Capitalism in the Cross Hairs!

March 3, 2009 Market Updates, Physical Gold, Politics No Comments

The current market woes are a reflection of capitalism in the cross hairs. Pro free market proponents are currently losing the battle with big government anti capitalists which is leaving capitalism in the cross hairs.

Once again the markets voiced their concern over the direction the Obama administration is taking this country with with a resounding 299 point NOOOOOOOOOOO vote. Today things are a little calmer as the dust from yesterday’s action begins to settle. The DOW is currently up 68 at 6831, the NAS up 14 at 1,336, the dollar is coasting up .01 (.02%) at 88.98 and gold has given up the ghost, down $11.10 at $914.30. Last week’s push to and through $1000 was obviously not the move that was meant to stick. Now we are left to wonder why?

Gold breached the $1000 mark before before reacting back heavily, which was not totally unexpected because gold had run into the oversold area of it’s upper trend line. The expected resistance materialized at the $1000 mark and because traders took profits once gold moved through the $1000 mark.

Yesterdays DOW plunge added more stimulus to the downside move and now sentiment has shifted and all of the weak hands are throwing in the towel.

mar022009 gold chart Capitalism in the Cross Hairs!

Gold Bounces Off Upper Trend Line

The chart clearly shows the the bounce off the over bought line and also points out the low on the over sold line which is between $890 and $900. If the low holds than the bullish up trend continues. I would like to see this drop in price hold the $900 mark and consolidate for a bit in that area in order to build a solid base at that level before the next leg up.

With the action in the markets today, anything can happen. One major new financial bombshell could send gold through $1000 very quickly. On the other hand if Socialism works and everything comes up roses, we could be looking at $32 gold again and if Socialism works maybe Communism would work even better, because we all know that the reason neither has ever worked before is not the system’s fault but rather because the wrong people were implementing the systems. Did I get you going there, just for a second? Just kidding!

Despite gold’s retreat from the $1000 mark, the recent action was bullish and bodes well for the future, because by breaking the October highs, gold is continuing it’s pattern of higher highs and, if all goes well this time, higher lows. There may be a bounce in the price of gold because it has entered oversold territory, but I think it will test the $890 to $900 resistance before pushing up solidly.

The markets are in turmoil and we should not think for a second that the gold market is exempt from what is happening around it. The financial crisis is a real event that is being batted around like a ping-pong ball between the proponents of free markets and the proponents of controlled markets. Gold is a sounding device, the canary in the coal mine, that is trumpeting the the winners on a daily basis. If we look at the situation, without bias, it is clear that, for now the government control group, has the upper hand. Gold will reflect this battle and the moves in it’s price will become more and more violent as these two groups continue to wage the war. As of today, the Obama administration has been in power for one and one half months and the DOW has lost around 2,800 points and they seem not to care at all. This bears watching and we must prepare ourselves for the worst, because it looks as if it is coming.

More and more money is being created out of thin air with this “we will spend our way out of it crowd” and the press would have us believe that this will not lead to inflation. This could not be further from the truth! This was recently trotted out by Paul Krugman of the New York Times.

“Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery two big ifs, to be sure getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.”

When I read that my mind goes immediately to P. T. Barnum. How stupid do these people think we are? I will not even go into detail on these comments because it’s a really nice day and I don’t want to waste my time with this machine politics B.S.. This is wishful thinking from a party hack. Swiss cheese would hold more water than all these ifs. If this is the direction of “change”, it is time to buy gold and to buy gold stocks to protect ourselves from “change”.

The important thing now is to see if this correction in gold holds the $890 to $900 level. If it does, it will be time to back up the truck for the next move up.

Till next time, good luck and good trading!