Fears for Global Economy Propels Gold Price
September 23rd, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
Guys, I don’t like it when the mainstream press starts to sound like Cryptogon. I don’t like it at all.
When I wrote things like what you’ll read in the article below, before the move, it was actionable, valuable intelligence and many of you have made a lot of money as a result.
Now that the “press” has a hold of it, the noise level and the volatility are both going to go way up.
Don’t try to trade it. Don’t try to trade it. Must… Not… Trade… It…
Ok, if you can’t help it, read on:
If we get further gaps higher on hype from the media, consider unloading some into the herd and then buy it back from them lower when they get whipsawed out. This is risky, but there’s nothing wrong with taking some profit. As a gold holder, I’m very concerned about the failure of the USDX to crack 78.33. (I know, inverse correlation between gold and the dollar is weak medium term, so, pfft! on this USDX stuff.) It went down there and ominously hovered over that level. Some of you will want to string me up by my codlings for saying this, but we need to be aware of it.
If 78.33 stays intact, we could see a short squeeze from Hell on USDX. Ultimately, I think it will be a sucker bounce, but it won’t look or feel that way. That’s the point with short squeezes. If They are going to teach gold bugs a lesson, this is an opportune time to deliver the blow. The Money Honies will have their blouses unbuttoned a bit more than usual, talking about the rally in the dollar and the silly gold bugs. You might see a central bank gold sale, or two. Silly gold bugs. Silly gold bugs. Repeated everywhere, over and over. Even gold bugs will start to think, “I’m silly.” That, of course, is the time to buy. But that’s skipping ahead a couple of steps from now.
Right now, the Money Honey industrial complex might be about to start hyping gold. If you can’t help yourself, if you must trade it, this, of course, would be a good time to think about selling some.
I want to see support at $721. If that doesn’t hold, take your pick of supports down to the critical $650 level. Now that it’s entering the herd mind: The move higher could take on dynamic, sustained characteristics, then again, WATCH THE F OUT!
Me, personally, I’m not selling. I don’t care. I’ll wait out any shakeout. There’s too much interest lurking under the spread, a lot of paper that needs to go… Somewhere. Gold longs, just know, we could be in for an intermediate term shakeout. I refuse to try to trade this. I’m providing this commentary to those of you who may have gone in heavy and are thinking about locking in profits.
For you guys, the phrase, “Pigs get slaughtered,” is the order of the day.
Diversification. Diversification. Diversification.
I know how we’ll know when to pull the plug: When I hear from my dad and he’s asking about buying gold. As long as he thinks gold is a bad idea, gold bugs should be smiling. HAHA. Dad, love ya!
UPDATE: Would you believe me if I told you that my dad called within a few hours of me writing this post?! He doesn’t read Cryptogon. He has never read it. He doesn’t like to read much at all, actually. He doesn’t use computers. Never has. Never will.
“What idiots are buying gold at $730 per ounce? How can it be that high?”
I’ll call this the Angry Old Fart Oscillator. So, since he thinks gold is a bad idea here, gold bulls should probably be confident in their holdings.
Via: Telegraph:
The moment every gold bug has been waiting for finally arrived this week when ‘Barbaric Relic’ smashed through resistance to close the week at a 27-year high of $737 an ounce on the London PM Fix.
A heady mix of a collapsing dollar, a British banking crisis, and widespread suspicion that central banks are slackening in the fight against inflation, all combined to propel gold above the $730 peak of May 2006.
Analysts say there is now “clear blue sky” until reaching the all-time record of $850 in December 1980, when speculators drove it upwards in a parabolic rally at the end of the great inflation crisis.
Greg Wilkins, chief executive of the world’s top producer Barrick Gold, said the shock half point rate cut by the US Federal Reserve had been the trigger for a major break-out.
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“I think it’s a perfect storm, to be quite honest with you,” he said. “What we have is inflation plus lower interest rates, and that’s not something that we’ve seen before. I think that’s going to be very bearish for the dollar, which is conversely good for gold,” he said.
Adding to the mood of euphoria, the autumn is typically a season for gold rallies, and Spain’s central bank has at last halted its bullion sales.
Madrid has been a major cap on prices this year, flooding the market with 150 tonnes. The bank has now cut its total holdings by 46pc, leaving the country with wafer-thin foreign reserves.
Experts suspect that Asian central banks may have become buyers. China has less than 2pc of its vast $1,340bn reserves in gold, and has signalled an intent to diversify away from dollars.
President Vladimir Putin has instructed Russia’s central bank to raise the gold share of its huge reserves from around 5pc to 10pc.
The Fed’s aggressive rate cut at a time when oil is hovering at an all-time high of $82 a barrel, and food prices are rocketing, has created the impression that the US authorities are willing to tolerate higher inflation rather that allow the credit and housing bubble to deflate fully.
As recently at late July, the Fed warned that inflation remained the “predominant” risk to the economy. Although price rises were tame in August, there are concerns that the headline CPI rate could jump from the current 2.4pc to nearer 3.5pc. China’s inflation jumped to 6.5pc in August and price pressures are developing across Asia, the Middle East, and Eastern Europe.
The Federal Reserve may be right in calculating that the US housing slump is now so serious that it will slow the economy sharply, dampening global price pressures over time. But for now, a large number of well-heeled investors are willing to bet otherwise.
Where’d my comment go, dammit. I swear Godzilla and their Huns are onto me and my communications with Cryptogon.
Anyways, before my digits inadvertantly “slip” and destroy my comments to this site, yet AGAIN,
I’m holding on Gold. Would sell if I had a DIRE need – like eating, drinking, and making merry. You know, you must “put food on your family.”
Otherwise, I’m holding.
Pretty soon here – and this might be a fantasy/wish of mine – but the Plunge Protection Team will soon have its own full court press in the light of day, much like Blackwater is having its soiled underwear viewed by any and all who give two shits about the fraud, waste, and abuse going on with federal dollars, and the killing fields of Iraq. SOB! (that’s a crying sob from here). Manipulating the US dollar and the world economy to keep the investment bankers from pooping their pants and losing at their game must END! I think that holding onto gold will in some measure accomplish this.The dollar will go through a reincarnation process – as it will. The world doesn’t want the U.S. dollar anymore, and will shun it further, because those entrusted with its management have lied, cheated, and stolen in their crap shoot on subprimes, and most likely, other schemes we have yet to learn of.
If you bought gold in the past, look at the buying price. You are in a win situation. You can’t lose by holding.