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Everything You Must Know About Investing In Gold, Investing In Silver, Investing In Gold Coins, Gold Coins, And Gold Bars.
It may seem old fashioned, but it is still possible to place some of your wealth and prospects into the ancient practice of hoarding gold. Gold has been the standard of wealth for centuries, in almost every culture that requires some system of barter, from Europe to Asia to South America. The metal has been known to launch expeditions for new lands, start wars, and to be the cause of the annihilation of entire cultures. The reasons for the world’s fascination with gold have been the same from the first item that a person exchanged one good for another until the present day. Gold is rare, easy to move, does not go bad or decay in any way, and it can be broken down into smaller parts. All...
Are Gold Bullion Coins Worth It? Today's world offers investors plenty of avenues for their money. Which ones are worth it and which ones just bring unnecessary risks with very low chances of profit? Many people have turned to buying gold bullion in order to improve their financial situations. We know gold has been around ever since man first started living in a society. Gold has grown together with mankind, or vice-versa, depending on how you want to look at it. Let's have a look at the process of investing in gold bullion coins and at some of the factors related to such a financial placement. What Are Gold Bullion Coins? A gold bullion coin contains one ounce of pure gold. The...
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Appears that the SILVER and GOLD PRICE broke today, or at the very least, must back off for a running start at $1,750 and 3400c. The GOLD PRICE lost $18.90 to close Comex at $1,737.90, and in the aftermarket lost another $10 to $1,726.10. Silver lost 42.6c, closing at 3372.5c, but dropped nearly another 25c in the aftermarket, falling to 3349c.
"Twas a big tumble for both. Let's look closer.
GOLD PRICE wiped out all its gains since Monday down at $1,725 support/resistance. After rising all week, that's not terribly surprising, but come Monday gold had better wake up and dig its claws into the bark, or it might fall out of the tree. Support stretches out its limbs at $1,725 and $1,705. Breaking those takes gold down to $1,680.
Up above, the GOLD PRICE high close has been $1,756.80 (yesterday), but it hasn't been able to breach $1,760. Therefore, watch that level on the upside.
Today's break probably wasn't enough to correct the move up from $1,523.90, but a drop to $1705 might be. More likely target is $1,675. That would also mark a kiss-back to the downtrend line.
SILVER PRICE looks like gold, but the range is 3440c and 3290c. Always bear in mind that silver is much more volatile than gold, both upside and downside.
First, if silver's rally has not been stymied at the 300 day moving average (3448c) for a goodly correction, then it can't fall below 3300c.
Next, a routine and shallow correction would sweep silver to 3250c - 3200c. If things get pricklier, then 3100c. Lowest target expected would be 2950c. Of course, we have to patiently wait to see how the correction unfolds.
Meanwhile, another buying opportunity is coming y'all's way. Stop your ears now against all the Wall Street Sirens who will be shrieking the silver and gold bull market has died. By now you understand that those folks don't know no more than somebody who works as a spokesman for a government numbers office.
One glance at the chart tells you that silver and gold and platinum and palladium all trod water this week. On the other hand, stocks rose this week, mostly today. US dollar index flatlined, and today silver and gold broke.
Lo and Behold! The Dow exceeded 12,850 today, and fact of the business is, nearly reached the May intraday high (12,876). Dow today gained a respectable 156.82 points (1.23%) to close at 12,862.23, nearly on the 12,869.95 high. S&P500 was even happier, rising 19.36 points (1.46%) to 1,344.90. What has everybody clambering all over each other to buy stocks?
Well, if you can believe it, government numbers. Personally, I don't put nearly as much stock in government numbers as I do in astrology, and I couldn't even tell you what my birth sign is -- the Possum, or the Turkey Buzzard, maybe.
Yet in this age of Reason, High Technology, and Right Big Government Lies, people still suck up those government numbers like they were single malt scotch at a free bar.
All this big news was that the government's unemployment rate dropped to 8.3%, nearly the low for the last three years. (On another note, if you believe unemployment is 8.3%, call me about some wooden Krugerrands I can sell you really cheap.)
Truth is, market was looking for some excuse to rise, that was the news today, so it took the bait.
Oh, and by the way, did I tell y'all that a Greek Debt Deal Is Near?
Y'all might wonder why I am so negative on stocks. Because they are in a primary down trend (bear market), and if I don't do much more than keep you out of stocks, five years from now you'll still think I was the brightest bulb in the box. Hide and watch.,
That US Dollar Index this week played Bait and Switch. Looked like it would break through 79.50 and fall off the face of the earth, but it stopped and rallied and even ended the week 7.6 basis points higher than last Friday.
Today the dollar index lost a tee-tiny 3.2 basis points (0.04%), leaving me wondering why the currency market has gone so quiet all of a sudden. It ended at 78.959, but climbed as high as 79.357. This currency thing isn't clear. Dollar may rally still and euro may sink to its intrinsic value -- zero -- before the dollar does.
The 1.3200 level seems to have blocked the euro this week. Closed 1.3155 today, up 0.06%. Also bumping up against its critical 62 day moving average, and can't punch through. Brace yourself for another stumble for the euro.,
Reason hath fled the yen market. Closed today down 0.50% at 130.56c/Y100 (76.59/US$1), giving back a third of its spectacular gains since 24 January. It gaps down, then bounces right back, gaps up, then waterfalls down. Why does that picture make me thing of Nice Government Men in their cubicles phoning their partners in manipulation on the market floor?
