopping list too.
China is already the world's largest gold miner, and many analysts now assume - following the country's announcement last year that it had been building up its gold reserves for six years unknown to the West - that it is still expanding its gold holdings in  a way that does not necessarily show the gold going into official reserves.  And now it appears to be looking elsewhere to purchase supplies of the yellow metal without overtly impacting the market. China grabs more HERE.


Gold in the context of the financial crisis

In another article from the Erste Bank 2010 report on gold, Ronald Stoeferle looks at the metal in respect to the current financial crisis and draws parallels from history
Author: Ronald Stoeferle
Posted:  Saturday , 26 Jun 2010
VIENNA (Erste Bank) -

The paradox is the trigger of the crisis, i.e. too cheap money, is now being treated as its medicine. This could be regarded as an absurdity of historical proportions. Three years ago probably nobody would have expected the Federal Reserve to take USD 1,250 worth of mortgage-backed securities (MBS) onto its balance sheet. This is certainly not a step that would be beneficial to building confidence in paper money- and neither are the countless desperate stimulus and bailout packages of the past few years. On the other hand this represents a clear argument in favour of gold and should thus ensure a positive environment for gold investment.  
The following quote is an impressive reminder that history tends to repeat itself:
"We have tried spending money. We are spending more than we have ever spent before and it does not work... We have never made good on our promises.... I say after 8 years of the Administration we have just as much unemployment as when we started, and an enormous debt to boot!"  
Henry Morgenthau, U.S. Secretary of the Treasury during the New Deal, May 1939  HERE.


The best stimulus? Spend less, borrow less

Of all the highlights of Allan Meltzer's half-century as a distinguished monetarist -- advising Presidents Kennedy and Reagan, producing celebrated books on John Maynard Keynes and the history of the Federal Reserve -- none proved more memorable than a crisis session at 10 Downing Street in mid-1980.
A group of 346 noted economists had just written a scathing open letter to Prime Minister Margaret Thatcher, predicting that her tough fiscal policies would "deepen the depression, erode the industrial base, and threaten social stability." Thatcher wanted to make absolutely certain her unpopular attack on huge deficits and rampant spending, in the face of high unemployment and a weak economy, was the right one.
So Thatcher summoned Meltzer, along with a group of trusted advisors, to explain why the experts were wrong. Even leaders of her own party advised Thatcher to make what they called a 'U-Turn,' and enact a big spending program to pull Britain out of recession. "Our job was to explain why lower deficits and spending discipline were the key to recovery," recalls Meltzer.
Thatcher was regally unamused by arcane jargon. "Being right on the economics wasn't enough," intones Meltzer. "She made it clear that our job was to explain it so she could understand it. If we didn't, she made it clear we were wasting her time. She'd say, 'You're not telling me what I need to know.'"
Thatcher stuck with draconian policies, invoking the battle chant "The Lady's Not for Turning." She launched Britain years of balanced budgets, modest spending increases, falling joblessness, and extraordinary economic growth. This is a good contrast of current Keynesian vs Austrian Schools of Economics. Read it thoroughly HERE.

From The

"To recap... The G-20 left the markets confused, and not really knowing exactly what the G-20 leaders wanted. So... The bias this morning is to sell dollars... The U.S. data has been soft recently, and there are a quite a few data prints this week to confirm that the economy is not growing or recovering! Aussie and Canada are inching higher VS the dollar this morning, and Chuck went out on a limb (a fat one) to say the Riksbank would hike rates this week in Sweden..." (Emphasis added)

From today: "--Back to the bigger picture. It is hard to know which is the more dangerous group gathered in Toronto for this weekend's G-20 meeting. Is it the balaclava-wearing, black-shirted vandals who destroy public property and break windows to bring down "the system"? Or is it the men in suits behind the security fences deciding how to cut spending and raise taxes in order to repair the broken debt-based funding model of the Welfare State and then shove that deal down everyone's throats?


--On the one hand, the balaclava wearers have a point: why should the G20 leaders meet in private to devise and impose a global financial regulatory regime that benefits, primarily, the banks themselves? You could argue that the G-20 leaders are the democratically elected representatives of their people. But still, it feels a bit like a private party to which you're not invited.

--Our sympathy for the bomb-throwers ends at their wanton destruction of private property and vandalism. The truth is - in our experience - there is always a small group of people at these gathering who just want to break and burn stuff. They are criminals and vandals. And if we believed in capital punishment - we don't because we don't support the power of the State to take life - all property crime would be capital crime.

--By the way, the only good thing about burning cop cars and broken windows is that you have what the PC class refers to as "a teaching moment." That is, if breaking stuff were really good for the economy because it created jobs (lots of windows to repair, new cop cars to buy), then the most sensible economic strategy to create the most growth would be to break everything.

--This must be what people mean when they say that war is good for the economy. It stimulates production and jobs. Taken to its logical conclusion, the best strategy for the strongest growth is perpetual war - which funnily enough seems an awful lot like the strategy of the American Welfare/Warfare State.

