Gold Breaks Out; Ready To Take On Its All Time High

July 12, 2011, at 9:21 pm
by Dan Norcini in the category Trader Dan Norcini |  Print This Post |  Email This Post

Dear CIGAs,
Judging from the price action in gold, it seems as if all three factors that are currently driving this market are gelling together into one powerful inducement to buy the yellow metal. As discussed in my recent radio interview over at King World News on the Weekly Metals Wrap, sovereign debt fears originating out of Europe, inflation fears in China and elsewhere in that region of the globe, and a continuation of the extremely loose monetary policy currently in place by the Fed are producing a toxic mix for the bears in the gold pit as buying momentum is driving them back as bidders are overwhelming their offers.
Gold was strong all evening last night with buyers eager to snap it up below $1550. That was a good technical signal that dip buyers were coming in and that long side liquidation was not going to be a problem this time around. As the market moved into the early part of the New York trading session, it held well even as sellers were making an appearance near the $1555 level. Once the minutes from the Fed’s recent meeting were released, it was Katie bar the door as traders rightly interpreted those minutes to read the strong possibility that additional monetary stimulus in the form of another round of QE will certainly be forthcoming should the economy remain stuck in its current moribond condition. My pal Jim Sinclair has been saying this for quite some time now and I have been echoing the same – namely – the hawks on the FOMC have gone into hibernation and the doves are currently in the ascendancy. Unless we get some real humdingers of economic reports coming our way, chances are very good that a few more stinkers of a job reports are going to get the QE guns a blazin’ again. This goes back to the third of the points I raised at the beginning of these comments – Fed monetary policy is not going to turn tight any time soon and such an environment is strongly bullish to gold.
Gold now is in position to challenge its all time high. It is difficult to see how it will not best that level if conditions in Euro land continue to deteriorate. Downside support lies first near $1550 on followed by $1530.

My read on all this price action was the speculative side of the market was already looking ahead for more QE and was loading up on the long commodities/short dollar trade once again. In other words, risk was back in even in spite of the fact that many investors and traders are extremely worried about what is transpiring in Europe.
Where we stand now is very simple – gold once again scored brand new all time highs when priced in both terms of the Euro and of the British Pound – and is within easy striking distance of its all time high in US Dollar terms. This is signaling the lack of confidence in the respective monetary authorities of those nations and in their political leaders to take the necessary steps to actually get to the root of the structural problems that have led to their terrible fiscal condition.
I might make mention here of the Japanese Yen. Remember that big, coordination intervention by the ECB, the BOJ and the Fed to knock the stuffing out of the Yen after the tragic earthquake and tsunami hit struck? The Yen is within 3 1/2 points from its strongest level, or the high point, from which it rapidly descended when the Yen selling spree by these Central banks began. In hindsight, we can now see how even coordinated intervention can completely reverse a currency’s trend if speculative money wants to keep coming in and buying up that currency. The Yen rally is tied to more risk aversion trades as the carry trades using that particular currency get unwound driving it higher in the process. There is also a type of trade which takes the Yen as a type of proxy for the entire Pacific reason, and just bids it up as trading the Yuan is not nearly as liquid as the Yen or even the Korean Won for that matter.

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 Why Bernanke And Pals Will Soon Need a New Pair of Pants

Posted by: Phoenix Capital Research

Post date: 07/12/2011 - 19:02

Ultimately, all of these efforts will fail (see the Euro situation today). But this will only happen after the Fed has done any and every action it can to prop things up. This will include QE 3 and as many QE’s as the US Dollar will allow. So, QE 3 is coming. We might even see QE 4 before the system collapses. But the system WILL collapse. And when it does, it will be a 2008 type Crisis on steroids.

FMX Connect Explains Today's "Comical" Gold Move To Near Record Highs 

Submitted by Tyler Durden on 07/12/2011 20:12 -0400

We think what’s happening is almost comical. Most Western governments are in a race to the bottom to get their currencies as low as possible. This is an attempt to cheapen their debt by debasing their currencies. Every time the dollar spikes it must make Bernanke pull the hair he has left out of his head. Every time the euro weakens the Fed does what it can to strengthen it. One way is by opening swap desks with the European banks to give them all the dollars they need. Another way is to say the magical phrase QE3. While the timing of this news is in many respects a coincidence (because the minutes are released weeks after the event) we do recognize that Western economies must devalue their debt. We are in a race to the bottom and the euro is winning, hence the rally in gold. Gold goes up for two reasons now. The first is obvious: gold is a dollar-denominated asset and as the dollar weakens it will increase in value. The second is sovereign or default risk, which is actually deflationary. Europe and the U.S. will continue taking turns driving gold higher with the Chinese chasing it all the way up. 

