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Wednesday, February 27, 2008

US Dollar Index

The US dollar index broke below 75:

One Year US Dollar Chart
A one year chart of the US dollar



5 Day US Dollar Chart
A 5 day chart of the US dollar


Dispair at US Dollar Index
Some are in despair but should have seen it coming.


"Gold is probably one of the most misunderstood investments of our time and I think that is by design. You see the popular misconception about gold is that it is a commodity and it is extremely risky. ...

No country can remain great, an Empire, living off of the kindness of strangers and America will not be the exception to the rule. ...

What’s more, gold is a messenger ...

I don’t know how high gold is going but I am quite worried about the reason for the rise. ...

The US has lived so far beyond its means for so long that you have a whole generation that doesn’t know anything else. They think that’s the way the world works and they’re going to be in for one hell of a shock some day. ..." - Dow Theory Analysis SAC, Lima, Peru, February 26, 2008


The US dollar index having broken below 75 is now in new low uncharted territory. No wonder silver and gold prices have reacted to the upside.

Thursday, February 21, 2008

Gold and Silver Are Moving the HUI

Gold and silver prices are on the move; and they are moving the HUI Index, too.

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard. (1967)...Gold still represents the ultimate form of payment in the world....(May, 1999) " Alan Greenspan


A ten year chart:










A two year chart:










A six month chart:
Today, the HUI Index broke up and out of its triangular flag formation. Bullish. This makes sense seeing how the US dollar is losing value so fast, not to mention other government fiat tokens. Gold in going up in price of virtually all government fiat tokens since they are all devaluing their tokens, to varying extents. The US dollar being one of the worst, and this whole devaluation scene being far from over, thus gold and silver being on the move, **up**.

Wednesday, February 20, 2008

Gold Price and Silver Price Outside Reversal Days

The gold price and the silver price put in outside reversal days to the upside. Very bullish.

(Click on charts to enlarge)














Friday, gold put in what was probably a "chart painting" outside reversal day (by the anti-gold cartel) to the downside to try and spook the weak longs. Monday, the New York markets were closed. Tuesday, gold gapped up and broke up out of its flag. Wednesday, today, gold went down to close the gap and then turned around and went up to produce a bullish, "in your face" (to the anti-gold cartel) outside reversal day to the upside, making a new bull market high. So much for the spooking. Guess the cartel has to go back to spooking school. An arrow shows Friday's probable "chart painting" outside reversal day to the downside.

"Gold is absolute objectivity. It is blind, like justice. It has no politics and ideology, no likes or dislikes, no friends or enemies. All it recognizes is its possessor, whom it serves faithfully so long as he has it." -- British historian Paul Johnson quoting Charles de Gaulle

"If a politician found he had cannibals among his constituents, he would promise them missionaries for dinner." --- H. L. Mencken














Today, silver did the same as gold. Another "in your face" outside reversal day to the upside. That is really bullish gold price and silver price action.

Friday, February 15, 2008

Gold and Silver are Major Protection from the Future that they are Trying to Hide

A Lot More Of No More M3. Gold and silver are major protection from the future that they are trying to hide. The US Fed stopped publishing M3 "money" supply numbers about a year and a half ago, stating that the stastic was too costly to produce. It looks like they are going to try to hide a lot more than sky rocketing M3.

The latest at http://www.economicindicators.gov/

"Due to budgetary constraints, the Economic Indicators service (http://www.economicindicators.gov) will be discontinued effective March 1, 2008."

It seems that the government does not want people to easily know some pretty important statistics, probably because they know that the statistics are going to get ugly. The following statistics available at ecnomicindicators.gov will be discontinued:

Advance Monthly Sales for Retail and Food Services
Advance Report on Durable Goods
Construction Put in Place
Gross Domestic Product
Manufacturers' Shipments, Inventories, and Orders
Manufacturing and Trade: Inventories and Sales
Monthly Wholesale Trade
New Residential Construction
New Residential Sales
Personal Income and Outlays
Quarterly Financial Report
Quarterly Services
Retail E-Commerce Sales
U.S. International Trade in Goods and Services
U.S. International Transactions

(Click on or open in new tab to increase size of graphic)









A bigger attempt to hide even more. Scary when one thinks about the US being known for financial "transparency", or ** used to be ** known for. How blatant can they get about what they think the future holds for the US?

In case you missed this financial transparency monkey wrench slammed into the gears:










With the BIS's (Bank for International Settlement) total notional value of otc derivatives in the world over $500 trillion, there are major entities in the world's financial system playing little children's games of Make Believe. They drank, are drinking, their own Kool Aid, as Warren Buffet put it.

"Send lawyers, guns and money. The sh*t has hit the fan." - Warren Zevon














A Lot More Of No More M3. Gold and silver are major protection from the future that they are trying to hide. How, when will it end?

