Thursday, January 27, 2011
Bull Market In Gold Now Under Cover
"If you want to remain slaves of the bankers and pay for the costs of your own slavery, let them continue to create money and control the nation’s credit."
- Sir Josiah Stamp[1880-1941]
Has the mother of all Bear Traps been set in the Precious Metals markets? As Gold and Silver move from weak hands into strong hands during this "correction", is the stage being set for the next major leg up in these markets?
In September 2010, Gold broke from a bearish rising wedge and raced to $1400 on the rumour that the Fed was going to institute it's QEII program to further support our failing economy. Gold traders and investors bought this rumour with vigor.
Following the country's trip to the polls on the first Tuesday in November 2010 for the mid-term national elections, the Fed came forth with it's QEII program of economic salvation. The Fed announced that they would spend [create] $600 BILLION to buy US Treasury debt and keep interest rates low to spur economic growth. Coupled with the spending on US Treasury debt already taking place with "income" from the maturing mortgage backed securities on their balance sheet, the Fed effectively announced plans to make available over $900 BILLION to buy US Treasury debt though June of 2011.
This announcement buoyed Precious Metals traders and investors, and the drove Gold to an all-time high in price, and Silver to a 30 year high in price, as the year 2010 came to a close. But a funny thing has happened along the way...
Interest rates on US Treasury debt began to rise, instead of fall or remain steady, as the Fed had planned with their QEII announcement. A new Republican controlled Congress began to question the validity of the Fed's plan to purchase US Treasury debt as they came forward with demands to contain the country's rising debt load. And then, as if by magic, economic data points signaling an upturn in the economy began to appear in the headlines daily.
Though suspicious, these positive economic headlines began economists wondering if perhaps the Fed's QEII program was unnecessary, and would be curtailed prior to it's June 2011 end-date. This, and the Congress' reluctance to see the Fed buying US Treasury debt, created enough uncertainty about the Fed's QEII program, and it's inflationary implications that the wind came out of the Precious Metals market's sails. Gold and Silver prices began to drift lower.
Sensing opportunity, the bullion banks at the bedeviled CRIMEX decided that the Precious Metals markets were ripe for a take down. And so they have been, much to the chagrin of Gold Bugs globally. The opportunity for these crooked bullion banks to bring in prices and cover their naked ass shorts was too good to pass up as it would save them BILLIONS of dollars in potential losses, AND afford them the opportunity to load up on Gold and Silver to the long side at discount prices. These CRIMEX bullion banks might be crooked, but they aren't stupid. They know just as well ans you and I that Gold and Silver are going multiples higher from where they are today.
Here in the West, as foolish traders, and even more foolish investors, have dumped their Gold and Silver holdings at the beginning of 2011 believing the nonsense about a bubble top in Gold, Gold and Silver investors in the East have been Hoovering up Gold and Silver at wonderful discount prices. The transfer of wealth from the weak hands in the West to the strong hands in the East is now in full swing.
As the suspicious positive economic data that closed out 2010 is now being replaced by the reality of poor economic data coming into view as the New Year unfolds, the Fed yesterday proclaimed a steadfast determination to continue the purchase of US Treasury debt in a never ending effort to "sustain" an economic recovery. Well, the illusion of one anyways...
The reaction in the Precious Metals was quick to the upside on the Fed's announced continuation and "need" for QEII to contain deflation and raise inflation to levels that will support growth in the economy. Yesterday the Fed basically announced that they intend to promote rising prices to give the illusion of growth in our economy to the rest of the World. This is fiscal insanity! It is also a call to anybody listening and paying attention to buy Precious Metals to protect oneself from this stealth debasement of the US Dollar.
The Bear Trap in Precious Metals has been set, we wait to see if it will be sprung. The low in Gold and Silver for 2010 may well be established by the close of trading February 4, 2010 and the beginning of the Chinese New Year, the Year of the Silver Rabbit.
Fed Keeps Rates Unchanged, Says Bond-Purchase Program Needed- AP
Ending its first meeting of the year, the Fed made no changes to the $600 billion program. The Fed says the economy isn't growing fast enough to bring relief to millions of unemployed Americans.
Treasurys Fall As FOMC Statement Fuels Inflation Worries - WSJ.com
NEW YORK (Dow Jones)--Treasurys fell Wednesday, led by the 30-year bond, as the Federal Reserve's latest interest-rate statement prompted investors to deliver a double-whammy to the bond market.
January 26, 2011
Inflation Is So Much Worse Than We're Told[MUST READ]
By Chris Martenson
Inflation is actually much higher than what the BLS claims it is; something that purchasers of college tuition, pharmaceuticals, or health insurance know all too well.
To give the BLS some credit, they must try and estimate a single rate of inflation that applies to everyone equally. But that is a completely impossible task. An octogenarian living in Seattle on a meager pension and taking lots of prescription medications will have a totally different inflation experience than an 18 year old living in their parent's basement eating Ramen noodles.
But even after spotting the BLS some slack, there are some enormous and glaring errors in their methods that render the official inflation measure hopelessly - and dangerously - inaccurate.
In this article, I am going to reveal how US inflation numbers are badly understated, how this practice short-changes institutions and fixed-income individuals alike, and why this means fiscal and inflationary train-wrecks are the most probable outcome for the US -- and, by extension, the globe.
Richard Russell - Get Out of Your Dollar Assets Now!
From Eric King, KingWorldNews.com
The real news, the critically important news, centers around the US dollar. It's as if you are reading a report on a building you want to buy. The report tells you all about the heating system, the repairs to the roof, the condition of the wood floors, but the report leaves out the critical fact that the foundation of the house is crumbling.
So it's the dollar, the dollar, the dollar, that I'm directing my subscribers' attention to. If the dollar collapses, every investment you own will be adversely affected -- your home, your stocks, your insurance policies, your bonds, your 401K --everything that is denominated in dollars.
The Russell advice -- swap your dollars for physical gold or CEF, GLD, or SGOL. In other words, do as China and Russia and many other nation are now doing -- get out of your dollar assets.
...I realize that what I've written above may seem outlandish to many subscribers. Outlandish? Then you tell me how the US is going to finance a national debt of $13.9 trillion (some say the real debt is over $50 trillion). The fact is that we now BORROW just to pay the interest on the national debt. Treasury is moving the debt to ever-shorter maturities, hoping that the current zero interest rates on short debt will ease the situation. But with bonds sinking, rates are now rising, so what's the answer?
The answer is that we're eating ourselves up alive through compounding interest on our debt.
There's only one way out that I can think of. The dollar amount of our national debt stays the same. But the item that we pay the debt off with -- is variable, and I mean the dollar. Thus, our government hopes to pay off the carrying charges of the debt with cheaper dollars -- MUCH cheaper dollars.”
Tax cut deal pushes deficit to $1.5 trillion: CBO- CNNMoney
The federal deficit for 2011 will hit $1.5 trillion, driven higher by the "slow and tentative" economic recovery and the bipartisan tax cut deal passed late last year, the Congressional Budget Office said Wednesday.
The deficit forecast would equal to almost 10% of the economy.
Durable goods orders drop 2.5 percent- AP
U.S. factories saw a disappointing drop in demand for their products in December, reflecting weakness in demand for commercial and military aircraft.
S&P cuts Japan's credit rating on debt concerns- AP
Foreclosure activity up across most US metro areas- AP