Tuesday, September 18, 2007

Gold Leapt From 715.80 to 723 After Fed Announcement - If it Holds Gold Will Run For 800

Lo, the Fed hath spoken, & eloquent it was, portentous for the future of Bernanke's reign. It was, in a word, inflationary. Shorn of its silly, toothless warnings, the Fed spake comfort & mountains of easy money to uneasy hearts on Wall Street. Paraphrasing Emma Lazurus at the Statue of Liberty, Bernanke quoth, "Send me your illiquid, your nouveau riche, your bankrupt millionaires, your real estate developers yearning to speculate, the wretched refuse of your scheming Street. Send these, the greedy, the reckless, credit-deprived & liquidity-tossed to me -- I lift my money machine beside the paper door!"

Helicopter Ben & his Money-makers reduced the federal funds rate (at which rate banks loan to each other overnight) by 50 basis points (1/2 of 1%), AND, to leave no doubt un-overthrown, dropped another 50 basis points the discount rate (at which the Fed loans to banks, which window few ever use). So there was a substantive rate cut along with an empty but publicity-pregnant gesture, all of which said to the world: "Come on down! There's free money for everybody, and we'll keep it flowing."

The Fed had a choice between keeping the economy going and keeping up the dollar. The Fed chose the economy and, eventually, hyperinflation. The Fed will keep on following this path, inflating whenever & as much as necessary to keep the appearance of the economy afloat. The future is clear, & there is no strong dollar in it. The deflationists' case died today forever, conquered by the political will to inflate.

After an unchanged close the Fed made its announcement, and gold leapt from 715.80 to 723, & silver to 1294. Those figures were goosed by the Fed; let's see if they hold up for a two-day close over 720. If they hold, gold will run for 800 & silver for 15.

The US stock market rose nearly 2.5%, which shouldn't surprise anybody -- so did the Fed purpose. The Dow stopped at the top of its range. Again I ask, can it hold that level two, even three days? Lots of folks are betting lots of money that it can. Don't be among them. Swap stocks for silver & gold, now, more than ever, do it quickly.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at the Best Prices"

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.