Gold Price Close Today : 1,776.40
Change : -35.70 or -2.0%
Silver Price Close Today : 39.11
Change : -1.67 or -4.3%
Platinum Price Close Today : 1,772.00
Change : -41.90 or -2.4%
Palladium Price Close Today : 710.35
Change : -20.85 or -2.9%
Gold Silver Ratio Today : 45.42
Change : 0.98 or 1.02%
Dow Industrial : 11,509.09
Change : 75.91 or 0.7%
US Dollar Index : 76.60
Change : 0.36 or 0.5%
Vacations are wonderfully refreshing, but they take you out of your own place to another. Places, like women, each have their own peculiar beauty, but no matter how beautiful others may be, you always prefer your own. It's good to be home.
Y'all know already that trying to find information on the Internet resembles trying to drink out of a fire hose. But that's nothing new, it's always been that way, trying to pick the important events & causes from the middling-piddling ones. Great traders, I've heard, find a few very reliable indicators & stick with those, & don't vex themselves trying to find out everything about everything.
Now I'm nothing but a natural born fool from Tennessee & don't claim to be anything more, but even I can see that some things are causes, and some effects. If you can spot those CAUSES, then 'tain't too taxing to forecast the effects.
For instance, an Obama speech is not a cause. Shucks, it ain't even an effect. It's just bloviating, whistling, skizzing, steaming, and smoking, & don't mean as much as a wasp buzzing in a jug. Sounds fierce, but can't hurt nor help nobody.
On th'other hand, the sovereign debt crisis over in Europe is a CAUSE (well, actually it's an EFFECT of central banking, but here lately it's assumed the size of a cause). Last week, S&P announced it was downgrading the credit ratings of two of the biggest French banks because of their exposure to Greek sovereign debt, and it was eyeing with jaundice another big one, BNP. Not only that, it was squinting with suspicion at the big German banks. Just to mix things up real special, the Eurocrats announced they wouldn't give Greece its promised next dose of bail out if Greece didn't get on the stick & fire a hundred thousand or so government "workers" & kiss the dirt and kowtow more earnestly. That provoked the appearance of the NEXT cause.
Five central banks -- the ECB, Fed, Bank o'England, Bank o'Japan, & Swiss National Bank -- announced they were opening the 2nd story window & flinging out dollars for the banks to pick up, seeing as they needed 'em so bad. And they'd make it easy with "repurchase agreement."
Think of it this way: you have a really sorry old Ford car, & you need money really bad. You don't just go down to the car title lender with that thing dusty and dirty. No, first you detail that rascal, to make it look like something. But then you get there, & lo an behold! That usurious scoundrel at the title discount shop just beams and smiles like you had driven up in a new BMW, & he's happy as a beaver in bark to loan you something on your sorry old Ford, but you have to pay him back in 90 days.
In a repurchase agreement, the central banks agree to loan dollars for whatever "collateral" -- sorry Greek debt, rotten Portuguese debt, bad stinking mortgage-backed securities -- the banks want to put up, but at the end of 3 months, the Central Banks get back their US dollars, & the banks get back their sorry paper.
What signifieth this moiling hugger-mugger? Just this: central banks have only two weapons in a crisis, BLARNEY & LIQUIDITY. This re-purchase offer is the liquidity cannon firing. A panic is brewing with a flight to US dollars, so the central banks will temporarily flood the market with dollars to meet the crisis, then soak them back up in 90 days to minimize the damage -- or so they think.
The repurchase offer, complete with public and publicized co-operation among five central banks (the blarney cannon a-blazing away) shouts, screams, & outright hollers that a big panic is loose, & the central banks are desperate to stanch the flow of liquidity out of the system.
Now you can sit there calmly sipping on your High Fructose Corn Syrup drenched fizzy drink if you want, but this leaves me somewhat less than optimistic about the state of the financial system. For me, here's what I'd do:
1. Reduce bank balances to the absolute minimum needed for the next three months.
2. Get at least three months' cash needs in currency. If it costs you $3,000 a month to live, get $9,000 and put it someplace you can reach it 24 hours a day.
3. Put unused cash balances into gold. It may go down, but at least I can get my hands on it, whereas those balances in banks? Well, maybe we'll let you have it, and maybe we won't, if we need it worse than you. Maybe we'll let you have just a little drab and drib of it, with limited withdrawals. & remember, we're the banks, & we've got the government to back us up.
