Gold & Silver React To Global Economic Crisis

June 14, 2010 Global Economy No Comments

Gold & silver react to global economic chaos and provide a barometer for the health of currencies across the globe. Gold is telling us that the continued use of “quantitative easing” across globe is not going to end well. Amidst all of the hype and spin gold & silver are reacting to global economic chaos.

Gold Liberty Coins Gold & Silver React To Global Economic Crisis

In order to understand gold’s potential at this time, it is imperative to understand its past. In 1981, the gold bull market of the 7o’s hit its peak at $850 per ounce. If we adjust the price of gold for inflation based on the dollars that it is quoted in, gold would have to reach $2,270 just to reach parity with the 1981 peak.

For the same time period, silver topped out at $50 dollars. Inflation adjusted, silver would be at $125 per ounce. These numbers assume that gold and silver match the 70′s bull run highs. The case can easily be made that this time the highs will be far greater due to the massive monetary increase that “quantitative easing” is bringing to the global monetary supply.

Monetary inflation is a reality and, if anything, it is picking up speed across the globe. Government’s attempts to reign in this inflation will fall short as we are witnessing with the Greek debt bomb.

Greece is Just The First of Many!

Greece is only the first of many nations that will succumb to bankruptcy. The European socialist states are like dominoes that will roll into and topple each other as the debt bomb expands.

Sovereign debt default are the buzz words of the times. Greece is just the tip of the iceberg, with Spain and Portugal soon to follow in Greece’s footsteps. The IMF is pushing the bailout of Greece for one reason alone: They need to buy time in order to institute their new global fiat currency.

Gold Prices Surge Past $1,180

NEW YORK (The Street) 5-3-10 — Gold Prices Monday were passing $1,180 as the Greece debt crisis reached a resolution and China tightened lending.

Gold delivery for June was up $4.30 to $1,185 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,185.90 and as low as $1,177.10. The U.S. dollar index rising 0.41% to $82.20 while the euro was falling 0.52% against the dollar. The gold spot price was rising over $6, according to Kitco’s gold index.

Greece will receive 110 billion euros from a joint IMF and European Union financial aid package by May 19. In return, Greece will have to enforce even harsher measures such as salary and pension cuts for public-sector employees, a hike in the retirement age, tax raises, and an end to annual two-month bonuses, all of which resulted in riots and protests. The plan still needs to be approved by the European countries’ parliaments. Despite hope for Greece, the massive bailout is putting pressure on the euro and investors are turning to safer assets like the U.S. dollar and gold. Gold is appealing during times of economic uncertainty as money that doesn’t deteriorate in value.

One variable for gold will be China. The People’s Bank of China reportedly raised the requirement banksÂ must hold in their reserves by 50 basis points meaning there will be less money in circulation. A consistent fear is that if China keeps tightening lending then the country and consumers will stop spending especially on luxury good items like gold.

Gold prices popped 2.3% last week and many analysts are confident that gold will break $1,200 to test its all-time high of $1,227 an ounce but are skeptical as to how long prices will stay there. “I do think there will be some resistance as we attempt to eclipse the December highs,” says Scott Redler, chief strategic officer of T3Live.com. “[But] I do think we take out those highs and we see $1,300 to $1,400 an ounce at some point this year”

Silver prices were rising with gold prices up 17 cents to $18.81 while copper prices were down 3 cents to $3.31.

The Euro is toast and the dollar will be right behind it! Make no mistake about it, “The times, they are a changing”.

It Can’t happen Here

Oh yes it can, and it will, unless drastic changes are made in U.S. Monetary policy. Nothing has been done that will create private sector jobs. In fact all of the policies of this administration are based on expanding government and its power at the expense of the private sector. Here are a few of the things that will keep America sliding into the economic hell that is Obamunism.

1. California has a worse debt ratio than Greece currently does and yet it is not mentioned

when considering sovereign debt default (I know that it is not a nation), even though its

economy is larger than that of Greece.