Well, I know election year has come because so many pious confessions are spontaneously erupting from politicians' lips. Yesterday it was Bernard O'Bama shaking out his Christianity before the National Prayer Breakfast, and even Newt Gingrich is claiming to have got religion. You may think I am harsh to say these things, but I say it's as sorry as gully dirt for politicians to trade on their faith. I never have thought much of them "talkin'" Christians, only the "walkin'" ones. They never need to tell you what they believe, because you already know from watching 'em.
All the This Day In History websites say that the 16th (income tax) amendment was ratified 3 February 1913, but that's a lie. Secretary of State Philander Knox fraudulently and knowingly certified it when it had never passed. The irregularities in the supposed state ratifications are too numerous to list, but you can read all about it in "The Law That Never Was" by Bill Benson and Red Beckman. Of course, if you don't pay the income tax, the government will try to jail or kill you.
Speaking of the IRS, tax time is fast approaching. My friend, Dan Pilla, Jr., at www.taxhelponline.com has over 25 years experience fighting with the IRS for taxpayers' rights. If you have bad tax problems, Dan's the man to call. One of the 11 books he has written is "How to Get Tax Amnesty." Check him out. I receive no remuneration whatever for recommending Dan.
Y'all enjoy your weekend!
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Silver Gold Ratio Today : 0.01933 Change : 0.000210 or 1.10%
Platinum Price Close Today : 1617.20 Change : 35.40 or 2.24%
Palladium Price Close Today : 697.75 Change : 12.40 or 1.81%
S&P 500 : 1,324.09 Change : 11.67 or 0.89%
Dow In GOLD$ : $150.46 Change : $ 0.20 or 0.14%
Dow in GOLD oz : 7.279 Change : 0.010 or 0.14%
Dow in SILVER oz : 376.47 Change : -3.66 or -0.96%
Dow Industrial : 12,716.46 Change : 83.55 or 0.66%
US Dollar Index : 78.93 Change : -0.356 or -0.45%
The SILVER and GOLD PRICE both enjoyed a profitable day. Gold busted clean through the $1,740 barrier and closed at a new high for the move, $1,747.10, up $9.30. Gold also posted a new intraday high, $1,750.77, but couldn't clear that $1,750 wall.
The GOLD PRICE Relative Strength Indicator has now reached the "Shur-nuff Overbought" level, but little else hints this rally will end any time soon. Above stands $1,800, which without question will pull out a big knobkerrie and pound gold about the head and shoulders. But that's $50 higher.
SILVER gained 54.5c today and closed Comex at a new high, barely, 3377.8c, but it didn't manage to clear the next resistance, 3400c. That hurdle just stands there, rock solid for the moment.
Thus although today silver encouraged us, it didn't reach in its pocket and put any real money on the table. We are left looking at the same range, 3300c to 3400c, and until silver breaks out of that prison, nothing has happened.
Y'all are going to look back one of these days and tell your children, "You know, once upon a time I had a chance to buy silver at thirty-four dollars!" They'll look at you in wonderment, and then ask, "Grandpappy, what's a dollar?"
Good thing about writing these commentaries is that every day that dawns brings a new chance to be wrong.
I was not, however, wrong to suspect silver and gold were about to jump, based on that one-slightly- down-other-slightly-up rule. But more below.
Okay, y'all, a Greek Debt Deal Is Near. Don't forget that. What kind of person would I be if I didn't remind y'all?
The US dollar, Laughingstock Of Fiat Currencies, only slightly less ridiculous than the euro and yen, shed 35.6 basis points (0.46%) today to land at 78.932. Yesterday's Big W resolved into a triple top, and obligingly fell lower than Friday's lows, to 78.623, relieving our minds of the worry that it might suddenly rally. Still, give the devil his due. Until the dollar clearly violates that 78.60 level, it's liable to do anything. Well, we all know that over time it can only do one thing -- slowly evaporate -- but I mean in the short run.
The scruffy and disgusting euro is flagging at the 62 day moving average, today 1.3209. Euro closed up 0.58% at 1.3158. Looks like it won't punch through, but will fall again for some sort of double bottom.
Did I mention that a Greek Debt Deal Is Near? Don't forget that. That will really help the euro by, uh, by, uh, well, I'm sure it will help Greece, at least. We won't talk about all the other bankrupt countries because one of them begins with an F.
On the other side of the globe pretty much nobody knows what they're doing, because they bid up the doomed yen 0.07% to 131.32c/Y100 (Y76.20/US$1). It's still rallying -- why is anybody's guess, given the fundamentals. Never mind, don't expect anything to make sense in a fiat money world.
Okay, stocks hung me on my own words, and sure's this world did manage to peck through 12,700. Dow rose 83.55 (0.66%) today and closed at 12,716.46. S&P500 rose through my strict 1,320 to 1,324.08, gaining 11.67 (0.89%).
As that notorious wit and indefatigable wag, Queen Victoria, used to quip, "We are not amused." Nor are we enthused. Stocks may simply be setting up for a little double top below 12,850, whence they will sink like your car keys when they were in your shirt pocket and you leaned over to get a better view of Hoover Dam. BICBW.