 

 

 

 

 

Vladimir Putin Calls Bernanke A Hooligan, Angry At American Money Printing 

Who would have thought that Ron Paul's ideological ally in his quest to take down the Chairsatan would be none other than the Russian dictator-in-waiting (or rather, in actuality), Vladimir Putin. In a speech before the of economic experts at the Russian Academy of Sciences, the Russian prime minister had the following to say: "Thank God, or unfortunately, we do not print a reserve currency but what are they doing? They are behaving like hooligans, switching on the printing press and tossing them around the whole world, forgetting their main obligations." What appears to have angered the former KGB spy is the end of QE2. According to RIAN: "Putin's comments came in the wake of the completion of the US' quantitative easing (QE) 2 program on June 30, in which the Federal Reserve bought $600 billion worth of its Treasury bonds. The Fed's first round of QE, which ended in March last year, amounted to less than half the size of QE2." We can't wait to hear what expletive Putin will usher once Bernanke launches QE3.

Regulators Investigate Banks For Lying About Investor Interest In European Bond Market 

Submitted by Tyler Durden on 07/12/2011 20:54 -0400

A year ago we discovered that several European countries only managed to squeeze into the Eurozone by misrepresenting their total debt courtesy of Goldman Sachs facilitated currency swaps which misrepresented the true state of said countries' finances. Yesterday it was revealed that at least one Spanish region had been openly lying about its economic performance and underrepresented its budget deficit by about 50%. Today we go deeper into the rabbit hole, after a WSJ report discloses that European banks 'may' have been openly and frequently lying by misrepresenting to others about the amount of third party demand at any given bond auction. Think of it as the same BS that a bulge bracket bank in the US will use to sucker retail momo investors into a hot IPO. "A European self-regulatory body is looking at whether that perennial optimism might have at times been misleading for investors in the European debt markets, according to people familiar with the matter. The International Capital Market Association, or ICMA, is examining whether banks have been improperly exaggerating the amounts of investor demand they are seeing in certain bond sales, including for debt issued by European governments, these people say." Where does the rabbit hole lead next: someone discovers that the Bid To Cover ratio in all US bond auctions over the past several years have really been 50% lower than represented publicly? As for Europe: does anyone believe anything coming out of that continent anymore following the whole Jean-Claude Juncker fiasco? The Eurozone and the euro are both doomed and everyone knows it. But all is fair in love and perpetuating doomed ponzi pyramids (which is not to say that the US is any better).

China Q2 GDP 9.5%, Higher Than Expectations, But Lowest Since Q3 2009 

Submitted by Tyler Durden on 07/12/2011 22:02 -0400

• China 2Q GDP rises 9.5% y/y vs est. 9.3%; rate is slowest since 3Q 2009.
• 1H GDP rises 9.6% vs est. 9.5%.
• June industrial production increases 15.1% y/y vs est. 13.1%, rose 13.3% in May; June IP up 1.48% q/q
• 1H IP up 14.3% y/y vs est. 13.9%
• June retail sales rise 17.7% y/y vs est. 17.0%; 1H retail sales rise 16.8% vs est. 16.7%
• 2Q GDP up 2.2% q/q vs 2.1% in 1Q
• 1H fixed asset investment exc. rural rises 25.6% vs est. 25.7%
• NOTE: GDP grew 9.7% y/y in 1Q.

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Gold Hits $1,574/oz on Fed Minutes Release (LC)

Author: goldnews | Filed under: Central Bank News, Forex News, Precious Metals News The Federal Reserve released their minutes today which gave fuel to the possibility of more monetary stimulus from the Fed. The minutes said,
“a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run.”
It is likely these members are the more powerful Fed governors, like Janet Yellen, the Fed Vice-President, Bill Dudley, head of the New York Fed, and Fed Chairman Ben Bernanke.
An analysis of the minutes will be available by tomorrow.
In response to the release gold has soared, now reaching a new all time high of $1,574/oz. The dollar is falling on the news as well, but equities have failed to turn positive.

Ron Paul: ‘We Should Default to the Fed on US Bond Holdings’ (video)

Author: goldnews | Filed under: Central Bank News, Economic News, Political News Many do not realize this, but the Federal Reserve is the largest holder of US government debt. The Fed currently holds $1.625 trillion of US Treasuries alone, and this is the debt the Treasury is required to pay principal and interest on. This may seem uninteresting, given that the Fed is just an organization of the same government which owes the debt, but the real effects of this debt existing must be considered. Read the rest of this entry »