Observations on the market action and the implications of the gold and silver markets.
Gold Price per Ounce in Euros
Friday, May 29, 2009
New Gold Price High
The gold price has made a new monthly closing high in this current bull market in gold.
There are going to be many money managers and other types that will sit up and take new notice of gold because of its new bull market monthly high closing price. This is an all time monthly gold price closing high, too.
The history making growth rate and amount of US government debt assures a higher US dollar price of gold and silver, including virtually all other government fiat token prices.
The US has to borrow almost $3 billion dollars a day to maintain its standard of living. And, it doesn't create amounts of real wealth anywhere near like it used to. To pay off the debt, or seriously reduce it, it would have to be creating real wealth at a faster pace than it is borrowing it. That is simply not possible for a huge number of reasons.
All that new debt being created represents an equal amount of new dollars being created and going into the financial system.
It would make sense to have expected central banks around the world to have backed off substantially from buying US dollar denominated debt. Basically, that has not happened in any way that makes a difference.
Probably, central bankers around the world fear that if they did start to back off buying, that that would collapse the world's financial system. Since 1971, they are all playing the same game and know that they have to support each other to varying extents.
They can only keep this scam going for so long. Not for ever. No financial system/economy can take on unlimited amounts of debt. The powers that be do not care if their actions end up causing the implosion of the US economy/country or most any of the other economies. The powers that be are short term oriented. Power players are like that.
"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage." -- John Kenneth Galbraith
Gold and silver are the most powerful protectors from economy and country implosions (shake, rattle and roll), but not if you are a last minute buyer.
Most in the English speaking world did not learn didly squat from the implosion of the huge USSR. The new puppet in the White House is continuing the concentration of the power of central command of the US economy by the federal government just like the last puppet did.
If the "Land of the Free" is now more communistic and fascist than not, what does that say about the future of their fiat token? The dominant philosophy determines the future.
At some point, gold and silver will not be easily available, never mind a much higher price. The picture of those trying to get some later rather than sooner could get interesting/entertaining.
The HUI is the American Stock Exchange's Gold Bugs Index (of gold and silver stocks). Symbol: HUI.
It has been up about 900% since the beginning of the gold and silver bull markets:
More recently it is up well over 100% from the recent bottom:
That is in just the last 7 months.
What market in the world was up about 900% since 2000/2001? What market in the world was up well over 100% in the last 7 months?
Gold and silver and the market leading shares have been doing their job since 2000/2001 protecting those that know Keynesian economics is a scam, those that know Austrian economics is how the world really works, and those that studied the really valuable history that is not taught in government schools nor in almost all private colleges/universities. These colleges/universities would lose their government financial assistance of many varied sorts if they taught reality or how the world really works.
The current puppet is no different than the last puppet:
Still the Anglo Saxon world is comatose about gold and silver. Can you imagine what these markets will be like when the gold rush starts? When the Anglo Saxon world is rudely interrupted from their complacency and panics into gold and silver from raw fear, when they realize that there has been no change of the trends in place, and that the situation is just being made even worse, and that a huge transfer of wealth and stored value has been taking place?
Gold and Silver Are The Serious Bull Markets of This Decade and the Next
Gold and silver have had positive gains priced in virtually all government fiat tokens, every year, since the start of their bull markets around 2000-2001. This is the time period that the general equities markets in the US topped out.
Below is a chart of the Dow priced in gold:
Money, currencies and government fiat tokens have a unit of measure of value (unit of account) as one of their essential characteristics. They are like measuring sticks, like a yard stick. Governments keep chopping off a small part of their measuring stick but still refer to it as the original stick, still refer to is as a full yard when in fact their yard stick is not as long as a real yard. It keeps getting shorter. If you are not aware how their game is played, you might believe that you are making gains by investing in general equities when in reality you are taking losses over a period of years.
Looking at how fast the US government and the Fed are creating fiat tokens (US dollars) out of thin air,
it pays to measure your gains with something more related to reality like gold or silver, the classic measuring sticks for the last 5,000 years or so.
What the Dow priced in gold is saying is that despite nominal gains in the Dow, real gains are negative. This has been going on for about 8 years and still most people in the Anglo Saxon world are clueless as to what the real state of / value of their savings are, and, still have no interest in gold and silver. Truly amazing. Government schools have done a superb job of dumbing down their citizen units which is the whole point to government schools.
What is reality? Most in the Anglo Saxon world are not interested and will pay an awful price for not caring in return for a promise from their government to be taken care of. The wiping out of what is left of the middle class in the US is one example of price to be paid.
Gee! Why would the TPTB (the powers that be) do that? Because...
"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage." -- John Kenneth Galbraith
The combination of the US Treasury and the Fed have created extra dollars and made payments, extra guarantees and extra future promises of payments of over 13 trillion dollars in less than a year. Heck, M3b is a little over 14 trillion dollars. Eventually, this is a baked into the cake roughly 50% future devaluation of the US dollar. And, it looks like this is just for starters.
Not to worry too much (some worry is justified as a really high gold price means some bad things are going to happen on the ground) for those already properly positioned. "There is no rush like a gold rush". Gold looks like it is a month or two away from heading on up into new high territory.
Riding the gold bull market is a test of character. Many have been thrown off the bull for fear, ignorance, impatience, etc. The way to beat virtually all "professionals" is to buy the bottom and ride it to the top. Most professionals are not professional. They lack knowledge of how the world and humans really work. Only about the top 5% of professionals are professional. It's easy to beat the Street.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it." - Frederic Bastiat, 'The Law'
[Plunder is a great word for what is happening in the US. Most of those that are being plundered do not know who is doing the plundering; are even actually looking to the plunderers to save them from their plundering.]
