Barbarians At The Gate!

This has been an event filled week that will culminate with the vote on Sunday that will determine whether we are a government of the people, by the people and for the people or a government that has been felled by a revolution (or as the “progressives” have rephrased it, evolution)  from within, that brings us a Socialist/Marxist State.  Freedom certainly is not free, and I fear that we are about to learn that lesson and pay the price.

The Gold Market:  Waiting In The Trading Range

Gold is still tied to the dollar at the hip, so the best way to explain gold’s trading is to look at the dollar.  All eyes are focused on Greece so the currency traders beat up the Euro, the Pound and the Franc on Friday.  The lemmings, seeing that action, jumped aboard the dollar train and drove it up  .534 to close at 8o.75.

With all of the euphoria in the dollar pits, gold was beaten up once again and sent to the bottom of its current trading range.  Weak hands dumped gold, but wiser hands stepped in to pick it up!

Gold gets smacked every time it approaches $1,130, but buying comes in before it breaks $1,100.  That is the trading range that we currently find ourselves in and in it we will remain until some event sparks a breakout in either direction.

Maybe the take over of one sixth of the U.S, economy by the “progressives” will provide that impetus.

The Barbarians Are Bringing Greece To The U.S.

The number of states in the U.S. that are teetering on bankruptcy due to Democrat control is growing by the month.  California alone is so much more a threat to world financial stability that it makes me marvel that the spin on the Greece problem drives investors into the dollar.

This piece from MSN Money gives a little insight into what is rapidly approaching our country,

Foreign versions of our coming crisis

Greece and the United Kingdom are suffering a dire funding problem that is headed for US shores.

MSN Money

Regrettably, these days it seems that ferreting out the right investment decisions is sort of all macro, all the time. The top-down economic overview is far more important, I think, than the bottom-up fundamental view of any company or stock.

Important pieces to that macro jigsaw puzzle are Greece and the United Kingdom, as the U.S. is headed for a variation of the funding crisis, though how severe ours will be remains to be seen. Without a money-printing press — because it uses the euro, not a currency of its own — Greece is forced to consider austerity measures to deal with its debt woes. The U.K., on the other hand, is not as bad off as Greece, and it does have a press.

For America: A Greco-Anglo scenario?

A crisis of confidence has invaded Greek and U.K. shores, and we can all learn a bit about what our future might look like as we watch developments there. (The U.K. may be the most useful example for us, since we also have a printing press.)

We will soon find out whether Bank of England Gov. Mervyn King will extend quantitative easing and, if he does, how the bond market will respond to a renewed effort to pump money directly into that economy. (The pound is already under a good deal of downward pressure.)

I would say that the U.K.’s funding crisis — to use my ballgame analogy — is probably in the third inning or so, even if we are still taking batting practice over here.

Back to Greece for a second: The sort of straitjacket that it’s being placed in by its inability to print money is what’s forcing the country to consider making tough decisions.

Only in a funding crisis where you have no other options are the Western world’s “soft” social democracies willing to — or rather, are forced to — make hard decisions. So, the upside of the crisis is potentially coming out the other side in a more sane, sustainable fashion. That’s what we all have to hope for.

Inflation ahoy?

But before facing our own debt and currency crisis, the U.S. is liable to experience a period of stagflation and inflation. Regular readers know my view about the strong connectivity between money printing and inflation.

What’s difficult is trying to describe in advance the exact path whose destination is inflation. That’s because government money printing infects certain markets or niches sooner, with some affected more than others. But one thing is knowable: Money printing always ends up raising prices.

Thus far here in America, we’ve witnessed a lot of taxes and user fees raised by the government, and businesses that have seen competitors fall away have increased prices. That’s a variation of inflation, which will be exacerbated by more money printing.

Barbarians At The Gate!

The IMF publishes estimates of adjustments to restore viability

Debt is the antithesis of wealth and quantitative easing is a fancy term for creating massive new debt.  The IMF recently released info on what countries would have to do in order to bring their financial houses back to order.

1. Japan and the UK would have to fiscally tighten by 13% of GDP

2. Ireland, Spain and Greece would have to tighten by 9%

3. In sixth place, the U.S. would have to tighten by 8.8%

The U.S. is beginning to be lumped in with the “problem” countries in the IMF’s eyes.

More Bad News!

The Community Organizer in Chief’s new budget assumes 3.6% real GDP growth over the next 5 years and inflation averaging at 1.4%.  If you buy that load of c%$#@p I have a congressional “bridge to nowhere” to sell you.

To add insult to injury, Moody’s Investor Service warned that the triple A credit rating of the U.S. “should not be taken for granted”. We had better get ready for the wave of inflation that is rolling towards our shore!

Gold is no longer a luxury!.  It is now a necessity because the barbarians are at the gates and they are not here to help us.

China gets it as the next article demonstrates.   Maybe we should take heed of the hidden messages that the world’s next super power is sending.

China Prepares to Transform the Gold Market

Seeking Alpha

By: Peter Cooper

The inscrutable Chinese are hardly likely to inform the world that they are on a gold buying spree for fear of sending the gold price through the roof before they can finished their acquisition plans.

China’s gold reserves amount to 1,054 tons, ranking fifth in the world, said Yi Gang, central bank vice governor on Tuesday. China is the largest gold producer in the world, with more than 300 tons of gold produced annually, all of it consumed locally and not exported.

Private gold reserves

China is the second largest gold consumer in the world, with a consumption of over 400 tons of gold a year, second only to India. And it has been conservatively estimated that there are far more than 3,000 tons of gold accumulated among Chinese people.

Indeed it was only at the start of last year that China suddenly announced to the IMF that it had doubled its official gold reserves to 1,054 tons from 2003. Nobody knew anything about it before then, although there must have been suspicions in the trade.

Ah but let me run that past sharp readers again. Yesterday the Chinese central bank announced gold reserves of 1,054 tons, exactly the same figure as it gave the IMF a year ago. Is that not suspicious? When will we see the true figure including whatever they bought last year?

‘Gold is not a bad asset but currently a few factors limit our ability to increase foreign-exchange investment in gold, Mr Gang, also director of China’s State Administration of Foreign Exchange, told a news conference during the National People’s Congress.

He went onto explain that the supply of gold was too limited for the precious metal to play a major role in currencies, and that if China bought too much the price would go up.

Accumulating gold

But China should be judged on its record and not its rhetoric. In 2006 the World Gold Council said its central bank held 600 tons and had doubled its reserves to this level at the time when the UK was selling its gold reserves.

China has clearly been increasing its gold reserves steadily for a decade and has benefited from the quadrupling of gold prices over that period. But never mind the central bank, surely the surging private gold and silver holdings are the thing to watch.

When a population of 1.5 billion, Chinese become gold bugs then $5,000 an ounce gold will be seen as far too conservative as a forecast.

Push is about to come to shove and the world as we know it will be changed forever.  Gold is going to play a prominent role in the new world financial order, make no mistake about it.

Owning physical gold bullion and coins as well as silver bullion and coins should be a part of everyone’s financial planning. Gold stocks provide an opportunity for profits going forward in the coming volatile months.  One would be wise to put some of those profits into physical gold and silver, because with the barbarians at the gate, paper promises will not be worth the paper that they are printed on.

Till next time, good luck and good trading!

More Gold Market Analysis:

• Gold and the Dollar: Joined at the Hip
• IMF Diversion Will Not Stop Gold Buying
• Where Is Gold Going?
• “QE-3 To The Moon, Alice!”
• India’s Announcement Pops Gold Up!

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