China, Gold and the Dollar

January 26, 2009 Gold Stocks, Market Updates, Politics No Comments

Gold goes through $900 while the Obama administration takes aim at China. With it’s first contact, the Obama administration takes aim at China and may have inadvertently pushed gold through $900!

Friday finished off the week with a bang. Gold ended the week closing up $41.90 at $898.30 after breaking $900 earlier in the session. All this occurred while the dollar traded up for most of the session. At the time of this writing, the DOW is up 115 at 8,193, the NAS is up 36 at 1,508 and gold is continuing last weeks move, up $12.80 at $911.10. Earlier this morning the benchmark contract for February gold futures rose to it’s highest level in three months, reaching $909.70 . It might be too early to call a top in this move in the dollar, but this could be the beginning of a serious leg down for the greenback.

dxy 9 am 1 26 09 China, Gold and the Dollar

Is The Dollar Finally Breaking Down?

The dollar weakened this morning (finally) as more investors moved into gold and out of the dollar. The dollar index, DXY, opened at 85.48 and then proceeded to drop .97 to 84.54. We should see more of this in the near future baring any dramatic manipulations that the Fed can pull out of it’s hat. Their bag of tricks is rapidly emptying.

The Obama administration takes aim at China!

Listen To Me! I Know Everything!

This past Thursday, President Obama’s nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, “backed by the conclusions of a broad range of economists, believes that China is manipulating its currency.” Saturday morning an official from China’s Ministry of Commerce said “we never have used currency manipulation or exchange-rate manipulation as a means to gain an advantage in international trade.” In a more telling part of the statement the official fired right back at the US when he stated that China would not “rely on devaluations” of its currency, the yuan, to promote exports. Ouch! That really stings, considering the policy of “quantitative easing” that the Fed has embarked on of late.

It is interesting to me that the first contact from the Obama administration with China would be so provocative. One would think that some pleasantries would have been exchanged before stepping into the deep end of the pool. China holds a lot of US paper and is in a position where they can seriously damage the dollar if they choose to do it. It makes me wonder if the new kids on the block have any clue how serious the stakes are in this game.

Anything can happen with a new administration and we are way early in the game here, but I really don’t think that antagonizing China is the right move at this time with the economy in a shambles. But that’s just me, I’m sure that the “experts’ in Washington have examined all the ramifications before they started out on this path. NOT!

Gold through $900!

To be quite honest, I am surprised that there was so little resistance at $880 and $9oo. At this time gold is up $9.70 at $908. At some point soon, the paper shorts will attack the price of gold. There is too much at stake to allow gold to move unfettered in an upward direction. A little consolidation and side ways action would be nice here for gold to build a strong base over $900. Do not be surprised if gold is pushed back below $900.

A Quick Update On Some Of My Preferred Gold Stocks

The gold stocks that I am interested, ABX, GG, NEM, KGC,RGLD, etc., are all down by about 2% right now. That is not unusual, considering the run that they have had of late, but I would feel better if they were leading the way. It appears to me that there are some weak hands out there that might be exploited if the shorts want to make a stand and push gold back under $900. If we get a pullback in the price of gold it will once again be time to buy gold, and these gold stocks in particular.

With that cautionary note in hand, till next time, good luck and good trading!