The affects of plundering:
"Changes to the international monetary system that weaken the discipline of gold have never before produced permanent prosperity, but only larger and more destructive economic cycles." - The Golden Sextant
There are perhaps 5% of the population that simply can't think. There are another 5% who can, and do. The remaining 90% can think, but don't. -- R. A. Heinlein, The Moon is a Harsh Mistress and other sci-fi novels
"If a nation values anything more than freedom, it will lose its freedom, and the irony of it is that if it is comfort or money that it values more, it will lose that, too." - Somerset Maugham
"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage." -- John Kenneth Galbraith [Which is one of the reasons that there are still years left to this gold bull market.]
"It's not how much you know, but the truth and quality of what you know." - Trader Vic (Victor Sperandeo)
What's the big deal about a one year long correction in the whole scheme of things. This correction in the gold price is going to look tiny in the overall view of the gold bull market years from now.
The gold price is nicely forming the right hand shoulder of the upside down head and shoulders pattern.
The first attempt at breaking out to the upside of the down trend of the shoulder failed. The second attempt made it with a 4 days in a row to the upside end of downward trend signal. This baby is going places, now!
There are still plenty of miles left that this powerfull gold price train has to go.
The gold price is going way, way higher. The amount of new debt the US government is taking on is skyrocketing. Remember, the US government is broke. To increase spending, guarantees and other promises, it has to ***borrow*** dollars. For that to happen, the Fed has to create them out of thin air. There is too much debt in the system now. The government's borrowing to spend is just going to increase the problem and make the problem last far longer than it has to.
Besides, economy "stimulation" by the government is just a scam. They are in the process of creating so many dollars that they will be worth far less than they are now, far far less.
William Black, law and economics professor at the University of Missouri and a former U.S. bank regulator:
If you want to hear more of what he has to say, there is a 3 part interview by Bill Moyers on youtube.com. Here is the link.
The US made world wealth and standard of living history back when government was tiny. That's all over now, same for the US dollar. The country is choking on government and debt; and too many people are still playing pretend. It's time to get back to plain 'ol basics like gold and silver. It is not too late.
Wealth is economic goods and services people are willing to pay for. The more wealth a person has or a group of people have, the higher the standard of living they have.
Wealth is not money, currency or government fiat tokens. Gold would not have been of value to Robinson Crusoe when he landed on the island.
However, money, currency and government fiat tokens can be stores of value.
Value can be converted into capital.
Capital is the means of production.
Capital can only come from savings. Before there is capital, there has to be savings.
Capital plus the use of human minds and hands create wealth.
There is no theoretical limit to the creation of wealth.
Statist governments screw up this process time and time again. Sometimes they hurt the process particularly badly which is what is going on in the US right now. They do that because governments are not wealth creators. They are wealth consumers.
No wealth can be created simply by borrowing to consume. When you borrow and force others to pay your debt, you will be decreasing the standard of living of those you are forcing to pay for your debt. Today the government has most of those who bother to vote conned into believing that day is night, noon is midnight, black is white. This ignorance and mental lazyness of most of those that bother to vote is going to result in a huge decrease in their wealth, standard of living. Most do not know this, let alone know what to do to protect themselves from what is coming; maybe the biggest heist/theft/robbery of wealth in modern history if not in all history.
Alf Field made his last wave analysis 25 November 2008 at: ELLIOTT WAVE GOLD UPDATE 23 ... Major ONE up from $256 to $1,015 (actually 4 times the $255 low); Major TWO down from $1015 to $699, say $700 (a decline of 31%); Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low); Major FOUR down from $3,500 to $2,500 (a 29% decline); Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE) ...
The upside down right hand shoulder of the price of gold is coming along just fine.
M3 is growing at a slower pace but still growing. The more there is of something, the less value it has. Part of the decrease of the growth rate is default on debt which contracts the supply of dollars. A dollar's worth of debt has to be created first before a dollar can be created in today's world of a credit "money" financial system. Since 1971, the world has never been in this situation. It is going to be really something to see how this plays out. We should see some big time changes to the world's "money" system in a few years.
US Treasuries (30 year) do not like what they see. The yield on US Treasury bonds have recovered the dive that they took recently, meaning the price of these bonds is going down along with the US dollar. Probably the end of an up trend that started in the early '80s. The "Fed" has already announced that it will buy new US Treasury debt by creating dollars out of thin air and sending them over to the US Treasury after the Treasury sends them an I.O.U. which they put on their books as an asset which (through magic) enables them to say that their "reserves" increased, which enables them to create more USD out of thin air.
If the money center banks will not lend dollars out into the economy, the last resort is for the federal government to do it (lend or simply spend). This is the first time in the US's history that government executives and legislators are openly and brazenly saying / showing that they are stealing from the poor and the middle class to give/lend to the rich. At least FDR was smart enough to lie.
The federal government steals a dollar's worth of value from what would be normally spent / invested in the general economy, and spends it on the politically connected. Somehow government spending/lending is supposed to be more knowledgable/effective/smarter than that in the normal economy. Not only is it ***impossible*** for governments to make the right spending/lending decisions in an economy (communism proved that command economies implode on themselves), the US government and the Fed have to add debt to the financial system/economy to do it when too much existing debt is the problem. Thus government spending will make the economy do even worse and for a longer period of time.
No wonder, finally. The US dollar tanked on Friday, May 8, breaking below the March low. Ominous.
More than 32 million Americans receive food stamps and 13 million are unemployed.
The Dow made an outside reversal day last Thursday, is into a heavy resistance level and may have topped out here at this level:
Mostly, the things to own are unleveraged stuff, molecules, atoms (real estate involves molecules but is usually highly leveraged therefor not on the list although there are some exceptions in some places in the world), particularly gold and silver.