Anyway, who would want to own stocks and undergo all that fatigue of trying to pick the right one and do all that worrying when you can just buy gold or silver, stick it in the safe, and wait until Ben Bernancubus and the US Gov do what they do best: destroy the dollar.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Silver Gold Ratio Today : 0.01912 Change : -0.000284 or -1.47%
Platinum Price Close Today : 1581.80 Change : -40.00 or -2.47%
Palladium Price Close Today : 685.35 Change : -3.15 or -0.46%
S&P 500 : 1,312.39 Change : -0.62 or -0.05%
Dow In GOLD$ : $150.27 Change : $ (0.83) or -0.55%
Dow in GOLD oz : 7.269 Change : -0.040 or -0.55%
Dow in SILVER oz : 380.12 Change : 3.47 or 0.92%
Dow Industrial : 12,632.68 Change : -21.04 or -0.17%
US Dollar Index : 79.81 Change : 0.023 or 0.03%
Y'all have observed with me, over the last year or so, that a day when silver drops a little and the GOLD PRICE rises a little, is often followed by a day when both shoot up. Today the SILVER PRICE dropped 26.4c to 3323.3c, after making a slightly higher high at 3407c. Now, that might be might form the first half of a key reversal down (new intraday high and lower close, followed by lower close next day), but it might not. Silver still held up at 3300c, and never sank lower than 3292.
Cut silver some slack! It's butting its head against a big downtrend line from the August high, and it's still above its uptrend line from the 29 December low. We're warned, it MIGHT drop, but if it works its way through 3400c resistance, y'all can kiss silver good-bye because it will shoot skyward. But silver must hold 3292c.
While silver was dropping 26.4c, the GOLD PRICE gained $6.80 to $1,737.80, chugging on up a mighty steep mountain. More, gold pushed through $1,740 resistance to $1,747.32 (knocking hard on $1,750) and easily caught a downspike to $1,725.90, proving that support.
Like the SILVER PRICE, should the GOLD PRICE punch through $1,750, all the shorts will flee in panic, clutching their wallets. On the other hand, today also told you that gold cannot afford weakness at $1,725.
In bull markets these rallies always climb a wall of worry. People keep asking me if they should buy here, or buy half here and wait to see if metals will drop. First place, I don't know any more than you do. I'm handsome and tall, but I ain't Nostradamus. Second place, as a practical matter I've watched my customers (learned almost as much from them as I have from my children) and those who do best are those who just buy when they have the money, and come back and keep on buying. They don't get too worked up or nervous about where the market is, because they are riding the primary trend for the long term. And that works right well.
At least, they're not like me, stuck here sweating that GOLD/SILVER RATIO. One tiny straw in the wind that suggests metals might not have a great day tomorrow is the nearly 1.5% rise in the gold/silver ratio today. Still waiting for 57.5.
Musing back over the yen's performance yesterday, and recalling the current buzz among Those Who Must Talk Whether Mentating Or Not, Asian stocks also rose yesterday, "on Greek Debt Deal Talks" and Japanese industrial production grew faster than economists estimated. A statement so obtuse, so wanting in causal connection, stinks of the same Bimbo Financial Journalism that moved that Canadian TV commentatoress to say gold wasn't a good investment "because it wasn't backed by anything like the US dollar is."
Point is, tons of hot money slosheth around the world looking for a likely place to light, hungry for return, and stupidly harkening to the latest news and commentary, groundless though they be. Investment du jour (IdJ) today is US stocks, because there may be a Greek debt deal and Bernanke's indigestion is improving. Tomorrow the IdJ will be European stocks, because there may be a Greek debt deal and Ferkel and Sarcophagus are no longer miffed at each other. Besides, the planets are lining up and Pisces is ascendant in the Fishbowl. And the Japanese are switching to rice from wheat.
I'll be glad when the adults come back and take charge again.
Okay, I can't dodge it; let's look at today's markets.
Now I've heard of heads and shoulders, upside down and right side up, triangles, boxes, wedges, spikes, and double and triple tops, but I don't recall seeing many Big Ws before. Be that as it may, there 'tis on the US Dollar Index chart, a Big W. Breaks down and begins at 79.50, drops to 78.75, rises to 79.45, drops yet again to 78.75, then today rises to 79.50. Man, that's either a PERFECT double bottom, or it's the Nice Government Men painting the tape. What do y'all reckon?
Mattereth not. Implication is that a dollar close above 79.50 turns the dollar higher, a close below 78.75 pulls the plug.
Dollar index today rose 11.8 magnificent basis points (0.15%, for those of y'all with magnifying glasses) to 79.285. Could it turn and resume its rally from here? Might, but I think the NGM in Japan, Europe, and the US have the dollar on the run, and want to keep it there. After all, a Greek Debt Deal may be near.
Disappointing its partisans, the euro today was chipped and clipped for 0.46%, closing down at 1.3080. It's bouncing off its 62 day moving average, a significant moving average for the euro. Also backed through through the 50 DMA today (131.06). Nothing here suggests the euro is NOT headed higher.
