Thursday, June 7, 2007

Stop Your Sobbing

World Gold Council Reports Demand for Gold Thirty-One Percent Higher Than Last Year
Santa Monica, CA (PRWEB) June 7, 2007 -- The World Gold Council has reported a thirty-one percent increase in the demand for gold from last year. This thirty-one percent increase is due to consumer demand in China, India, and the Middle East for gold coins and gold jewelry. These driving factors already in force have most analysts forecasting higher gold prices. According to Lear Financial.

INVESTOR DEMAND. Investor demand is how the Gold market can absorb 170 million tons of central bank Gold selling the past three months and still hold it's head above water. Investor demand is the single most important variable in the continuing upside in the price of Gold. And it is growing investor demand that will ultimately CRUSH dem Rat Bastids seeking to discredit Gold and prevent it's rise back to it's rightful place as the World's ultimate currency.

So what the hell happened to Gold today? Simple...the interest rate boogie man was unleashed on the market. Apparently since the rest of the World is raising interest rates, then the US Fed must be thinking about doing the same. The flaw in that thinking is that the rest of the world has "local" growth rates that warrant an increase in "local" interest rates.

Last year the United States ranked 148th in the World GDP rankings: How pathetic is that? I'll tell you...even poor bankrupt Spain is ahead of the United States on the list at 144.

And suddenly with a fear of rising interest rates, the US Dollar catches a bid. LOL, they could raise interest rates to 20% and the US Dollar would still be ca ca. And with the Dollar rising, Gold and Silver fell...of course.

There's some interesting facts about the relationship between interest rates and Gold that I think are being over looked by many. Gold can and will go up in a rising rate environment. The 1970s proved that. Let's look at some numbers that make the case for Gold rising in a rising interest rate environment. Please click on the charts above to enlarge...seeing is believing.

January 1977, 10 year T-bond = 6.84%
January 1980, 10 year T-bond = 10.50%

Interest rates on the 10 year T-bond increased 53.5% between Jan 1977 and Jan 1980.

January 1977, 30 year T-bond = 7.70%
January 1980, 30 year T-bond = 10.11%

Interest rates on the 30 year T-bond increased 31.3% between Jan 1977 and Jan 1980.

January 1977, Gold = $136 an ounce.
January 1980, Gold = $512 an ounce.

The price of Gold per ounce increased 276% between Jan 1977 and Jan 1980.

Surprised? You should be. The media today would have you believe that the sky was falling because interest rates were rising. Even more surprising is the fact that the stock market performs worse when interest rates are falling than when they are rising. The stock market was down from 2000 to 2003 as the Fed cut interest rates and was up from 2003 to 2005 as the Fed raised interest rates. Oddly, the Stock market has moved sideways or up over the past two years in hopes of renewed interest rate cuts. I think this says but one thing about the Stock market highs we have seen recently...they are clearly the result of inflation, purely liquidity driven. Interest rate cuts usually coincide with a recession. A recession pressures corporate profits and results in lower stock prices. Today's Stock Market is built on exponentially compounding lies spewed by false government statistics and the spin of the financial media. This is why Gold has out performed the Dow over the past six years, and why it will outperform the Dow for the next six years as well.

The Dollar was up today because the 10 year T-bond took out the psychologically important 5% yield threshold. But it was up on short covering nonetheless...this bump-up in the Dollar will be short lived [no pun intended]. There still exists no fundamental reason to actually buy the Dollar, and overwhelming fundamental reasons to sell it.
Meanwhile, the dollar's strength is not expected to be long-lasting.
"The further bond yields rise, especially in the US, the more likely the negative impact on the economy, so at some point the situation should stabilise," said Ian Gunner, currency analyst at Mellon Foreign Exchange.
Analysts at BNP Paribas agreed.
"We would reiterate that current market developments are ultimately dollar negative," they said.

As to interest rates...The fed has three choices: Raise interest rates, cut interest rates, leave interest rate unchanged. At this point in time, all are good for Gold.

Cut Interest Rates: destroy the Dollar, prop up the economy and the stock markets.

Raise Interest Rates: prop up the Dollar, destroy the economy and the stock market.

Leave Interest Rates Unchanged: watch the rest of the world kick sand in our face.

There is one indisputable fact in all this interest rate blah-blah...the price of Gold and Silver have been steadily rising since the turn of the century. For the past six years Gold and Silver have been rising along with the potential to rise much further. In three years from 1977 to 1980 gold rose 276%. Gold began 2007 at $640 an ounce. If history were to repeat itself over the next 3 years, Gold would rise $1766 to $2406 per ounce by January 1, 2010. Let them raise rates...Gold will not care.

Cheer up peeps. Today was just one day. Isn't it interesting that Gold held it's own today until the LME in London closed at 11am est.? Dem Rat Bastids at the COMEX can't get an ass whuppin soon enough... PATIENCE. Conviction. Good things come to those who wait. Below, I have added a link to an "uplifting" piece everybody should read so they can turn that frown upside down:

Gold: Where to Now
By Enrico Orlandini
Just about everyone and their brother have thrown in the towel and that’s what a gold bull market does best. It sucks you in when you have no business buying and it pushes you out just when you should be in. Next stop, gold at $775.00!

Silver Resistance: 13.53 / 13.58 / 13.63

Silver Support: 13.40 / 13.28 / 13.15
____________________________All prices SPOT

Gold Resistance: 660 / 663 / 665

Gold Support: 658 / 656 / 652

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