Wednesday, April 18, 2007

The Battle Rages On

April 17 (Bloomberg) -- Gold in New York fell from an 11-month high on speculation that a six-week rally was overdone. Silver also declined.

April 18 (Bloomberg) -- Gold prices rose on demand for a hedge against further declines in the dollar, which slid to a two-year low against the euro. Spot silver also climbed.

Reminds me of Dr. Doolittle's Pushmi-pullyu. The pushmi-pullyu (pronounced "push-me-pull-you") is a fictional creature in the Doctor Dolittle stories. It is an antelope which has two heads at opposite ends of the body. When it tries to move, both heads try to go in opposite directions.

The consolidation of recent gains in Gold and Silver continues... On April 8th I identified spot 691 Gold and 14.04 Silver as the next lines of defense by dem Rat Bastids. Da Vermin have now held us in check for the past four trading days at these levels. Volatility up here has been relatively low. I sense a reluctance on the part of the bulls to sell...there has been little reason too.

Quick Fact: April 11, 2006: Gold $593 oz. --- May 12, 2006: Gold $730 oz.
Gold up $137 in one month

Dem Rat Bastids have been hard at work rounding up as much metal as they can to dump on the market to stop its ascent. They're throwing almost everything they've got at us here and now. I dodged a raggedy old Cabbage Patch Doll and a Chia Pet this morning surfing the Internet. The kitchen sink and the baby with the bath water can't be far behind.

"...the level of Commercial shorts increased substantially last week and is now at a relatively high level. So it looks like the price is going to fail again at the major resistance above $690 and turn tail and retreat..."

A valid point is raised here by Clive, but I don't believe that a dump in Gold is imminent. I have a hunch dem Rat Bastids at COT are going to need a substantially bigger short position to stop the Bull this time...and even that may not be enough. We should know by the second or third Friday in May. Shorting Gold at COT, central banks dumping Gold to the tune of 60 tonnes the past month...neither have deterred Gold from rising. Breaking through $700 Gold and $15 silver will increase "investment demand" for the metals by a substantial amount. And it is just that increased "investment demand" that may finally overwhelm dem Rat Bastids. Have Gold Investors finally caught on to dem Rat Bastids manipulative games? Is that Rat Bastid ass I smell burning? Is the Mother of All Short Squeezes about to be unleashed on the fetid vermin that have stymied Gold and Silver's ascention to the top of the currency heap? The Battle Rages On.

Meanwhile: April 18 (Bloomberg) -- Banks began foreclosure proceedings against 47 percent more U.S. homeowners last month compared with a year ago as falling housing prices made it more difficult for borrowers to refinance mortgages.

People, the housing meltdown in the USA has only just begun. Change the channel or turn the page every time you hear or read ANYBODY telling you that housing is at or near a bottom.

The Fed ain’t messing around.
Enough is enough!
In an all out effort to pre-empt a rout in the housing market, the Fed has opened the money spigots WIDE open! The yield curve has duly steepened making monetary conditions even easier (is that possible?) and the Bank of Japan is doing a good job of managing the Yen lower to keep the $800Bn Yen Carry Trade on even keel. The flood gates have been released and what was once a raging river of Liquidity is now a tidal wave of Debt funded Cash inflating all asset classes in its wake.

Isn't it amazing that the Dow keeps rising in the face of all this economic carnage? It hit an all-time high today. Amazing. Could inflation have something to do with it? Easy credit?

I was stunned to hear about the latest figures on the amount of margin debt carried by U.S. investors. For New York Stock Exchange shares alone, the figure hit a record $285.6 billion in January.

To put that in perspective, the previous peak, occurring at the March 2000 market top, was $278.5 billion.

I suspect the Mother of All Double Tops is 1-2% from being set in stone for the Dow. Any rally in the US Dollar should not only stop the Dow in its tracks, but the Precious Metals as well. But I just don't see the catalyst...other than a dead cat bounce at 80 before she goes belly up and sinks like a stone in the ocean.

Silver Resistance: 14.04 / 14.12 / 14.30

Silver Support: 13.95 / 13.85 / 13.67
__________________________________ All Prices are SPOT

Gold Resistance: 688 / 691 / 699

Gold Support: 686 / 681 / 677

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