Don't y'all ever forget this: a bank is a thirty-horse, multi-action, sharp-knived, steam-powered threshing machine, & when it gets finished with you, there won't be enough scrimpshions left to cover a pin head with.
But you all go on enjoying your HFCS drink, & don't pay me no mind. I'm just a natural born fool anyway.
D'yall notice that the US dollar index was at 77.193 a week ago Friday, & today it's at 77.146? Now ain't THAT something, what with the whole world pressing into dollars? Nope, that's the result of the central banks' junk-buying drive. Them boys is desperate to keep that dollar down, but that old dog won't hunt. Dollar has broken away and is pounding strenuously on the top of its trading channel. Those central banks will have to sell a powerful lot of dollars to drive it down.
Like the mirror image but worse, that Euro has broken DOWN out of its trading channel, and to make matters worse, it gapped down today. Closed at 1.3685, down 0.79% and falling toward 1.3000 faster than quicksilver can get thru a sifter. Yen closed at 130.57c/Y100 (Y76.6/$1), but wants to rise, too.
Stocks didn't have as much chance today as a fat fly at a frog convention. Dow lost 108.08 (0.94%) to close 11,401.01 and right by its side the S&P500 dropped 11.92 (0.98%) and closed 1,204.09. Dow did barely manage to close above its 20 day moving average (11,291) after it hit it during the day, but it was a day spent wallowing underwater. So 'twas around the world.
Stocks -- better than a government job for guaranteeing your future prosperity.
I like to focus on the tallest cause around, 'cause that usually explains so much. Hence today I'm eyeing the central banks' dollar surprise party. Now if I were the Nice Government Men charged with Saving The World For The Banks, & I was running a special dollar giveaway to stem panic, you don't reckon I'd forget even for a minute to knock down that gold market, do you?
And when I look at that chart, I see that the GOLD PRICE reached $1,826, and then something -- natural forces? Aliens? NGM? -- whacked it back to $1,810. But look here -- when it fell through $1,810, somebody commenced to selling, and lots. Gold tumbled all the way to $1,771.50 like somebody throwing a wrench out of a car window. Time Comex closed it has lost $35.80 to $1,776.70.
But setting my suspicions aside, technically gold has drawn a double top around $1,920, and trended down since the second top, foretelling lower prices. (A close above the 20 dma and lateral support around $1,825 would gainsay that outlook.) Support lies at $1,750, $1,705, and $1,675.
Yet to promote humility and an accurate view of my talents & yours, I hasten to point out that gold (and all other markets) have been so jumpy lately that it's tough to way what they might do. Gold may yet break to new highs -- higher than $1,920 -- before this rally ends and a big correction takes hold, or this might be its beginning.
A friend today sent me a technical article about the diamond formation in gold, but it doesn't look like that sort of topping formation to me. Nor does the rising wedge pointed out in the same article impress me much, and here's why: I learned my lesson about those rising wedges by watching the Dow in the 1990s. The rising wedge is supposed to be bearish, but that Dow would form 'em over and over, then break out UPwards. Can't always trust those rising wedges in a bull market.
But Gold has broken down in the last two days below its rising trend line from the July low at $1,478.30, & that leaves even me a might tetchious. All things taken together, though, I still don't believe this will be a giant correction for gold. I think it's a panic, and you are watching bewilderment, confusion, and fear. I believe gold will still touch $2,100 before this rally ends, but it could well see $1,675 before it does.
Do I NEED to remind y'all that this is a cause not for mourning but for buying more?
Jumpy, jumpy, jumpy! That SILVER today was jumpy.
It opened around 4060c, and held on until 9:30, when somebody turned on the waterfall. It dropped to 3920c, fought its way back to 3970c, then fell down again, losing 167.1c to close Comex at 3911.8c.
But I sure hope you didn't tuck tail and short it then, because in about 20 minutes it leapt back to 3969c. Jumpy, like I say.
Clearly silver has drawn a line in the sand at 3900c, & if it can't hold that it's liable to get sand kicked in its face. Support abounds from 3900c to 3700c, but silver has fallen thru its uptrend line, out of a triangle that whispers a target of 3876c. If the panic in Europe builds enough, it might drive silver down to its 200 dma, now at 3588c.
The bull market in silver & gold remains in full flush of life. Only change is that you are being offered some bargain prices for a while. Watch close and don't miss your chance.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
© 2011, 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.
Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.