As the mysterious schools of investment herring switch from east to west, the Yen rose again today by 0.17% to 131.19c/Y100 (Y76.22/US$1). I am so suspicious it's scary. Scares even me. I keep looking at the dollar selling at about 130 eurocents and about 130 yen, and I keep thinking, "Now isn't that just like Nice Government Men! They pick some silly target number that makes it obvious to a blind man what they're doing, forgetting that nature doesn't round." This looks like a target range ginned up in a meeting over rubber chicken in Basel at the BIS.
The smell of the sickroom hovereth yet over stocks. A few indices rose today, but the S&P500 and the Dow were not among them. Dow lost 21.04 points (0.17%) to settle at 12,632.68. S&P500 perched at 1,312.39, down 0.62 point or 0.05%.
Folks, y'all lay a ruler across the tops of Thursday, Friday, and on through today. I'll show you a failed breakout attempt today, but nothing else to fertilize respect or optimism. I'll give it this: if the Dow can better 12,700, and the S&P can better 1,320, stocks MIGHT have a chance to creep or crawl higher.
Creep or call, not found new inter-generational wealth transfers. But mostly, stocks want to drop.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Silver Gold Ratio Today : 0.01935 Change : -0.000138 or -0.71%
Platinum Price Close Today : 1610.70 Change : -11.10 or -0.68%
Palladium Price Close Today : 686.75 Change : -1.75 or -0.25%
S&P 500 : 1,313.01 Change : -3.32 or -0.25%
Dow In GOLD$ : $151.11 Change : $ 0.04 or 0.03%
Dow in GOLD oz : 7.310 Change : 0.002 or 0.03%
Dow in SILVER oz : 377.76 Change : 2.73 or 0.73%
Dow Industrial : 12,653.72 Change : -6.74 or -0.05%
US Dollar Index : 79.11 Change : 0.131 or 0.17%
Not surprising the socks off anybody but the unshod, the GOLD PRICE and SILVER PRICE both backed away from big resistance today. Gold lost $1.20 to end at $1,731.00 on Comex while silver gave back 26.2c to settle at 3349.7c.
For three days the GOLD PRICE has moved sideways across the chart bounded by roughly $1,715 and $1,740. Friday marked the high, so this line is rounding over downward. Today's low came at $1,716.26. If gold violates that low tomorrow, then it might unravel all the way to $1,680. On the other hand, once it breaks through $1,740, next stop will be $1,805. Might as well steel yourselves for it, a correction will come some time, and fairly soon given the strong rise. Won't be the end of the world, or even the end of the larger rally.
SILVER PRICE three day range has carried it from 3300c all the way to 3400c. The silver chart shows (as does the gold chart) what might with equal justification be called a continuation pattern or a topping pattern. All we can do is watch the boundaries of the range -- 3400c to 3300c and see what happens.
Once again today I have been examining the GOLD/SILVER RATIO chart, and again I have to confess that I expect it to make one final push above 57.5. If I'm wrong, y'all can string me up. If you can catch me.
Scariest thing about writing a daily commentary is that buzzard that sits on your shoulder squawking, "What happens when you run out of things to say? Or on the day nothing happens?"
One of the advantages of being a natural born fool is that you never have enough sense to admit that you have nothing to say worth hearing, so that solves the first. But today was one of those days when not much happened. Oh, everybody showed up for work and went through the motions, but nothing much changed.
The US DOLLAR INDEX rallied a mite, up 13.1 basis points (0.17%) to 79.107. This changes nothing, however. Five day chart might have bottomed late Friday, but dollar will have to burst through 79.50 to prove that. 50 day moving average stands above the Dollar Index at 79.67, and other indicators point unanimously down. Not nearly enough enthusiasm to move much higher.
Greek debt talks are foundering -- come to think of it, they've been foundering since they began -- and the euro, having hit 132.34 Friday and its 62 DMA, backed off today to 1.3130, losing 0.68%. This doesn't near about turn the trend down. Look for higher euro still.
Something's going on with the yen, but I don't know what. It's the sorriest of the three big fiat currencies, worst debt, etc., but it's rising. Monday of last week it gapped down horribly in a move that screamed, Government Manipulation. Stayed down one day, traded back up through the 50 DMA, then Friday gapped UP above the 20 DMA and through internal resistance about 130.5c. This points to another trip back to the top of the trading range above 132c.
Against both the euro and the yen gold is breaking out toward the sky. Not quite confirmed yet in the euro, but clearly in an uptrend.
Against the other Loser Fiat Currencies, silver also offers a bright outlook. Silver in Euros has broken out of a down trend and traded up to its 200 DMA, standing above its 20 and 50 DMAs. The 20 has just crossed above the 50. Once silver crosses through 26 euros, it will be bye-bye earth. Silver in yen shows a similar set-up, but not quite as fully unfolded.
STOCKS had another sickly day. Dow only fell about 0.5% to 12,653.72, down 6.75 points, far less than the andSP500 that lost 3.32 points or 0.25%. Other indices lost more than the Dow, too, sending the smell of ripe mackerel into the air. A drop through 12,530 will push the Dow's head underwater. RSI and MACD are ripe to drop.
STOCKS -- they may be YOUR chance to buy a ticket on the Titanic this year.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Today the GOLD PRICE rose $5.50 to $1,732.20 and silver rose 4.5c to 3374.7c.
