Double dip, like hell! The bottom is going to fall out.
The smoke and mirrors modest upturn in economic statistics primarily due to the FASB capitulation in April of 2009 comes to an end as the Ski Jumper gets airtime.
This thing is going to unwind so fast that other than us here at JSMineset, no one will believe it.
QE to infinity is, and will continue to occur. Gold will trade at $1650 and higher.
Dear CIGAs,
The equity bulls were salivating over the prospect of watching another episode of “let’s take the shorts out and slaughter them all” as the world eagerly awaited the giving of the law from Mt. Jackson Hole. With claps of thunder in the background and with flashes of lightning interrupting his keen observations upon the state of the US economy, (some swear that they saw the angelic host), the prophet of Monetary religion sounded forth his prognostications and then looked upon his handiwork. He then saw that his work was good and sat down and rested on the seventh day.
Yessiree folks – Chairman Ben uttered his incantations making all well with the turbulent world and bringing light and order to darkness and chaos. I do not know about you, but I feel so much better today after Ben told us all that he is going to make sure that the recovery is safeguarded from harm. When you combine that with news that instead of the economy slowing from a growth rate of 2.4% down to 1.3% as expected, it only slowed down to a 1.6% growth rate, well, it just doesn’t get any better does it?
I mean, the first thing I immediately thought of is, “Why don’t I rush out and buy lots of copper because things are really getting better in a hurry”. Already forgotten are the abysmal housing stats of less than a week and the further rise in foreclosures and delinguencies, not to mention the clogged condition of the bankruptcy courts. Chairman Ben has whisked all of that out of the minds of investors with one mere pronouncement.
The fact that it has taken gazillions of conjured-into-existence-out-of-no-where dollars (some call that stimulus) to produce this pitiful growth rate number for the quarter, seems to have escaped the attention of the equity perma bulls who have yet to come to grips with the consequences of all of this. My own view is that it should be a relatively easy matter to get that growth rate up to double the figure given us. All we would need to do to get to 3.2% growth rate is to print twice the number of Dollars and double the rate of government indebtedness. That should be good for another 100 point rally in the Dow. If anyone knows the number that comes after quadrillion, please send that on to Ben and company. They are going to more than likely be needing it.
Seriously, it is hard to hide my contempt of this disgusting scene. This band of fools somehow believes that prosperity can be created by printing money without any consequences whatsoever. The US is sinking under a mountain of indebtedness and the Fed chairman tells us that it stands ready to engage in even more QE should the need arise. Flash to Ben – the need shall arise. China is already balking at buying US debt meaning you are going to have to buy it all yourself Ben.
What we are witnessing is the death throes of a debt-based monetary system of which those presiding over it apparently have come to believe their own delusions. The US public is learning what our grandfathers learned as a result of the Great Depression – Debt is something to be avoided – not heaped up and accumulated. That the borrower becomes the lender’s slave and that living beyond ones own means is inherently foolish and dangerous. That saddling one’s children and grandchildren with a debt burden that they did not create is immoral and wicked. Yet, all of this is lost upon the monetary lords who have their noses so close to the ground sniffing out the scent that they cannot see the path ahead leads off the edge of an abyss from which there is no escape. Or perhaps they do see and are attempting to secure their own parachutes before leading the rest of the masses over the edge.
I repeat – if lasting prosperity could be created by printing money and giving it away, previous generations that were wiser and more frugal than ours would long ago have stumbled upon this axiom.
That brings us to the war on gold. I am still amazed that after all these years and notwithstanding all the evidence to the contrary, there are still those obtuse enough to insist that there are no official sector attempts to manage or stem the rise in the price of gold. Gold is the only currency that these debasement thieves cannot pollute by conjuring more of it into existence. It rises when distrust of paper currencies is high and confidence in the ability of those who supposedly manage monetary affairs wanes. Thus it is and always will be in direct competition with unbacked fiat currencies.
Our money masters hate the yellow metal because its rise mocks their absurd assertions and debunks their claims of being able to “manage the economy”. It strikes, dagger-like, at the very hubris of these elitists who think that they are wiser than the collective judgment of the entire market, they alone possessing such keen insight into the nature of these matters that we should entrust our financial health to their hands. Imagine the conceit of a few men who think that by pulling on this lever or pushing on this button, that they can assure continuous prosperity and lasting wealth for all. Every generation considers itself wiser than the previous one which is why history does indeed repeat itself. Arrogant men never learn for they lack the one thing essential to make one truly wise – the ability to admit that we do not know all things nor that we mere mortals can always fix what ails us.
Back to the charts however – gold is being capped by its enemies near $1,245 in order to prevent an upside breakout and subsequent run to the lifetime high. Short term oriented traders saw that it could not pass through this level and decided to sell out. Dip buyers who have a longer term perspective, came in however and appear to be active today preventing much in the way of downside movement.
The weekly close was positive but I would have liked to have seen it close over $1,245 to set up more buying enthusiasm for next week. As noted on today’s chart, this week was the 4th consecutive week in which gold closed higher.
From a seasonal perspective, gold has turned higher right on schedule and if history is any guide, the odds favor a move higher into the 4th quarter from here. Keep in mind that even on a seasonal trade, the market never goes straight up. We are talking about the tendency or trend to rise from this point. What gives rise to the seasonal pattern is jewelry buying as the Christmas and other various holidays season approaches. That is an extra source of demand that generally is fairly reliable. It should be noted however that it is not jewelry demand that is driving the price of gold; it is investment demand. The jewelry demand is just an extra kicker.
Silver had quite a day today careening quite wildly as it soared to $19.34 and then faded back to unchanged. I suspect some of the longs who had some very nice paper profits decided to ring the cash register and go home for the week feeling pretty good about themselves. Bulls make money; Bears make money but Pigs get slaughtered. Morgan probably showed up above $19.20 anyhow. Even at that, it is very impressive at how shallow yesterday’s dip lower was and how short-lived it was.
We’ll see what kind of light this week’s COT reports will shine on the goings on in both pits. If I note anything of significance, I will post something up. The moves in silver in particular over the past three days unfortunately are not going to be detailed internally in this report but we will catch Tuesday’s action and that might provide a clue as to what occurred in there the remainder of this week.
The HUI, while not showing quite the gains of the broader S&P 500, is slightly higher today. Bulls are fighting to close the index above 480 which would be quite a technically impressive feat. Should they be able to hold their ground, such a close today would set up a strong possibility of a run towards 500 next week. It all depends on just where this thing closes this afternoon. A drop back down towards 470 would embolden share shorts who would try to take them lower in the early part of next week. A strong push past 480 gives the bull the clear advantage heading into the same time frame. The battle is joined.
Bonds got the snot beat out of them today as the steepeners were put back on with flatteners getting forced out. Judging from the ferocity of the downdraft, it looks like too many got caught leaning too heavily on one side of the market and were snared. Someone made one helluva lot of money today in the bonds if they decided to sell when Bernanke decided to start yakking. Even with the strong move lower, the bonds remain in an uptrend. We will see how they fare if and when they approach the 20 day moving average near 131^31.
The highest monthly close in the bonds was 138^02 back in December 2008. They spiked about one point shy of this at 136^31 this week but ran out of momentum. This area seems to be offering significant resistance. I shudder to think of the implications for all of us should it have given way. AS it is, bond bulls now have to take this level out in convincing fashion to continue the relentless rise in this market. Next week, and in particular next month, are going to be key to the future direction of this pit.
Once again the Dow mystically moved back above the 10,000 level. It seems that level has now become somewhat of a national security matter.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini
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