Thoughts on Markets

Monday, April 25, 2011

China Dumping Dollars - Gold - Silver - Miners - Currencies

Be still and rest in the Lord for peace and security. 

Note the news, below, that China is reducing its dollar reserves. This is a very strong tail wind for our precious metals which have responded by moving to ever higher levels. As this is written before US markets open, Gold is at 1512.50 up 7.80 and Silver is up 1.37 to 47.98 in light overnight trading. Both were higher earlier. 

I expect both to be hit upon opening here; however, it seems to be more challenging for the bullion banks and profit takers to keep a cap on the prices of both metals. With the recent run up in prices of both (drop in the purchasing power of the dollar), one should expect a rather sharp correction of, I suspect, short duration. That will provide me a buying opportunity as I want to add to my miner holdings on any correction. One of these day, we will be fully in the third phase, and I plan to be ready to unload some mining stocks as prices drastically escalate.

Since we have no price inflation here in America, it is nice to know that oil is only 112.64 a barrel. Look out for pump shock the next time you fill up the gas guzzler. 

Big News from China from Chuck Butler of  The Daily Pfennig (
 "OK. remember last week when I told you that China's Central Bank head, Zhou, had said that China had too much in reserves? (read dollars, folks). Well, this past weekend, a member of the monetary policy at the Central Bank, Bin, said that "$1 Trillion dollars in reserve would be sufficient.". So, in case you're searching for a calculator right now, (I know I did! HA) that would be a "skimming off the top" of $2 Trillion dollars! It just so happens that $2 Trillion is about the same amount that the Fed Reserve has printed with their QE1 and QE2!

Now, the question would be, just what are they going to do to get rid of $2 Trillion dollars? Ahhh, grasshopper. We all know what they are going to do. They're going to buy resources for their economy. They'll spread a little to the problem children of the Eurozone, and they'll invest in their infrastructure. The sleeping giant, that my dad used to warn me about when I was a kid, has awakened, eh?

Ok. so with that news spreading throughout the world last night, Gold & Silver, as they should, took off for new levels. Gold $1,517.20, and Silver $49.10. It's just crazy out there folks! Investors are running for the cover of these metals for they are the True Store of Wealth. and, as I always call them, and coined them, as the "uncertainty hedges". And brother are we walking in uncertain times right now!" This sent the dollar sprawling without any help to get up. China has been replacing dollar reserves for some time, but this seems to be a big time shift. The question is now "Who will be next?"

Mine Web:
Gold and silver rise as trust in banks and bankers plunges.
One of the significant reasons for the continuing strength in gold and silver prices stems from the complete erosion of trust in the banking sector. HERE.

Mine Web:
$1500 gold: the beginning of a revolution - James West
As gold and silver continue their spectacular rise. James West, always controversial in his opinions, sees this as the beginning of a global revolution that could result in long-term opportunities for gold and silver investors. Gold Report interview. HERE.

Mine Web:
Silver surges again, gold at another new lifetime high
Silver jumped nearly 4% on the U.S. futures market to a new 31-year high while gold continued its record breaking streak for a seventh consecutive session. HERE.

Mine Web:
High gold prices taking jewellery from babies
Surging prices for the yellow metal have forced South Koreans to cut down on the tradition of giving a gold ring as a gift to mark the first birthday of the children of friends and relatives. HERE.

A look at gold and silver through the eyes of KitCo over night and into the early US trading:

Miners from Scottrade:

Currencies from KitCo:

Some Prices: FVITF  6.39; OLVRF 2.0177; BYDDF 3.80; TBT 36.71 (Bonds up slightly); DOW down 114 to 12491.42; SPX down 0.49 to 1336.89; Gold up 3.40 to 1508.10; Silver up 0.72 to 47.33.

Best to each, Doug


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