"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


Monday, January 30, 2012

Question to the Bank of Japan - How's that intervention been workin' out for ya?

Talk about a collosal waste of money...

Some of the more industrious among us might want to tally up the total sum of money used to shove the Yen lower on the foreign exchange markets by the Bank of Japan as well as the ECB and the Fed. As stated many times, intervention can NEVER reverse a market trend; it can only postpone it.

As a point of reference, the continued strength in the Yen is tending to keep Yen-gold on the defensive, in contrast to gold priced in terms of most of the other world major currencies.

Gold firm in spite of Stronger Dollar

Gold is coming under a bit of selling pressure in New York after opening higher in Asia alongside of silver last evening. Both markets then saw selling originating in the form of both profit taking and new short positions (from top pickers) after traders' attentions turned back to the sovereign debt woes in Euroland, particularly Greece.

Also there was a bit of news that China was not going to be in a hurry to loosen the monetary strings as quickly as some were anticipating.

Either way, it led to a reversal of the recent risk trades in favor of the safe havens once again with the bonds getting a strong bid (they are now over a full point higher) so much so that the yield on the Ten Year Note is currently 1.84%. You have to understand that a great deal of these FOMC shenanigans have but one true purpose beyond the obvious ploy to keep the stock market propped up during an election year and that is to ATTEMPT TO PUSH BORROWING COSTS FOR THE US GOVERNMENT LOWER.

The fiscal condition of the US is so abysmal that rising longer term interest rates will send the deficit soaring even higher due to the escalation of servicing its gargantuan debt load. While this government-sanctioned mugging of savers and retirees continues, the US gets to borrow its trillions at extremely low rates, rates which otherwise would force a much larger chunk of its revenue to go towards paying higher borrowing costs.

It seems to me that the Gold market is seeing through all of this mess as it saw good buying below $1720 this morning. Bulls are reluctant to push it higher in today's trading session and are not chasing it but they do seem willing to step in down at these slightly lower levels. With some of the momentum indicators in overbought territory, some have decided to book a few profits out of the nice rally and see what their next move will be.

Any reversal higher in equities later in the session or a continuation of the recent Euro rally will see a rather swift bout of short covering occur in gold. We'll have to see whether or not we get that. In the meanwhile, the bears have the advantage for today's session as selling is being seen across nearly the entirety of the commodity complex with energy, grains and metals all lower.