Thursday, July 22, 2010

Gold Price is Trying to Turn Up

Gold Price Close Today : 1191.60
Change : 0.10 or 0.0%

Silver Price Close Today : 17.798
Change : 0.113 cents or 0.6%

Platinum Price Close Today : 1525.80
Change : 8.50 or 0.6%

Palladium Price Close Today : 458.05
Change : 11.00 or 2.5%

Gold Silver Ratio Today : 66.95
Change : -0.422 or -0.6%

Dow Industrial : 1,093.60
Change : 24.05 or 2.2%

US Dollar Index : 82.60
Change : -0.79 or -0.9%

While 1790c had been firm resistance, today silver burst through that level, clean straight up from 1780c to 1818c in thirty minutes. After 10:00 EDT it traded sideways, vibrating around 1810c. Odd chart, caused by what? Thinness of market? Certainly, strong demand. Makes me ponder silver's behaviour, how it so often makes outrageous, demoralizing falls, then roars back while nobody is looking. If silver can remain above 1800c, silver may be riding that mode. Comex silver closed today up 31.7c at 1811.5c. Mark that the 20 day moving average right now standeth at 1817c.

Today's gold chart has a Heron Head like silver's. Between 9:30 and 10:00 EDT gold blasted through 1190 resistance to $1200, then rested on $1,195 the rest of the day. Gold is trying to turn up. Twenty day moving average stands about $1,212.50, so that will be the first confirmation gold has turned up. Close over $1,225 removes all doubt.
Operating assumption until market contradicts is that silver and gold have bottomed and kissed back. Close below recent lows would be necessary to gainsay this.

Good economic news out of Euroland today sent the Euro up a bit to $1.2886, while the dollar, at the other end of the teeter-totter, dropped 79 basis points to 82.602. Alas, the dollar had a good start on what promised to be at least a counter-trend rally, but today whacked it back from the 83.40 hurdle nearly to where it began. Critical support is 82.20, versus today's low at 82.462. A rally is not yet ruled out, since this might constitute no more than a final kiss good bye to support. Naturally, if the dollar breaks 82.20 tomorrow, that imports a greater fall, maybe to the 200 DMA at 80.33.

Strong earnings reports goosed Wall Street today. Dow gained 201.77 points (1.99%) to 10,322.30. S&P500 added 2.25% (24.05 points) to 1,093.60. Look back at the record and you will discover that since May the Dow has crossed back and forth over this ground like those Hare Krishna teams used to dance back and forth over an airport lobby. Yet with what result? None. No advance, but plenty of retreat, burning your friends and their buying power along the way. Stay away from stocks. They will shortly find the cliff's edge. Today's rally merely brought them close to their 200 DMA at 10,391. Look at the longer chart: the trend is firmly earthward.

I have now lost count of all the emails, hysterical and otherwise, I have received about the "new tax on silver and gold" that was slipped into the Obamacare bill.

WHOA. Stop. It is nothing of the kind, and in truth is MUCH worse than a mere tax on silver and gold.

Here's what actually is happening. Section 9006 of the hilariously mis-named Patient Protection and Affordable Care Act amends the Internal Revenue Code to expand the applicability of Form 1099, but does not impose any new tax.

Currently 1099 forms are used to report miscellaneous "income" (another hilarious misnomer, which is misapplied to "revenue" to confuse the public) in the form of payments to independent contractors or the self-employed. Right, it is a method of government spying to determine how much revenue you have, which they call "income", so they can be sure they bleed as much as possible out of you, Turnip. Chances are you might sneak around and mow a yard for $20 without giving the government its fair share.

Currently the law supposedly requires businesses to issue a 1099 to any individual or unincorporated business paid more than $600 cumulative in any calendar year. Right, 30 payments of $20 qualifies. 1099s are not required to be issued to corporations, except incorporated law firms. (Maybe lawyers cheat on their taxes more than other people?)

So what's the change? Beginning 1 January 2012, not immediately, all payments over $600 allegedly must be reported on a 1099, including payments to corporations.
This is not a tax on silver and gold. Let me make this perfectly clear, as a person who has fought with IRS for 15 years, been indicted for conspiracy to defeat IRS operations, and wilful failure to file income tax returns and having been acquitted on the defense that the law contains no statute that makes anyone but foreign withholding agents liable to pay income tax: people who cheat on their income taxes are stupidly committing perjury. I will go to jail arguing with the government about whether I owe the tax or not, but I will not go to jail for lying about how much I owe.
If coin dealers and their customers are upset because the government is eliminating a way for them to cheat on income taxes they voluntarily pay, I have no sympathy for them. They sign returns under penalty of perjury.

This new reporting provision imposes NO new tax on silver and gold, none. If you are a person who is liable to pay income tax and you realize "income" when you sell silver or gold, you are ALREADY required to report the gain. This law changes nothing.
But this is the lighter and shallower question raised by this new 1099 requirement. The weightier consideration arises from the enormous accounting burden and cost it loads on small businesses. Every payment must be tracked by customer to make certain the total payments do not exceed $600. You probably pay your garbage man more than that every year. Will you send in a 1099 on him? Do you have his address and tax ID? Worse than that, payments to corporations were exempt from reporting, but must now be reported, a colossal increase in accounting labour.

As usual, the government piles stupidity upon stupidity. Apparently they haven't caught on that a depression is raging, and small businesses create more jobs than anyone else in the economy. Wouldn't it be a great idea right now to increase their costs by quintupling their accounting load? Well, I reckon it will create new accounting jobs - for a couple of months until the new costs shut businesses down all over the country.

But before everyone concedes the end of the world, ponder this. California Rep. Dan Lungren on 26 April last introduced legislation that would repeal this requirement. Look up HR 5141, Small Business Paperwork Mandate Elimination Act.
Finally, there are deeper questions still lurking here. Do all the folks upset by this latest tyranny not recognize already that we live under a financial police state? That a government that claims to be god must know and gather every fact about every person and transaction? After all, a god can't be a god unless he knows everything. What about the income tax itself? Why does the law contain no statute making anyone except foreign withholding agents liable for the tax? Why does everybody pay it then? Could the federal government actually have been collecting a tax for 97 years that doesn't exist in the law? Where are the emperor's clothes?

Listen: a little more 1099 reporting is the least of your worries, except that it will put hundreds of thousands of businesses, including coin dealers, out of business.
This new law changes nothing. It does NOT evidence an Obama plan to confiscate gold. It does NOT imply you shouldn't buy physical gold and silver -- just the opposite. It makes clearer than ever that the US government will drive the economy and the dollar into the ground. You will need the silver and gold in your own hands, and not another's.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

© 2010, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

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 $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't.