--Of course anyone smarter than a fifth grader intuitively knows that you can't destroy your way to wealth - unless you're a war financier and profiteer, and most of those jobs are already taken. Is it any coincidence that governments are so often declaring "war" on social issues and then borrowing from large money centre banks (often in the form of a cartel with monopoly powers like the Fed) to pay for those wars. Isn't this war profiteering too?

--The only real difference in substance between Toronto's street vandals and the government suits is that vandals are destroying tangible value in front of your eyes while the Keynesian inflationists are travelling forward in time to destroy value. "Pump priming" deficit stimulus spending robs from future demand and misallocates current resources to create the illusion of growth - a political motive for people like former Prime Minister Kevin Rudd to hang his hat on (attached the head Labor loyalists recently cut off)." These are some interesting thoughts which deserve a good look. The Daily Reckoning is a FREE newsletter which has many good thoughts for you.


Americans Relate to Founders, Not Progressives

Democrats are reportedly planning to raise $125 million for a campaign to sell Obamacare to the voting public. Apparently, the idea is that what 50-plus presidential speeches and statements and months of congressional debate could not do can be done by $125 million spent on everything from TV ads to community organizers.

Maybe. But there seems to be a more fundamental problem here. The Obama Democrats didn't set out to produce an unpopular stimulus package, an unpopular health care bill and an unpopular cap-and-trade scheme.

They thought these initiatives would be popular. In their view, history is a story of progress from small government to big government, and as historians of the New Deal wrote, that progress is especially welcome in times of economic distress.

The massive unpopularity of the Obama Democrats' programs suggests that view of history is defective. Let me propose another, starting with the Founding Fathers.

The Founders believed there was a tension between representative government and the right to life, liberty and property. So they wrote the Fifth Amendment to ensure that no citizen was deprived of those rights without due process of law. (Emphasis added.) Even the republicans seem to have ignored this, as well. Read the whole article HERE.


A.M. Kitco Metals Roundup: Comex Gold Trades Near Steady in Quieter Summertime Dealings

Comex gold futures prices are trading near unchanged and have traded both sides of unchanged in subdued Monday morning dealings. The market is pausing and consolidating recent price action that last week produced a fresh all-time record high of $1,266.50 an ounce, basis August futures. August Comex gold last traded up $0.20 an ounce at $1,256.40.  Spot gold was last quoted down $1.00 at $1,255.00.
The weekend Group of 20 meeting in Toronto, Canada produced no significant, market-moving news. The rhetoric regarding reducing deficits and implementing financial market regulation was expected by the market. The G-20 meeting also had no specifics on addressing the still very serious problem of the European Union's sovereign debt. That situation will continue to limit any selling interest in gold in the coming weeks. Investors have been buying gold on a safe-haven basis, with many focusing on buying gold as a hedge against any further weakening of the European currencies.
The U.S. dollar index is slightly higher, the Euro currency slightly lower and crude oil futures prices are trading weaker in early dealings Monday morning. The U.S. stock indexes are trading slightly higher early. Traders are awaiting Friday morning's key U.S. jobs report, which should provide for some more active trading in its immediate aftermath. HERE.


ETF Securities Gold Holdings Rise to a Record $10 Billion on Haven Demand

Gold held in ETF Securities Ltd.’s European exchange-traded products rose to a record $10 billion, accounting for half of the provider’s total global assets under management.
Its ETFS Physical Gold product held $5.2 billion of metal as of June 11, and ETFS Gold Bullion Securities contained $4.8 billion, London-based ETF Securities said today in a report. Total assets under management climbed to an all-time high $20 billion as of June 17 including commodity, currency and equity products, up 70 percent from last July, it said.
Gold ETP holdings advanced to an all-time high this year and coin sales from mints accelerated on buying by investors seeking to protect their wealth from Europe’s sovereign-debt crisis and on concern the global economic recovery may falter. Bullion climbed to a record $1,265.30 an ounce on June 21 and is up 15 percent this year. HERE.

Miners from

Currencies from
 Some prices: FVITF 2.1149; BYDDF 7.85; A new SPECULATION for me GBG 1.85; TBT 37.0719; TLT 99.61; DOW up 20 to 10163.08; Gold off 3.70 to 1252; Silver no change at 19.10.

We must make our decisions based upon the best information we can find. It is very important for us to sift through the information and run it against Scriptures to evaluate. The question should be, "Is this in concert with God's written word?" If not, beware.

Then we make out plan, commit it to the Lord and implement it. Then we look to the Lord to reveal the results of our actions. He will provide either the result we were seeking or an opposite result from which we can learn. In the latter case, we should pray to the Lord and ask Him for guidance. His result is always the best for us in the long run, because there is nothing that can separate us from His love as long as we are one of the faithful ones which belong to Him.

Best to each, Doug




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