The SILVER PRICE gained 6.6% this week, gold gained 4.1%. Meanwhile, they also bludgeoned their way through two or three resistance levels. This is about as good a week's performance as I have ever seen.
On Wednesday, thanks to the Bernancubus Fed's announcement they will continue jimmying interest rates down and inflating until 2014, gold shot from $1,670 to $1,705 in a single bound, smashing down $1,680 resistance. Next day it pierced $1,705 AND $1,725.
That carries GOLD PRICE through the downtrend line from September a full three percent and three days, proof enough it is a solid breakout. And for good measure gold also rose above its 150 DMA ($1,686), the rarely broken safety net under gold's bull market.
This week SILVER beat 3260c, then 3300c and 3350c and now stands knocking at the 3400c door, where it meets stout resistance. Most important goal here is for silver to climb above its 300 DMA. During this bull market silver has only rarely broken below this moving average. Whenever it crosses above it again, silver is offering you an extremely low-risk buying point.
Some time or other a correction will come. One target is the 200 DMA at 3575c, about where some lateral resistance also abides. Should silver pierce that mark, nothing stands in its way before 4000c.
RSI on both metals stands at 70, pushing the ceiling for overbought, but overbought can easily get MORE overbought and stay there longer than expected.
Big Picture has come into focus. The SILVER and GOLD PRICE correction has ended, but may correct and bump along sideways for the first quarter or two. Nonetheless, both are headed much, much higher. Gold can hit $2,660 this year, silver might hit 7600c, even 8300c.
Is the bull market over? Merciful heavens, NO! The wild part of the ride is only now beginning.
At the end of the football game, what do y'all do? You look at the scoreboard, right? Because even though the game may be fun at the end all that counts is that scoreboard. This week's board says that stocks are spinning wheels, US dollar is backing down the hill with transmission problems, and silver and gold are blasting ahead down the road.
Most notable this week was NOT the metals huge gains, although that was notable enough, but stocks' fall against the metals. On 29 December the Dow in Gold Dollars hit G$164.94 (7.969 oz). Today it's at G$151.32 (7.320 oz), down almost 9% although stocks have risen 3.2% (Dow) and 4.4% (S&P500).
Since 29 December the Dow in Silver Ounces has plunged from 450.5 oz. to 375.74 oz today, falling 16.6%. Instructive.
That 29 December high took both indices to new highs for the move, and for silver, above the long term downtrend line. The outcome until today shows that the tide in stocks versus metals has turned down again, and stocks have begun to lose another 80% of their present value against stocks.
Dow closed today at 12,680.14, down 54.49 (-0.43%) and the S&P500 at 1,318.01, lower by 0.42 (0.3%). This week has shown stocks unable to sustain the enthusiasm of the year's opening. Unless the Dow exceeds 12,850 and the S&P500 1,360, which I do not expect, their next leg will be down -- very much down. Acceleration begins when the Dow drops through 12,600.
The US Dollar did NOT have a good week. It broke support about 80, then 79.5, and today hit itself in the head with a ball peen hammer by dropping another 51.2 basis points (0.66%) to 78.883. Dollar now is trading below its 50 day moving average (79.64) and may be headed for its 200 DMA (76.49).
The euro has profited from the dollar's slide, gaining 0.93% today alone to reach my minimum target of 1.3200. Closed at 1.3237, will rise further next week.
Yen offers a classic snapshot of government manipulation. Gapped down on Tuesday, traded down to support, then gapped UP today. Closed today at 130.35c/Y100 (Y76.72/US$1), up 0.91%. So, let's see -- yen crashed on Tuesday, falling through its 20 DMA and 50 DMA, but today turned right around and shot back up, closing higher than it began the week? If that ain't Nice Government Men in action, canaries have fangs.
Y'all enjoy your weekend!
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
The GOLD PRICE pushed aside the $1,705 resistance like King Kong pushing down New York City streetlights, and sprang clean to next resistance around $1,725.
What more can you ask? Gold has (1) broken out above its downtrend line from September, and (2) traded above the 200, 50, 20, and now 150 day moving averages. Momentum hardly gets more unanimous than that.
Road for gold stretches out to $1,800. Someday will come a correction, not too long looking at the RSI, but not before gold makes more gains.
The SILVER PRICE traded overnight barely below 3300c, at 3297.5c, then climbed like a stubborn Sherpa all day to a 3377.5c high. Comex close at 3370c came very close to the day's high.
Here are the bounds: the SILVER PRICE must not close below 3300c, and must exceed 3400c to keep on rallying. With the world's largest central bank announcing that it will most surely keep on depreciating the dollar, what else would you expect silver to do? If you don't buy the silver breakout at 3400c, you'll never buy anything. It screams too loudly that it intends to move higher.
All that said, remember humility and recall that markets turn on a dime. Closes below 3300c or $1,700 gainsays everything above.
German chancellor Ferkel spoke at the Davos economic forum yesterday, coinciding with the FOMC's actions here. Coincidence? Or timed to manipulate fall of the dollar against the euro? No matter, she said nothing new. Crisis continues to be the elephant in the living room.
An Israeli website reported yesterday that India has agreed to pay for Iranian oil with gold. Not sure whether this can be believed, but if it's true it is a flashing harbinger of change.
