"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


Thursday, February 9, 2012

Gold Continuing to Fail at $1750

Gold has now spiked through the $1750 level several times since the end of last month but has not been able to CLOSE THROUGH this level. Until it does, the market will not be able to start a new leg higher in the uptrend.

Generally speaking, markets tend to pause at resistance levels until they can gather enough of a spark to take them strongly through those or they retreat and consolidate leading to some basing action. During the latter, some of the shorter term oriented bulls will liquidate longs out of frustration or out of a desire to cash in some profits and bank them. That selling then paves the way for some opportunistic short selling to emerge.

We had a combination of both today leading to a pull back in price. Support on the downside remains near $1725 - $1720 with stronger support down closer to $1710 - $1705.

Silver needs to get above $34 and stay there to allow it a chance to test major resistance near $35.00 - $35.25.

CME Group LOWERING margin requirements for Gold and Silver Contracts

                        Current Initial           New Initial             Current Maintenance           New Maintenance

GOLD                       $11,475              $8,500                        $10,125                            $7,500

SILVER                    $24,975               $18,500                      $21,600                           $16,000  

FOMC impact on the Yen

Note the following chart of the Japanese Yen and you can see the points at which the Bank of Japan intervened into the Foreign Exchange markets to knock it down and lower its value for the sake of their export market. One would be hard pressed to find a reason for the Yen to rally when the Japanese economy is so weak and its official interest rate environment is about as low as that of the US.

Still, the Yen has rallied on "Safe Haven" trades. Whenever traders were feeling risk averse, they would buy the Yen on the crosses along with the Dollar and sell everything else. To put a stop to that the Bank of Japan has twice intervened with rather dramatic results. Unfortunately for them, traders have simply used the intervention to come right back in and bid the Yen back higher basically negating the gargantuan effort required to derail it.

Now comes along the FOMC with its ZERO INTEREST RATE POLICY and it has basically the same impact on the Yen as did the BOJ intervention - it moves LOWER. The reason for this is that the liquidity party is a green light for the risk trades (why else would copper be at a nonsensical $4.00 pound?). In that environment, no one wants to buy the Yen so down it goes.

One has to suspect that the FED and the BOJ are closely communicating these days as the impact of monetary policy is working nicely for both of them as neither one particularly wants to see a strong rally in their respective currency.

Coming Soon - More PAIN at the Gasoline Pump

Unleaded Gasoline prices rallied off their lows with the inception of tensions in the Straits of Hormuz but that has now taken a back seat to the LIQUIDITY PARTY being thrown by the Federal Reserve.

Can we say, "DEJA VU!".

Get used to further pain at the gasoline pump once again thanks to our illustrious money masters who continue to throw both senior citizens and the average citizen under the bus in the name of jamming the stock market higher to supposedly bolster consumer confidence. Yeah, I feel extremely confident - confident that food and energy prices are going to resume their upward march once again thanks to these bozos.

Wait until you see beef and pork prices later this spring and summer. You ain't seen nuthin' yet!