Outside Reversal Days

Today, Friday, Feb. 15, 2008, gold and silver put in outside reversal days to the downside; or came so close that they might as well be considered outside reversal days to the downside. Do not be fooled by these which could be attempts at "painting the charts", attempts at rigging the gold and silver markets since gold and silver are the "canaries in the coal mine".

Gold prices and silver prices are in major once in a life time bull markets. It was partly the markets. But it was probably more TPTB (The Powers That Be) stampeding the markets in the direction they wanted the markets to go today to reverse the affect of the outstandingly gold bullish news today.

What is interesting is that they were not outstanding or definitively outside days. It's as if the market almost but not quite fell for TPTB's stampede start. It's not as if there is no question about it what so ever.

TPTB and/or the PPT (Plunge Protection Team, for the US stock markets) at work today while almost all commodities had good days? Why were only gold and silver stomped on? No matter. Because of the fundamentals, they will loose, are loosing.





























Outside reversal days to the downside: intraday prices went above the previous day's intraday high and went below the previous day's intraday lows and closed lower than the previous day's close. The opposite close (higher than the previous day's close) for a day to the upside.

Traders pay attention to these technical type of days. Thus the probable attempt at "painting the charts" to get the weak longs scared out of their positions.

These outside reversal days to the downside are not going to amount to a hill of beans in the whole scheme of things. TPTB could not get them to be **blatent** outside reversal days. They were weak or by the skin of their teeth type days. A good sign.

Thursday, February 14, 2008

M3 "Money" Supply

nowandfutures.com updated their M3 "money" supply numbers on Feb. 8, 2008. Try an annualized 18% on for size. Don't you wish you had your own central bank?

"Money for noth'in, chicks for free".

M3

M3 Annual Rate of Change


Martin Armstrong's Economic Confidence Model has a major bottom at 2011.45 (the middle of 2011). That could be an important high for silver and gold prices.

Economic Cycle

There is an ugly downside to really high silver and gold prices; deep recessions, full blown Great Depressions. These are caused by central banks creating way too many government fiat tokens. This action by central banks can greatly increase the amplitude of the business cycle.

This time around, it looks like a Great Depression for the US. A major indicator to watch is M3. The problem, which is too much debt, can not be fixed by creating more debt. That just makes the problem worse. Because of the nature of the banking system, a dollar can not be created without a dollar's worth of debt being created.

If creating more dollars fixed things, then why not create enough for us all to be millionares and be done with tinkering around and constantly attempting to fix things. Because creating extra dollars out of thin air does not create wealth. It creates more debt. Wealth is what people need. Increasing wealth increases people's standard of living. Wealth, to be created, requires work (the use of mind and hands by humans). Not the kind of work that is useless, but the kind that actually creates value.


From nowandfutures:

"GDP
Gross Domestic Product - the total value of all goods and services produced in a given country. It consists of total consumer, investment and government spending, plus exports and minus imports, and including earnings from foreign sources.

Note that a switch was made in November 1991 from using GNP (Gross National Product) to GDP. A major difference is that GNP does not include earnings from foreign sources and GDP does. That factor can make the growth rate over 1% higher all by itself. Another difference is that the payments the government must make to service the national debt are missed in the GDP numbers, which again causes GDP to be higher than it actually is.

Also see hedonics, which is the biggest cause of GDP being over stated when inflation adjusted GDP figures are viewed (our 'real GDP' chart on our forecast page attempts to adjust for this)."


GDP Annual Growth

Soooooo, do not be fooled by the government reporting a "growing" economy. It is tanking right now, and your protection is gold bullion and silver bullion.



Annual Money Supply Growth


shadowstats.com updated their M3 "money" supply numbers on Feb. 9, 2008. Try an annualized 15.5% on for size.

Tuesday, February 12, 2008

Long Term US Dollar Chart

Below is a link to a long term US dollar chart. But first, read this about South Africa's Rand:

Rand Sinks to Worst Performer as South African Power Grid Fails:
...
Feb. 11 (Bloomberg) -- Gold is above $900 an ounce and platinum has never been higher, yet traders are selling the South African rand faster than any other major currency because President Thabo Mbeki can't keep the lights on
...

[That is what happens under Communism: government ownership of the means of production. Didn't people learn anything from the internal implosion of the USSR? What is happening in South Africa means a decrease in production of gold; a decrease in world supply. If demand is increasing and supply stays the same, gold prices will increase. If demand is increasing and supply decreases, gold prices will increase even more.]

...
The rand is down 12 percent this year against the dollar, six times more than the next-worst performer among the world's most widely traded currencies.
...

The decline signals the world is losing confidence in South Africa's ability to remedy a power shortage that has disrupted mining of some of the world's most valuable precious-metals deposits just when prices are climbing.
...