Markets followed through today as expected from yesterday: gold and silver up, dollar down, stocks down. Maybe inflation isn't the universal economic panacea after all -- but what do I know? I'm no central banker, I'm just a natural born fool from Tennessee, not rating even 3 MLCs on the Scientific Stupidity Scale.
STOCKS melted when they approached the Kryptonite of last spring's highs. Dow gave up 21.65 (0.17%) to close 12,735.31 while S&P500 lost 7.60 (0.57%) to close 1,318.45. Dow below 12,650 will accelerate the fall.
More instructive is the last few days' behavior of the Dow in Gold Dollars (DiG$) and the DiSoz. From G$164.94 (7.969 oz) on 29 Dec. the DiG$ has fallen to G$152.47 (7.376 oz) today. From 450.5 oz the DiSoz has plunged to 377.88 oz today. Since the December highs showed upside breakouts on the chart, their retreat and failure now underlines one future: silver and gold will gain much more value against stocks, or, stocks will lose more value against metals. Same thing.
US DOLLAR INDEX today fell 17.7 basis points (0.23%) to 79.402. This further fall below 79.50 merely confirms that the dollar has broken down from its uptrend. Low came at 79.07, and dollar may be forming a rounding bottom there, which would send it higher for a few days. Owch, it's below its 50 DMA (79.59). Lower closes will simply nail more nails into the dollar's coffin.
Euro took a breather today, closing down 0.02% (nothing, basically) to 1.3104. Must remain above 1.3050 or foster suspicions that the ultimate bottom for the euro's long move is not yet behind us.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Dow in SILVER oz : 385.56 Change : -11.42 or -2.9%
Dow Industrial : 12,758.85 Change : 83.10 or 0.7%
US Dollar Index : 79.43 Change : -0.442 or -0.6%
The GOLD PRICE was fiddling around all day, pitty-patting at $1,660, falling as low at $1,650, and then gold's best friend Ben Bernancubus and His Clowns made their announcement, and the GOLD PRICE shot up to $1,712.85 in about one hour. The SILVER PRICE languished indecisively, lolling around at 3153c then climbing back to 3220c when Ben appeared. In about one hour silver had gained 3.6% for the day, shooting to 3340c and backing off to only a 116.1c rise to 3309.2 at Comex close.
Ben has taken SILVER and GOLD nearly to the next level. Now we've reached that $1,705 resistance I have been looking for, and gold surmounted today its 150 DMA ($1,683.03). IF -- if -- gold punches through $1,705, the next big resistance comes in $100 higher at at $1,805.
I emphasize "if" because today's news was as good as it gets for gold. This might have been the final surge of the move off of $1,524 in December, and it could correct from here for a week or two. I'm not a fortune-teller -- tomorrow will tell us whether gold will continue rallying or not.
Above silver the only barrier left is 3400c -- well, 3570c, but 3400c offers stronger resistance. After that, silver has an easy climb 4000c cents where it fell off the cliff in September.
GOLD/SILVER RATIO left a gap down two days ago. Generally, markets trade back up to fill gaps. Be patient, don't let the enthusiasm of a rising market fool you, or the fear of a falling market.
I was minding my own business sitting in front of my computer concentrating when all of a sudden my Stupid Meter went off, alarm blaring and honking, Stupid needle pushed way over into the red. Clearly somebody in the world was pushing the safety envelope for Stupid Radiation. Problem is, if the hole in the ozone layer closes up, then the Stupid Rays cannot escape the earth's atmosphere, and every man, woman, and child on earth -- especially those registered to vote -- loses 8 points off their IQ for every day the Stupid Meter reading exceeds 4.8 Central Bankers (standard scientific measurement for stupidity. One Central Banker, abbreviated "CB" = 10 "ERs" or "Elected Representatives" = 100 SCJs or "Supreme Court Justices." One SCJ = 100 MLCs or "Moe-Larry- and-Curlys." One the other hand, in order of ascending stupidity, Ten CBs = 1 SE or "Secretary of Education," and 10 SEs = 1 TSAA or "Transportation Security Administration Agent.")
My heart had no more settled down from the scare that Stupid Meter alarm had given me than my Hogwash Detector went crazy. I jumped up and ran outside, because an alarm that strong meant a TIDAL WAVE of hogwash must be about to engulf my house and Tennessee. About that time I realized that everything was all right. Last night we had a State of the Union speech last night and today an FOMC meeting announcement and whenever you overload a Stupid Meter and a Hogwash Detector like that, you have to expect a lot of alarms.
Bernancubus and the FOMC announced today that they would keep interest rates low until "at least late 2014" and that the committee "expects to maintain a highly accommodative [read: inflationary] stance for monetary policy." But that's okay because they expect "inflation" to be subdued. To prove beyond all quibble that they have all lost their minds, the FOMC specified a two percent (2%) goal for long term inflation, measured by some price index that makes about as much sense as averaging the price of tire-irons with kumquats and SUVs and calling that an index.
Go look at the five-day charts you will notice that suddenly today the silver and gold charts rise straight into the sky. THAT was when the Federal Open Market Committee made its announcement, and THAT shows you how markets interpreted the Fed's announcement: "more and more inflation."
