Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.
-Bob Dylan, The Times They Are A-Changin'
History is in the making this evening. The next 24 hours could change the face of our nation for all of eternity. For a country that thrives on instant gratification, the clock may be about to stop. In the next 24 hours history may be made, or America may become history. These are exciting times to be involved in the Precious Metals markets. rest easy this evening knowing you hold the sole insurance that can protect you from the uncertainty about to be unleashed up our once great nation.
Gold and Silver remain in a holding pattern as we go into the mid term election results this evening and tomorrow's most anticipated Fed announcement. Yesterday's "weakness" following Friday's breakout was very constructive from a technical point of view as both metals tested and held support. Gold held support at old resistance at $1349, and Silver did likewise at $24.48. These support levels will be very significant tomorrow following the election results and the Fed comments about QE2.
Risk in the Precious Metals at this time is to the upside as the shorts in both Gold and Silver are naked as jaybirds. The Fed could surprise us with a "weak" QE2 announcement, but they risk imploding the economy AND the equity markets by spoon feeding the QE2 instead of shoveling it. QE2 appears to be a given. Only the quantity of it could affect the short-term move in the Precious Metals. Be that as it may, QE2 is ultimately a HUGE positive for the Precious Metals.
A break above $1360 in Gold, and $25 in Silver will trigger a short squeeze of these naked shorts like none we have ever witnessed before. Nothing the Fed says tomorrow can be interpretted as Dollar positive. Avoid caving into any knee jerk reactions to the downside in the metals should they occur. The Asians will welcome any discount in prices with wide open wallets.
Enjoy the show...
Fed Risks Its Credibility on Bowlful of Mush
By Caroline Baum
Because Fed chief Ben Bernanke has been unwilling to admit the role low interest rates played in puffing up the housing bubble, he sees little risk from further easing, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
At the same time, he says, the Fed’s output gap models, which measure the difference between actual and potential growth and were “violently wrong in 2003 and 2004,” reinforce the majority view that deflation is the real threat.
Then there’s the Fed’s stated tactic of raising inflation expectations to lower real interest rates, a flawed concept even though it has succeeded splendidly in the short term.
In the two months since Bernanke first hinted at QE2 in his Jackson Hole, Wyoming, speech, five-year inflation expectations, the Fed’s preferred measure extrapolated from the yield differential between nominal and inflation-indexed Treasuries, have risen from about 2 percent to 3 percent.
So taken is the Fed with the notion that higher inflation expectations are the route to salvation that it has commissioned research on the subject. Last month, three Fed Board economists published a paper claiming that with overnight rates near zero, an oil price shock would be a plus for growth.
The “burst of inflation” from an increase in oil prices stimulates interest-rate sensitive sectors of the economy, the authors claim. (Aren’t higher oil prices a relative price increase unless the Fed prevents other prices from falling?) “In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion,” they write.
Where are the speculators when you need them?
Ten years ago I wrote a column titled, “Fed Chairman Ali Naimi Has a Nice Ring to It,” referring to Saudi Arabia’s oil minister. The piece debunked the idea that oil prices can do the central bank’s job.
Maybe I was wrong. If you believe the research, we should be rooting for one of those old-fashioned oil shocks, circa 1973 and 1979, to fix what ails the U.S. economy!
Politics of the Fed's easy money
By Emily Kaiser
WASHINGTON (Reuters) - While voters cast ballots on Tuesday in an election expected to shift Congress to the right, the Federal Reserve convenes what could be its most pivotal meeting since the height of the financial crisis.
The central bank was designed to be above political influence. But its policy decisions are not completely immune to the political environment.
A more conservative Congress would reduce the already slim chance that more fiscal support will come, putting the burden squarely on the Fed's shoulders to shore up a limp economy.
Douglas Holtz-Eakin, an economist who advised John McCain during his unsuccessful 2008 presidential campaign, said normally the Fed keeps quiet around elections to avoid any semblance of political involvement.
This time, the central bank sent a clear signal that it intended to take action, and investors are convinced the move will come this week in the form of relaunching asset purchases. This week's policy-setting meeting lasts two days, so the Fed's announcement will come on Wednesday, just after the election.
"It looks to me a bit desperate," Holtz-Eakin said, adding that he was not convinced another round of money printing would do much to stimulate the economy.
Gold Never Has Been (and Never Will Be) in a Bubble
By Nathan Lewis
10/30/10 Binghamton, New York – Most serious gold investors follow a basic principle: that gold is stable in value. Changes in the “gold price” represent changes in the currency being compared to gold, while gold itself is essentially inert.
This is why gold was used as a monetary foundation for literally thousands of years. You want money to be stable in value. The simplest way to accomplish this was to link it to gold. Today, we summarize this quality by saying that “gold is money.”