``The currency is the share price of a country,' said George Glynos, managing director of Johannesburg-based Econometrix Treasury Management, which advises investors on bond and foreign-exchange holdings. ``If anyone wants to know what foreigners are thinking about South Africa at the moment, they need look no further than the rand.'
...

Zurich-based UBS, the world's second-biggest currency trader last year with almost 15 percent of the market, according to Euromoney Institutional Investor Plc, forecasts continued ``rand weakness.'
...

Now, would you buy these shares of this company?
http://bp2.blogger.com/_H2DePAZe2gA/R660Qg2g1CI/AAAAAAAAAiw/6T3c6Bgxspg/s1600-h/LTDX.png
Chart from:
Jesse's Café Américain
Thoughts Concerning the Unfolding Economic Crisis
http://jessescrossroadscafe.blogspot.com/


These bull markets are about silver and gold prices moving inversely to the US dollar and other government fiat paper and digital bits because governments keep increasing the supply of paper and digital bits.

As the dollar was topping around 2001, gold prices, silver prices and other natural resource prices were bottoming. The dollar topped with classic head and shoulders and double top patterns, on top of each other. A screaming top; a no brainer time to switch from USD denominated financial instruments (digital bits) to gold, silver and other natural resources (stuff, atoms); when adding the technicals on top of the fundamentals.

9 year monthly bar chart of gold:

9 year monthly bar chart of silver

9 year monthly bar chart of the CRB Index
(commodities, stuff, atoms, the opposite of digital bits)

There is still a long ways to go for these trends that are in place. The 1971 Bretton Woods agreement is to politicians as giving whiskey and car keys is to teenagers. It disconnected fiat paper and digital tokens from the discipline of gold and silver.

That is one ugly looking long term US dollar chart.

Friday, February 08, 2008

Precious Metal Shares vs the S&P 500

Some people think that the precious metal shares will go down with the overall US stock market, or say the S&P 500. Ok, so how did they do the last time the US stock market topped out in 2000?

Chart comparing the HUI and the S&P 500
http://bp1.blogger.com/_H2DePAZe2gA/R6iymxqQ9AI/AAAAAAAAAdY/-pTWktRTvpw/s1600-h/2001plus.png
Chart from:
Jesse's Café Américain
Thoughts Concerning the Unfolding Economic Crisis
http://jessescrossroadscafe.blogspot.com/

This chart that goes from September of 2000 to February of 2004 is not necessarily what will happen in the future, but still instructive. The HUI ended up about 180% while the S&P 500 got cut almost in half, down about 45%. True, the HUI headed down for about 2 months along with the S&P 500, but that was it for the downside.

There is a big time, screaming head and shoulders topping pattern to the Dow that developed before it started to get serious about going into its current ominous decline, possibly ultimately to 3000 as the US economy skips a serious recession like '73-'74 and goes directly to a Great Depression like '30-'45.

Tidbit from LeMetropoleCafe:

"On that note a well known hedge fund from the West Coast told a colleague that the gold/silver stocks in the junior/exploration sector had gone to a 8 STANDARD DEVIATION to the downside compared to the price of gold and silver. That degree of deviation might be unprecedented."

Remember Newton’s Law.

Currently, it seems much safer to be in the precious metal shares rather than the S&P 500 shares (general US market shares).

Wednesday, February 06, 2008

Silver Price Charts

Below are 3 silver price charts. (click charts to enlarge)

The first silver price chart is a 6 month, daily bar chart showing little bullish rectangular flags that say silver has more to go on the up side.









The second silver price chart is a 2 year, weekly bar chart showing the little rectangular flags, and more interesting, spacing from an equal spacing tool. It looks like the very beginning of May, 2008 could turn out to be a significant silver price level. This bears watching. It is too early to say if it will be a much higher low or much higher high. Important highs in a bull market do not come around often. The last half of April and the beginning of May might be real interesting.



The third silver price chart is a 9 year, monthly bar chart showing the big picture. It's not exactly up to date, but still does the job. All silver price charts are screaming major bull market in silver. The silver basing period is over. Silver is in the process of moving up to another significantly higher level. Of course the same thing applies to gold.








"All the monetary and fiscal stimulus will not create the circumstances required to heal the underlying problem. The meltdown in credit derivatives and revelation that all derivatives are pieces of cyberspace garbage that will not perform when called upon will become worthless, not simply worth less." - Jim Sinclair, http://jsmineset.com


"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight." - Jesse Livermore




Silver is called the Mule. It can have a mind and will of its own. The silver price on the charts can go off on its own relative to what gold does. Silver is getting real interesting.

Sunday, February 03, 2008

Another Reason Silver and Gold Prices in Fiat Tokens are Going to Continue Up

Here is just another reason it looks like that silver and gold prices in fiat tokens are going to continue up and up and up.