Of course, the US dollar index took this news of more inflation on the chin, sinking below 79.60 support to 79.426, down 44.2 basis points or 0.57%. That wrecks the rally, but stopped just below the 50 day moving average (79.56). I suppose it is POSSIBLE the dollar might turn and resume rallying, but clearly the Fed is working with the other Nice Government Men and Beneficent Central Bankers to lower the dollar and yen against the euro.
And the scabby euro took a great jump to close at 1.3108, up 0.56% and almost touching its 50DMA at 1.3142. Since it already stands above its 20 DMA (1.2891), piercing the 50 DMA will twist up the frenzy knob on the euro's momentum.
The Japanese yen presents a fine picture of government manipulation. It fell through internal support today and at one point through the trading channel reaching back to August. Closed up in that channel, but Oh, My! Somebody BIG is selling yen. Closed 128.66c/Y100 (Y77.72/US$1).
Stock investors are about to set off my Lunacy Monitor, as they bought today on news that the dollar will be trashed and the Fed will inflate more. Can that possibly aid the ailing economy? In a pig's eye it can. The economy is ailing only because of inflation in the first place (Don't argue with me here. There would have been no speculative real estate bubble and stock bubble and soap bubble unless the Fed had been inflating and making money artificially cheap, exactly as they are doing now.) More inflation will help the US economy as much as another drink will sober up a drunk.
Dow rose 83.1 points (0.66%) to 12,758.85. S&P500 rose 0.87% (11.41) to 1,326.06. This charade, this farce, this "inflate-poke-and-hope" management ought to bring tears to any sane eye.
But, it's an ill wind that blows no good, and the ill winds of Central Bank and Government Stupidity, Keynesianism, and Official Hogwash all blew mightily into the sails of silver and gold today.
Just to show you things haven't changed much, except that 120 years ago men had more courage, on 25 January 1787 the militia of what was called "Shay's Rebellion" was met and dispersed by superior Massachusetts state forces at the Springfield (U.S.) Armory. Shay's Rebellion was an uprising of debt-ridden, taxed-out farmers who had fought a Revolution for liberty only to find that at home they were being made debt slaves.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Silver Gold Ratio Today : 0.01919 Change : -0.000022 or -0.1%
Platinum Price Close Today : 1546.90 Change : -16.80 or -1.1%
Palladium Price Close Today : 677.80 Change : -8.25 or -1.2%
S&P 500 : 1,314.65 Change : -1.35 or -0.1%
Dow In GOLD$ : $157.45 Change : $ 0.90 or 0.6%
Dow in GOLD oz : 7.617 Change : 0.044 or 0.6%
Dow in SILVER oz : 396.97 Change : 2.69 or 0.7%
Dow Industrial : 12,675.75 Change : -33.07 or -0.3%
US Dollar Index : 79.81 Change : 0.023 or 0.0%
The GOLD PRICE bounced off that barrier at $1,680 yesterday and gave back $13.80 today, closing at $1,664.20. The GOLD PRICE can drop back to $1,658 - $1,656 and remain in an uptrend. So far, today's action classifies as no more than a correction within an uptrend.
The SILVER PRICE backed off 30.2c to close Comex at 3193.1c. Silver dipped its toe below 3200c to 3184c, but held there rock solid. And so it must do tomorrow to avoid a painful correction, down to 3080c, a dollar lower.
You always have to take care that you are not "talking your position," looking at a chart and seeing only what you want to see and ignoring the rest. Still, I believe that pattern on silver's chart is a continuation pattern, very tight, and will break out upside.
So (as my friend R. asked me today) why not talk about the GOLD/SILVER RATIO? Because I am still holding out for 57.5 to swap, and believe we will yet see that. Silver and gold have most likely made their bottoms, but first time silver makes a correction, it will suffer much more than gold will, and that (I hope) will give us that push.
Think about something else. I am still smarting by swapping out of SILVER into GOLD too early last year. I don't want to jump too early on the swap back, and I know from previous years that the ratio can post several similar highs before it turns down for good.
Right, that's risky, but for right now I believe it's a risk worth taking.
US dollar today gained a massive, spectacular 2.3 basis points (0.03%) to end at 79.806. It skidded to a stop just above the 50 DMA (79.52).
High today reached 80.184, low skidded to 79.643. Without closing higher than 80.20, the dollar is merely trolling for fools gullible enough to buy it on the way down.
Of course, if the buck hangs around above 79.50 for a few days, I might change my mind.
Scabby euro rose 0.09% today to 1.3036, not much changed from yesterday, but still rallying. Still headed for 1.3200 at least.
Yen, on the other hand, fell off a cliff today. Dropped 0.9% to 128.71c/Y100 (Y77.69/US$1), leaving behind a huge gap and punching through its 20 DMA (129.65) and 50 DMA (129.19). Support there is none before 128c, or the 200 DMA at 127.37c. Looks like the Nice Government Men in Japan woke up today and decided to lower the yen.
Stock indices shrugged off their confusion today and all decided to drop together. Dow lost 33.07 (0.26%) to 12,675.75. S&P500 gave back 1.35 to 0.1%. Charts aren't quite the same.
S&P500 has bumped into overhead resistance from last spring's highs and stopped cold. Dow punched through slightly, reached 12,764, and has traded back to the line for -- a failure and fall back, or a final kiss good-bye? Not clear yet, but stocks don't have much gas left. Dow won't reach 12,870, S&P500 shouldn't reach 1,360.
