"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, July 25, 2012

Gold Clears $1600 - Psychological Boost to Bulls

The abillity of the gold market to push a "16" handle on the price can be considered a minor victory for the bulls. You can see from the chart below, that within its broader consolidation pattern, gold had been experiencing a somewhat tightening or constricting of its range. The upper boundary of that "mini-pattern" has been the $1600 level. The ability of the bulls to take it through this region gives them a very slight advantage over the bears in the immediate term and provides the possibility of a push towards more stubborn resistance beginning near the $1620 level.

Keep in mind that every bit of today's move higher was predicated on the notion being floated that the Fed is going to ease and provide additional stimulus measures as soon as next month. What the Fed giveth, the Fed can taketh away in a real hurry. What this means is that as long as traders feel fairly confident that the stimulus is coming sooner rather than later, gold will attract dip buyers. On the other hand, if anything comes along to disabuse them of this notion, the market will drop back down towards the bottom of the recent range where the big Asian buyers are lurking.

I have stated many times that I believe any additional bond buying programs are an enormous waste of time which will do absolutely nothing to deal with the underlying problems in the US economy, which are structural in nature. Simply put - there is already too much debt in the system. Trying to lower interest rates even further in order to encourage additional borrowing is a fool's exercise.

For Pete's sake, the yield on the Ten Year note is at 1.406% today. Speaking sarcastically here I am sure that all those fence sitters out there just itching to spend money they do not have will immediately launch forward with those plans if the Fed manages to push the yield down to 1.25%.

They can do all they want to entice banks to lend instead of holding money at the Fed and earning interest but if consumers are afraid of sinking further into debt in this jobless economy, what good will conjuring up more attempts to entice lending do?

Also do not forget - the Fed has spent a minimum of $2.5 Trillion between QE1 and QE2. What lasting good did any of that do??? Answer - nothing.

QE3 Timetable Moves Up to August

The market is abuzz this morning with chatter that the Fed is going to open the candy store next month instead of waiting until September as many had come to believe.

That is all you need to know to understand why nearly every commodity on the Board is moving higher today as well as equities.

Welcome to the brave new world of "investing".

As I mentioned in my post yesterday, if the Fed succumbs to this madness, hold onto your hats for food prices are going to shoot directly to the moon. The entire grain complex is putting back on a large portion of what it took off yesterday. If the Fed does indeed pull the trigger on another round of this idiotic bond buying, hedge fund algorithms are going to jam food prices due north.

Interestingly enough, about the only segment of the commodity complex not moving higher today is the energy complex. The current data releases continue to confirm slow demand due to the poor economic conditions.