"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, February 14, 2012

Gold moving higher in Yen terms; strong in Euro terms

Some of the friends of gold are no doubt frustrated by its inability to breach stubborn chart resistance near the $1750 level in US Dollar terms. Bullion bank opposition near this line is absorbing bids and has thus far resulted in some light long liquidation among the more short-term oriented bulls.

However, as stated many, many times on this site, gold is not ONLY A DOLLAR PRICED STORY - as much as its detractors would love to make it fade from the minds of men, it is ultimately a currency - a currency which is immune from Central Bank and monetary officials' debauchery efforts.

Overnight we learned that the Bank of Japan announced additional liquidity measures in another attempt to derail the money flows that have been coming the way of the Yen during periods of safe haven trades. The stronger yen is becoming a serious political issue there in Japan and exporters continue to put pressure on the monetary authorities to do something about it. That is exactly what they did as they attempt to meet the Federal Reserve's dovishness with that of their own.

Look at what has been happening to gold when priced in terms of the Yen as a result of all this. As the yen sinks in value on the foreign exchange market the gold price in terms of that currency is steadily moving higher. While certainly not as impressive as the Euro gold chart shown beneath it, one can see that the price action today is thus far signaling that BOJ efforts to debauch their currency might just be working. It is certainly losing value against gold.

Keep in mind that gold strength, in terms of these other major currencies, is going to prevent any deep sell offs in the US Dollar priced gold. As long as this continues, dip buyers will keep showing up on any bouts of price weakness here in the US. It is this occurence that is the Achilles' heel of the bullion banks - they can absorb paper bids here in the US but attempting to prevent gold from rising in terms of the other major currencies is simply out of their ability. World wide liquidity efforts by the Central Banks of the West have consequences that cannot be avoided, no matter how many games are played on the Comex Exchange.

1 comment:

  1. I would love to see some economists do a study with some assumptions around aggressive reflate and money printing, because that's been the word the last 5 years or so.

    Inevitably, it's the consequences of loose money that will be the end of the fiat system. Nobody wants to ever see another recession again. So what happens with reflate to infinity?

    Answer: Class warfare, stagnant economies operating well below potential, stealth inflation, significant rise in both violent and non-violent crimes, a brutal tale between two cities developing between the haves and have nots. (go look at government check cashing day at walmart on the 1st of the month).

    If the economy ever gains momentum - it ends up consuming itself. We're all headed down the path of Greece, and it's really not that far away.


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