2. “Quantitative Easing” will continue because the fed has no other alternative. They have to

kick the can down the road so the blame falls on the next administration. There will be

no interest rate hikes until well after the November elections for purely political reasons.

3. The gulf oil spill guarantees higher energy prices for the foreseeable future which will curb

any chance of the U.S. consumer spending us out of the current recession/depression.

Don’t be surprised if the “Community Organizer In Chief” suspends drilling in the gulf in

to “protect the environment”.

Gold And Silver Will Rise To New Highs In This Environment!

We are living in an age of governmental smoke and mirrors. Things are never quite what they seem to be. Gold and silver provide a good barometer of how things are really going. The current upward move in gold should break the record high and push through $1,300 per ounce and possibly hitting $1,400 per ounce before correcting back and consolidating again.

It is all important to keep focused on the big picture. The day to day fluctuations in the prices of gold and silver are inconsequential, unless they break major support levels. Gold and silver are in a long term up-trends and any corrections in price should be viewed as buying opportunities.

No matter how the news is spun on the Greek bailout, California’s impending financial implosion, the rising number of bank failures and on and on, gold will reflect what is really going on with the dollar and the global financial markets.

Investments in gold and silver are insurance against what is coming to America and should not be sold at this time. There will be time enough to sell when gold enters its blow-off top phase. We are no where near that point at this time. When the public finally figures out that the dollar is toast, they will pile into gold en masse. Then and only then, will it be time to start exiting the market.

The stock side of the gold and silver market is where profits can be made. Sell into strength and buy weakness. I will only sell a third, or at most one half of my position because I don’t want to be left out if there is an unexpected surge due to unforeseen event. The risk is greater of being left out at this time. Volatility will be the norm and global “quantitative easing” virtually guarantees a higher gold price.

Those that stay the course will be richly rewarded because this gold bull is just beginning to get interesting.

The Government Motors Spin Continues

Here is an interesting article that sheds some light on the smoke and mirrors that the current administration is pushing in order to keep the lumpen proletariat in the dark about their plans for America’s future.

Grassley Slams GM, Administration Over Loans Repaid With Bailout Money

April 22, 2010Â FOXNews.com

A top Senate Republican on Thursday accused the administration of misleading taxpayers about General Motors’ loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money.

A top Senate Republican on Thursday accused the Obama administration of misleading taxpayers about General Motors’ loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money.

Sen. Chuck Grassley’s charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP. Watchdog Neil Barofsky told Fox News, as well as the Senate Finance Committee, that General Motors used bailout money to pay back the federal government.

“It appears to be nothing more than an elaborate TARP money shuffle,” Grassley, the ranking Republican on the Senate Finance Committee, said in a letter Thursday to Treasury Secretary Timothy Geithner.

GM announced Wednesday that it had paid back the $8.1 billion in loans it received from the U.S. and Canadian governments. Of that, $6.7 billion went to the U.S. treasury.

But Grassley said in his letter that a Securities and Exchange Commission form filed by GM showed that $6.7 billion of the tens of billions the company received was sitting in an escrow account and available to be used for repayment. He called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep.

The bottom line seems to be that the TARP loans were ‘repaid’ with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the administration have claimed in their speeches, press releases and television commercials,” he wrote.

Vice President Biden on Wednesday called the GM repayment a “huge accomplishment.”

But Barofsky told Fox News that while it’s “somewhat good news,” there’s a big catch.

“I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn’t from earnings. … It’s actually from another pool of TARP money that they’ve already received,” he said Wednesday. “I don’t think we should exaggerate it too much. Remember that the source of this money is just other TARP money.”

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through “a liquidation of its ownership interest.”

Grassley criticized this scenario in his letter.

“The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment,” he wrote.

This report is a far cry from what is being touted by the government press as a major policy success for the administration. Government Motors is still being run by the “oblivitards” that have seized power under “Obamunism”.

Make no mistake about it, gold & silver are reacting to global economic chaos. They are the canaries in the coal mine that are warning us about trouble ahead.

Till next time, good luck and good trading!