From this we can see immediately, that if gold doesn’t change in value – at least not very much – then it can never be in a “bubble.” There may be a time when many people are desperate to trade their paper money for gold, but that is because their paper money is collapsing in value. It has nothing to do with gold.
Let’s take a look at some of the great gold bull markets of the last hundred years:
•From 1920 to 1923, the price of gold in German marks rose from 160/oz. to 48 trillion/oz.
•From 1945 to 1950, the price of gold in Japanese yen rose from 140/oz. to 12,600/oz.
•From 1948 to 1967, the price of gold in Brazilian cruzeiros went from 648/oz. to 94,500/oz.
•From 1970 to 1980, the price of gold in US dollars went from 35/oz. to 850/oz.
•From 1982 to 1990, the price of gold in Mexican pesos went from 8,000/oz. to 1,025,000/oz.
•From 1989 to 2000, the price of gold in Russian rubles went from 1,600/oz. to 8,120,000/oz.
Each of these situations was an episode of paper currency depreciation. Today is no different. The rising dollar/euro/yen gold price is simply a reflection of the Keynesian “easy money” policies popular around the world today.
We can also see that, if gold remains stable in value, then the supply/demand considerations that affect industrial commodities do not affect gold, which is a monetary commodity. This is why gold is used as money. If its value was affected by industrial supply/demand factors, we would not be able to use it as money.
Thus, “jewelry demand” or “peak gold,” or any other such factor, has little meaningful effect on gold’s value. Day-to-day money flows will affect the price at which currencies trade vs. gold, but this ultimately affects the currency in question, not gold.
None of these historical “gold bull markets” resulted from jewelry demand or mining supply.
Any attempt to attach a valuation to gold is mostly a waste of time. Concepts like the “inflation-adjusted gold price” or the “gold/oil ratio,” or a ratio of outstanding debt or currency to a quantity of gold bullion, are a distraction. An item that doesn’t change value is never cheap or dear. That’s what “gold is money” means.
The “price of gold” may reach five thousand, ten thousand, a hundred thousand, a million, or a billion dollars per ounce. The gold bubble-callers will be frothing at the mouth, until they finally have the realization that there was never a bubble in gold, but only a crash in paper money.
Gold is money. Always has been. Probably always will be. This time it’s different? I don’t think so.
KWN Source Says Asians to Squeeze Silver Shorts
Eric King, KingWorldNews.com
A King World News contact out of London has confirmed that, “Massive Asian buying is going to squeeze the shorts in the silver market. Any reactions in the price of silver will be heavily purchased, and these buyers will take delivery of physical silver.” The source who wishes to remain anonymous agreed with Eric Sprott that this squeeze could take the price of silver to $50 in a matter of months.
November 1, 2010
I have recently been discussing a coming commercial signal failure with John Embry, James Turk and Eric Sprott. As previously mentioned, this is an extremely rare event but when it occurs it is a sight to behold.
Right now, sentiment levels are nowhere near what we see at a top. Keep in mind that Rick Rule was recently discussing with KWN the possibility of future supply shortages in silver, and we are also not seeing the type of dealer activity that is suggestive of topping behavior. These factors are all supportive of a significant move higher in the price of silver.
While the price of silver on a short-term basis can gyrate, the important thing to be aware of right now is that these Asian buyers smell the kill. You can be assured that their intention is to put an incredible squeeze on the silver shorts before this is over.
Currency Swings Show Faith in G-20 Pledge Fading
By Matthew Brown
Traders are losing confidence in Group of 20 finance officials’ pledge to avoid foreign-exchange manipulation, less than a week after the leaders vowed to stop devaluing currencies to prop up their economies.
Volatility among Group of Seven currencies rose to about the highest level in four months since the G-20 meeting ended on Oct. 23, according to the JPMorgan G-7 Volatility Index. Euro- dollar fluctuations jumped 30 percent since Sept. 20, a day before Federal Reserve policy makers said they were prepared to buy bonds and pump more money into the financial system, data compiled by Bloomberg show.
While G-20 nations committed to refrain from “competitive devaluation,” officials from South Korea and South Africa said last week that they may consider currency controls. The reliance on intervention underscores the challenges finance officials face to keep their economies on track after injecting more than $2 trillion to spark growth following the worst financial crisis since the Great Depression.
“Volatility is the price of uncertainty,” said Richard Benson, an executive director in London at Millennium Asset Management, who oversees $14 billion of currency funds. “Volatility’s current elevated level is a function of the currency war issue.”
The Changing Landscape in Gold and Silver
By: James West
Whereas the apparent robust performance of major indices around the world suggests the world is returning to something approaching normal, what we’re really seeing is a long line of traps being set to snag a fresh round of suckers who fall for the mainstream smokescreen. With another US$1 Trillion on the way from the Fed to further devalue the dollar, and with other nations thereby comforted sufficiently to follow suit, gold and silver prices can do naught but rise. Full Story