Of Gold, The Dollar, Russia, China and Vending Machines!

This week brings us a tale of gold, the dollar, Russia, China and vending machines.  All are pieces in a larger puzzle that, when completed, will launch gold on a target for $1,250 and beyond.  We have entered an era where social and economic upheaval is the norm, not the aberration.  Gold will be the lynch pin in this age of gold, the dollar, Russia, China and vending machines!

This was a very interesting week for gold stocks.  As I said last week , this would be the week to pick up both Novagold (NG) and New Gold (NGD) if the gold price was hammered down.   Gold was pushed down and bounced off the $930 level providing good entrance points for both stocks.  I am pretty convinced that the low for this correction will be between the mid $910′s and $930′s.  The next leg up in gold should begin within the next 2 weeks.  If  I am proven wrong, I am still comfortable with picking up these two stocks at this price level and I will add more if gold moves lower, but that is not what I am expecting.

Here is Novagold’s 5 day chart ending on Friday, June 19th, 2009

Two chances to pick up Novagold in the $4.60′s.  It may not be the bottom, but it is certainly a nice point to have picked some up!  Now let’s take a look at NewGold’s 5 day chart for the same time period.

New Gold looked pretty strong this week despite the shorts working over the price of gold.

The $932 appears to have held, so things will be turning up for gold shortly. This leg up should surprise a lot of the gold naysayers and will probably shock a lot of gold bugs with it’s intensity. I would not want to be caught on the sidelines when this move begins.

As is always the case with any stocks mentioned here at buygoldco.com,  stocks are mentioned because I am interested in them.  In no way am I suggesting that you purchase, or for that matter sell, any stock unless you do your own due diligence.  I write about stocks, gold coins, and bullion that I like, or dislike, and what you do with that information is entirely up to you.  Be responsible and do your own research!  Everyone’s risk threshold is different, so pick a level that you are comfortable with.

The Continuing Saga of the U.S. Dollar

The dollar managed a media driven resurgence towards the end of the week, but the fundamentals do not support this uptick as having any real legs.  The dollar is on it’s way to .72, 62. and then .52 before this party is over. The only thing that is in question is the amount of time that it will take for the dollar to reach these levels.

China and Russia are making waves again that will help shorten Friday’s latest dollar safe haven voyage.  China has the power and the resources to put a “world of hurt” on the dollar, if they choose to do so.

China sells US bonds to show concern

Jun 17 04:20 AM US/Eastern

A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.

The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.

“China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar,” He Maochun, a political scientist at Tsinghua University, told the Global Times.

According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.

It was the first month since June 2008 that Beijing failed to purchase more US T-bills.

Zhang Bin, a researcher at the Chinese Academy of Social Sciences, said China’s move showed a more cautious attitude.

Japan came out supporting the dollar early in the week which helped the dollar, but then we got a new wrinkle from Russia.  They decided to play both sides against the middle!

Medvedev calls for new reserve currencies

Tue Jun 16, 2:23 am ET

YEKATERINBURG, Russia:   Russian President Dmitry Medvedev says the world needs new reserve currencies.

Medvedev told a regional summit Tuesday that the creation of new reserve currencies in addition to the dollar is needed to stabilize global finances.

Medvedev has made the proposal before. It reflects both the Kremlin’s push for greater international clout and a concern shared by other countries that soaring U.S. budget deficits could spur inflation and weaken the dollar.

Airing it at a summit meeting underlined the challenge to U.S. clout.

Medvedev spoke at a summit of the Shanghai Cooperation Organization, which includes China and four Central Asian nations.

Not happy with just bashing the dollar and putting their investments at risk, Bloomberg reports the Russian  “good cop” of this   ” good cop, bad cop”  story from The Russian Finance Minister.

“Russian Finance Minister Alexei Kudrin said the dollar is in good shape, further affirming that there’s no substitute for the world’s reserve currency. Kudrin rushed to reassure investors of Russia’s confidence in the dollar just days after his boss, President Dmitry Medvedev, questioned its global status, joining China’s central bank Governor Zhou Xiaochuan in suggesting the world may need another benchmark for settling international debts.

It’s too early to speak of an alternative, Kudrin said in an interview two days ago in Lecce, Italy, after meeting officials from the Group of Eight nations. Kudrin’s comments underscore the dependence of Brazil, China, Russia, and India on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. Even as some of their leaders questioned the dollar’s status, the four nations increased foreign reserves by more than $60 billion in May to limit their currencies gains and support their exports. They now have combined reserves of $2.8 trillion and are among the largest holders of Treasuries.”

No matter how Russia plays it’s hand, the dollar is headed down.  Don’t expect a massive drop, because the dollar will be defended at every turn because it is the world’s reserve currency.  The central banks will not let it go without a massive fight. The dollar’s drop will be in a stair step fashion down and will probably have some nice head fake rallies as it goes down.  These rallies will effect gold, but to a lessening degree as the drop steepens.

Elina Rybakova, Chief Economist of Citi Group Russia  brings another Russian view point to the table that is well worth listening to.  I particularly like her take on the reasons for shopping central banks to find the ones that best preserve the value of their currencies.

This weeks final bit of news comes from News.Scottsman.com and as interesting as it appears, it also makes me start looking around for a top in the gold market.  Just kidding, but these kind of stories do tend to appear during market blow offs.  Fortunately for the gold market, we are no where near a blow off top.  This guy seems to have found a better mouse trap at just the right time!

There’s gold in them thar vending machines!

Published Date: 21 June 2009

It’s a novel twist on the vending machine. In go the coins, out comes a nugget of gold.

TG-Gold-Super-Markt, a company based in Reutlingen, south-western Germany, is developing a machine to dispense pieces of gold as small as one gram in ornamental boxes for about £25.

CEO Thomas Geissler came up with the idea of gold dispensers just before Lehman Brothers collapsed in September and was further convinced by a heightened interest in the precious metal as a hedge against inflation as the financial crisis rippled around the globe. “People do not believe that the worldwide financial changes will have a good end,” Geissler said. “So I say give the people what they like to buy.”

The largest lump dispensed will be ten grams, a size “only suitable for gifts”. Wherever the machines are placed, said Geissler, they will communicate with head-quarters in Reutlingen via internal computers to update the value of gold every two minutes and maintain the lowest possible price.

Oh, the modern conveniences of the times we live in!  Now if only some one could come up with a government that was not constantly looking to acquire more power and control over it’s population!  The founder’s of the United States thought that they had it, but I guess they didn’t consider the persistence of this generations Neo- Marxists.

Now we are done with this week’s tale of gold, the dollar, Russia, China and vending machines.  Each little piece signifies little taken individually, but collectively they are pointing to major rally coming shortly in the gold market.

Next week we will see what the immediate future holds for gold.

Till then, good luck and good trading!

More Gold Market Analysis:

• Russia, China United?
• Gold and the Dollar: Joined at the Hip
• Gold In Flux And The China Syndrome
• Inflation, Deflation, Barrick and China
• China, Gold and the Dollar

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