Since the year 2011 has begun, a new and steeper price channel appears to be forming as the fundamental factors that have driven the metal onto new record highs show no sign of ameliorationg; if anything they are growing worse.
These three factors are:
(1.) Sovereign debt woes out of the Eurozone
(2.) Raging inflation across China and other parts of Asia
(3.) Anemic economic growth in the US guaranteeing accomodative monetary policy for the foreseeable future
One can add to this a 4th factor which is the enormous amount of indebtedness being heaped upon the citizens of the US by politicians which is sinking the nation into an inescapable mire of perpetual debt slavery and has now set the stage for an inevitable downgrade of US debt worthiness. It seems to me that this recent travesty of a spectacle, in which lawmakers actually cheered plunging the nation further into bondage has brought home the gravity of the situation to an increasing number of citizens/investors.
In the West this has resulted in a loss of confidence in the monetary authorities and political leaders which has resulted in surging demand for gold as a safe haven and vehicle to protect the earning power of accumulated wealth. In the East it has led to gold buying as a hedge against soaring food and energy costs. All of this has now come together and is feeding the bullish sentiment for the metal.
Gold has been able to better the price cap near the $1625 level and is now in the process of attacking the $1650, the level which my good friend Jim Sinclair long predicted it would approach. Should it take out this level, it looks to be on a path to $1680 based on what I can from this newer channel. Downside support is initially at yesterday's low of $1608 followed by $1600.
Aiding its upward progress in US Dollar terms is the fact that it has once again scored new all time highs priced in both the Euro and the British Pound.
The bond market is acting as if it has totally dismissed any rating agency potential downgrades. The Long bond continues moving vertically shoving rates lower putting a huge smile on the face of Federal Reserve officials and other assorted policy makers who are gleefuly watching the fools who would entrust their wealth to paper IOU's of the federal government. I do not care whether US bonds are considered safe compared to the bonds of many EU member countries' or not - buying Treasuries is a fool's game especially when the US government is spitting them out faster than a Persian cat can spit out hairballs. They are utterly and completely worthless. Even China is sick to death of the things.
China loses trust in US economic stewardship
Asian giant to say no to dollar dominance
By Stephen S. Roach
Published: 00:00 July 31, 2011
http://gulfnews.com/business/opinion/china-loses-trust-in-us-economic-stewardship-1.845120
The S&P 500 has returned back down into a region from which it will have to soon reverse or else it will experience a rather rude sell off. If we get another rotten payrolls number, it is difficult to see how it is not going to break below 1250 this time.
Dan,
ReplyDeletedo you think silver is the better buy here as it is over 40 to 1 ratio? Or has the broken parabola in silver ended its bull market?
Thank you Dan and congrats to Jim Sinclair ($1650 gold) for his vision and aiding investors like me to stay focused.
ReplyDeletebuying Treasuries is a fool's game especially when the US government is spitting them out faster than a Persian cat can spit out hairballs
ReplyDeleteLOVE IT! Having cats and understanding hairballs and all :)
Thanks so much Dan - LaMachinna
China buys almost every U.S. dollar that floats their way, converting most of it to U.S. Treasuries. And that won't stop soon. The paper chase continues, and there will be paper moving from here to there, everywhere, every minute of every day. Yesterday, congress authorized $2.5 trillion more debt-based paper ("tigers"), the future budget cuts are an unknown factor at this time. Sec. Gates had aready made many of them.
ReplyDeleteMy, my...and, wasn't it China who called the U.S. a "paper tiger"? Folks, paper is gonna be flying around like manna...like a regular blizzard.
Shelter from the storm? Of course, that will be QE3.