Thoughts on Markets

Wednesday, July 07, 2010

Founders vs. Current Administrations - Silver - Gold - DOW


Walter E Williams

The Founders' Vision Versus Ours 

The celebration of our founders' 1776 revolt against King George III and the English Parliament is over. Let's reflect how the founders might judge today's Americans and how today's Americans might judge them.

In 1794, when Congress appropriated $15,000 to assist some French refugees, James Madison, the acknowledged father of our Constitution, stood on the floor of the House to object, saying, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." He later added, "(T)he government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government." Two hundred years later, at least two-thirds of a multi-trillion-dollar federal budget is spent on charity or "objects of benevolence." WOW! How clear this is! Our founders knew that the Constitution was designed to limit the power of the Federal Government (Not the states governments who were to remain semi-sovereign within their boundaries). Would that we would still force government to obey the Constitution. HERE.

From The

"Front and Center this morning, Gold is retreating again today and has fallen well below $1,200... Here's the skinny... Yesterday, it was announced that China's Agricultural Bank of China reported a very successful public offering, raising more than $22 Billion. Now, what does this have to do with a Gold sell off I hear you saying? Ahhh grasshopper... Come, sit, let's discuss...

Basically, it's like this... If a Chinese Bank can pull off a very successful IPO without breaking a sweat, then the daggers can be put away on a global risks, and that could be seen in the performance of equities all across the board yesterday.

So... Where does Gold go from here? Well... I would have to think that the selling has been overdone, probably some real big profit taking was mixed in, and we should see buying emerge from this sell off. In the recent past, $1,200 has been a launching pad, and the time Gold has spent below $1,200 has been brief... So, this would qualify for a dip, eh?


European gold buying still strong - Nicholas Brooks - Head: Research and Investment strategy - ETF Securities

'his last week, even as the price of gold was falling quite sharply, we saw around $90 million flow into our gold ETCs'

Hear the interview HERE.



Update: Gold stutters again on China statement

A Chinese statement that gold would not form a major part of its central bank portfolio caused another gold price stutter this morning.

Gold fell further below $1,200 an ounce in Europe on Wednesday, extending the previous session's losses, as a report that China will not make gold a major part of its portfolio undermined sentiment, and the dollar firmed.
 Official sector interest in gold, which has seen a number of particularly Asian central banks increase their reserves and European banks hold off selling the metal in the last year, has been a major support to the metal's run higher in that period.
 However, analysts said given the size of China's currency reserves, it was unsurprising gold would play only a relatively minor role in its portfolio, and that the news was unlikely to detract from central bank interest in gold if prices fell. HERE.


How does China really view gold?

Chinese officials have been making contrasting statements on how it views gold? What is the true picture?


It had been banned for decades - gold buying in China. But the Chinese government underwent a volte face last year, and urged the public to own physical gold, while China's gold reserves managed to breach 1,054 tonnes by the end of 2009.
While this immediately lifted the country to the world's fifth largest in terms of reserve volume, behind the US, Germany, Italy and France, the Chinese government appears to have gone to town recently to highlight its disinterest in gold.

China's State Administration of Foreign Exchange, better known as SAFE, reportedly said that ``the gold market is too small, illiquid and volatile to be considered suitable for asset allocation.'' HERE.


Gold Production in China May Advance by 5% This Year, National Gold Says 

Bet that none will leave China HERE.


European banks use gold reserves to raise cash

This is another reason for the recent drop in gold prices. Once these sales have finished, the pressure will be lessened. Go HERE to find link


With the US trapped in depression, this really is starting to feel like 1932

The US workforce shrank by 652,000 in June, one of the sharpest contractions ever. The rate of hourly earnings fell 0.1pc. Wages are flirting with deflation.

 Ambrose Evans-Pritchard; Comment

"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.

"California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Hynes. "We are not paying bills for absolutely essential services. That is obscene." HERE.

Indian silver imports poised for strong recovery
Good monsoon rains suggest a good fillip for the Indian silver market with imports poised to pick up strongly this year.

The annual monsoon rains, a key factor that drives India's economy, has covered the vast country after a sluggish spell, boosting the outlook for farm products and rural income, as well as for precious metals, gold and silver. Global uncertainty has also added its bit and is proving to be a major fillip for the price of silver in India, which shot up by 64 rupees to clock 28779 rupees per kilo, in day trade on Tuesday.
Like gold, silver is sought after as a hedge against dollar weakness and financial distress. In India, good monsoons portend a bullish scenario for silver consumption. Though prices are at near record highs on the Mumbai market, traders expect to see a short term correction in the next couple of days. HERE.


Jim Rogers: Silver is one of the few safe refuges left

From Bloomberg:

Investors should sell bonds and buy commodities like silver and rice as a “refuge” as the world economy may continue having problems, Jim Rogers, chairman of Rogers Holdings said.

“Bonds are not a good place to invest in,” Rogers said at a conference in Kuala Lumpur today. “You should own commodities because that’s your only refuge” whether it’s silver or rice, said Rogers, who predicted the start of the global commodities rally in 1999. I like silver coins. Read it HERE. 


Wednesday's Analytical Charts for Gold, Silver and Platinum 

Great graphs HERE.

Miners from

Currencies from Kitco.comNote that the Swiss Franc and Canadian Dollar are virtually equal and strong against the dollar. 

Some Current Prices: FVITF 1.8292; SDS 36.89; SSG 18.20; TLT 101.10; TBT 35.69; DOW up 112.30 to 9856.62; Gold up 0.90 to 1195; Silver up 0.09 to 17.93.

Best to each, Doug


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