On 24 January 1848 James W. Marshall discovered a gold nugget at Sutter's Mill in northern California, the discovery that set off the Gold Rush. Discoveries of gold in California, Australia, and later South Africa led to a CHEAPENING of gold against silver, and the price of silver in gold rose steadily from 1848 until 1873, when silver was corruptly demonetized first in the US ("Crime of '73") and then in the new German Reich. Contrary to the propaganda, it was NOT new silver discoveries, like the Comstock Lode, that led to silver's cheapening against gold or its demonetization. That was all politics, and silver was gaining value from 1848 forward, never trading below the $1.2929 statutory value from 1848 to 1873, and rising at some points to $1.35 (4.4% over statutory price). No, ultimately driving silver out of the monetary system was a project of special interests who planned to drive out first, silver, and then gold, and so create their own money out of thin air. So far, they've won, and think what a tragedy it would have been if the banks had lost. Why, how would states have raised the money to fight all those world wars without central banks and fiat money? Gee, they couldn't have, so they would have been forced to make peace. It would have been a historical tragedy, wouldn't it?
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. Be advised and warned:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
For years, I had a fight with The Wall Street Journal editorial board over its front-page summary of market indexes, which highlights a dozen daily indicators, including stocks, bonds, oil, the dollar, etc. Yet it deliberately omitted the single-most significant asset that each day measures the level of geo-political and monetary stability around the world: Gold! Dan Henninger, deputy managing editor of The Journal, wrote me, "We do not believe gold is the best indicator of inflation." Since the Keynesian revolution of the 1930s, gold has been relegated to a "barbarous relic." The establishment prefers flat money to the gold standard. It wants government rather than the market to maintain authority over money. It doesn't want to legitimatize a "non-performing" asset that might be warning of trouble down the road. As they say in the commodity trading pits, "Gold is just another commodity." Wrong! Gold is not just another commodity. Today, let's look at gold as an inflation and market indicator... and what we should be investing in right now.
First, how many other commodities have served for centuries as money? Not oil, soybeans, or pork bellies. Moreover, unlike other commodities, gold is never used up in the production process. Annual production increases at a steady 1-2% a year and is added to the total stock of gold, creating a monetary Rock of Gibraltar in a sea of instability. As a result, gold has always preserved its purchasing power over the long run.
Gold always returns to its full purchasing power, although sometimes it may take several decades to do so. Granted, the price of gold became more volatile as the world moved off the gold standard since the 1930s. But as Steve Forbes told me in a recent interview, "Gold is volatile because monetary policy is volatile. Gold is a constant, like the North Star." In my economics classes at Columbia University, I demonstrate the long-term value of gold by holding up a $20 Saint-Gaudens Double Eagle gold coin. Prior to 1933, our grandparents carried this coin in their pockets as money. Back then, they could buy a tailor-made suit for one double eagle, or $20. Today, the Saint Gaudens coin, which is worth between $600 and $1,000, depending on its rarity and condition, can buy the same tailor-made suit. Gold also has the amazing ability to accurately forecast the direction of the general price level and interest rates. Recently, I ran an econometric model with the assistance of John List, a top economist now at the University of Chicago. We tested three commodity indexes (Dow Jones Commodity Spot Index, crude oil, and gold) to determine which one best anticipated changes in the Consumer Price Index (CPI) since 1970. It turns out that gold proved to be the best indicator of future inflation, as measured by the CPI - even better than oil. The lag period is about one year. Most of the media and the general public think oil is the premier indicator of economic performance. An energy crisis means a recession, right? Not always! Germany and Japan, for example, import most of their oil, but they avoided the 1979-82 recession. Today, energy prices have doubled, but there's no sign of recession. One reason is that the world economy has become more energy-efficient, and thus less dependent on oil and gas as the major source of energy. Douglas Bohi, director of the energy and natural resource division of Resources for the Future in Washington, D.C., claims that energy accounts for only 3-4% of the total cost of producing goods and services in the U.S. Our econometric model also suggested that higher gold prices spell higher long-term interest rates. They tend to move together. Will the price of gold stay above $500? Ultimately, gold is an inflation hedge. When gold declines, it means less inflation down the road. When gold goes up, it means more inflation ahead. What is gold predicting now? Gold has been in a major bull market since 2001, when the terrorist attacks took place in New York and Washington.
What Does This Mean for the Future? Four things Regarding Inflation and the Markets: 1. War is inflationary. Since 2001, the Bush administration has dramatically increased government spending to fight terrorism and the war in Iraq. The Fed has been accommodating this increased spending with more money. 2. Expect more inflation ahead, as measured by the CPI and other price indexes. 3. Expect higher interest rates as inflation heats. 4. Higher inflation is bullish for hard assets in 2006. So, as far as the markets are concerned, I recommend buying gold and silver coins, mining stocks, oil and gas and real estate. Suggested fund: RS Global Natural Resources Fund (RSNRX), which has a five-star rating from Morningstar.
About the author:
Dr. Mark Skousen is a professional economist, financial advisor, university professor, author of over 20 books, and Chairman/Editor of Investment U. In the IU e-Letter, Dr. Skousen helps nearly 300,000 readers become better investors with actionable investment advice, including the gold article above.
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