"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


Wednesday, December 7, 2011

Gold chart continues to show the tightening coiling pattern

Gold seems to be anticipating some sort of monetary stimulus and/or agreement out of the upcoming Brussels meeting this Friday in Europe to deal with the sovereign debt crisis in the Eurzone.  For that matter, so too do the US equity markets which are grinding higher.

Failure to come up with some sort of market pleasing action or agreement on the part of these finance ministers will send the equity markets on a very sharp trip lower out of disappointment. On the other hand, any agreement reached will put a firm bid beneath those and engender buying in the Euro, at least for the short term.

The latter will see the Dollar move lower and should bring on the risk trades pushing both gold and silver higher. It might be enough to take gold out of this coiling pattern to the upside. It will need to at least better the $1765 level and hold above it to give us a shot at a test of $1800.

Keep in mind that no matter what they come up with, it is NOT GOING TO SOLVE the longer term, deep-seated structural issues. Conjuring up a mechanism/(s) to shore up the debt of nations who are hopelessly mired into a socialistic style system that has addicted a good portion of their citizenry to endless government handouts merely puts the proverbial bandaid on a growing cancer. When push comes to shove, loaning money to nations who have bankrupted themselves by this sort of lunacy solves nothing. It may and probably will buy a bit of extra time but there is no way out of this except by purging the debt, something no politician or monetary authority seems inclined to do. They can devalue the currency but buyers of the debt will understand that game and will demand higher interest rates to compensate them for currency risk, a guarantee of slower economic growth as it will act as both a drag on the economy and raise the cost of servicing any new debt obligations.