The Fed lowered the overnight rate (Fed Funds Rate) 2 times in a little over 2 weeks. Talk about panicking! Lowered by 1.25% so that the rate went down to 3%. This may start a new carry trade.

The boyz, the privileged few, have been able to borrow Yen from Japan at 0-.5%, then sell the Yen for USD, then take the USD and buy US Treasuries paying say 4-5%. A no brainer, thus profiting from the difference.

Some might be tempted to do that with the dollar now.

Borrow USD at 3%. Sell it for Euros (or other fiat digital bits of other countries with higher interest rates). With the Euros, buy higher paying European debt instruments. If this happens, it will increase the flow of USD out of the US and into the "money"/"currency" exchanges. This increases the already huge supply of USD outside of the US, which would make them even less valuable. This is part of the incentive for this carry trade. Profit can now be made from the interest rate plus the increased value of the Euro vs. the USD. If I have a Euro denominated bond and sell the Euro denominated bond after the Euro has gone up relative to the USD; I make a gain because the Euro proceeds from the sale of the bond will now buy me more USD, plus I was making the interest gains, also.

For this to happen, the Fed has to increase credit (create digital bits of USD out of thin air) and get them loaned to "money" center banks. This may be the US government's strategy to try to bail out, or at least keep operational, the "money" center banks. But, this could be hugely inflationary because of the massive amounts of USD that would have to be created out of thin air by the Fed. Amounts needed are probably in the amounts of tens and tens of trillion USD.

The BIS has notional value of otc derivatives in the world at over $500 trillion. These are a zero sum games, like futures and options. So some group of entities has to, eventually, loose half that amount roughly speaking since most are tied to interest rates, and interest rates are going up due to the increasing risk of lending, and the devaluation (loss of purchasing power) of the "money"/"currency" lent. So, tens and tens of trillions does not seem to be an exageration. The world's net worth by some estimates is aroung $140-150 trillion. The world's GDP is around $40-50 trillion by some estimates. There doesn't seem to be enough wealth, net worth in the world to back up one half of all those otc derivatives.

It is going to get ugly.

This new carry trade can benefit existing holders of USD denominated debt, particularly if the borrowed USD was immediately sold for local fiat token for some productive wealth creating operation. Later, when it is time to pay of the US denominated debt, it will take less Euros, for example, to buy the amount of USD that was originally borrowed. Over time, in Euro terms, the debt could turn out to have been cheaper than originally estimated.

So, there are reasons for this new carry trade to get started. We'll see. Of course if you are a USD holder, it could end up being awful for you. Since it would drive the USD down in purchasing power, thus driving up the USD price of the same amount of gold or silver as before it started.

Doug Nolan's Credit Bubble Bulletin quotes Mr Ricardo Hausmann in the UK Financial Times on January 31, 2008
http://www.prudentbear.com/index.php/CreditBubbleBulletinHome
"The same voices that supported tough macroeconomic policies to deal with the excesses of spending and borrowing in east Asia, Russia and Latin America are today pushing for a significant relaxation in the US to deal with the so-called subprime crisis. Interest rates should be slashed quickly and $150bn put into taxpayers’ pockets by April at the latest, they say. The goal seems to be to avoid a 2008 recession at all costs. As Larry Summers, former Treasury secretary, put it, failure to act would make Main Street pay for the sins of Wall Street."

What is Buckler's response?

"What Mr Summers knows but is not about to say in public is that Main Street HAS been paying for the "sins of Wall Street" for decades. But be that as it may, the point made by Mr Hausmann in this quote is a good one. The US controlled IMF has "presided" over financial and monetary crises affecting almost every nation on earth over the past two decades or so. The "formula" presented to the afflicted government was always the same. Cut spending, raise interest rates, balance budgets, take the downturn. Now, it is the turn of the US government. And what is THEIR formula? RAISE spending, CUT interest rates, BLOW OUT budgets, AVOID the downturn. After all, it is an election year."

Heck, they'd do the same thing even if there was no elections coming.

This new possible carry trade could increase the speed at which the USD loses its value. Of course if you are a gold or silver holder, what happens to you is the opposite of what happens to USD holders.

Friday, February 01, 2008

Gold Chart Painting

Friday, Feb. 1, in New York, gold opened higher than yesterday's high, then got pounded down to a low that was lower than yesterday's low, and closed low. That is an outside reversal day to the down side.

This should be considered normal cartel/TPTB (the powers that be) gold chart painting to try and throw off TA (technical analyst) types that do short term trading; to try to get them to get out of their long gold positions.

The last thing TPTB wants is for gold to act as the canary in the coal mine, giving off financial/economic warnings, especially at a time when the money center banks are particularly fragile.

Do not be fooled by this outside reversal day to the downside. Gold is in a major long term bull market. Consider today's action mere gold chart painting by TPTB.

They were not able to make an outside reversal day to the downside in silver.