Gold $864, Fed Zero

So the Fed pulled a rabbit out of it’s hat and surprised the markets by dropping rates to ” a range between between zero and .25%”.  I guess that means the score is gold $864 and the Fed Zero.  Not a good batting average for the Fed if you look at it in baseball terms.

The DOW loved it and was up 360 plus points.  The dollar had the inverse reaction and took a dive looking for the drain.  The Fed no longer has any arrows in it’s interest rate quiver and now is forced to rely almost exclusively on “quantitative easing”.  It seems that the only area in the economy where there will be new hiring is in the printing press maintenance department of the Fed.

“The Federal Reserve has embraced ‘Helicopter Bernanke’s’ inflate or die massive reserve and money creation academic theories in an attempt to prevent deflation,” said Mark O’Byrne, executive director at Gold and Silver Investments Ltd., referring to Fed Chairman Ben Bernanke.

“Markets realize that this will lead to a lower dollar and higher gold prices in the medium and long term,”  O’Byrne said in a research note.

The dollar index the DXY 78.83, -1.85, -2.3%) , a measure of the U.S. dollar against a trade-weighted basket of six currencies, fell 1.8% to 78.54, down from 79.921 in North American activity late Tuesday. “Note how rising risk aversion continues to fail in propping the dollar as was the case since the beginning of the market turmoil,” said Ashraf Laidi, chief market strategist at CMC Markets.

“Considering the Fed’s yield assault on the dollar, foreign exchange traders are no longer focusing on the woes of a bankrupt U.S. auto industry,” Laidi commented.

This dollar’s dive is extremely positive for gold.  This is just the beginning of the dollars dive to the depths.  At some point in this dive down the dollar will hit .72.  There will be bear market rallies on the way way there, but they they will be short lived.  Expect a major battle at the .72 resistance level, but once that is overcome the next stop will be .62 and then on to .52.  The direction is clear and the only fog in the equation is how long it will take to get there.  It may be quicker than we think.

Kinross Gold (KGC) Update

Expanding And Growing

I want to take a minute here and post some news on Kinross Gold.  This company is quietly acquiring assets and is a company that I feel has a bright future in this current environment.

TORONTO, ONTARIO–(Marketwire – Dec. 17, 2008) – Kinross Gold Corporation (“Kinross”) (TSX:K)(NYSE:KGC) announced today that it has completed its acquisition of a 40% interest in Minera Santa Rosa SCM (“Minera”) from certain subsidiaries of Anglo American plc (“Anglo”) for an aggregate purchase price of US$140 million. Minera owns 100% of the Lobo-Marte gold project located in the Maricunga district of northern Chile, roughly midway between Kinross’ Maricunga and La Coipa mines.

As announced on November 20, 2008, Kinross has also entered into a separate agreement with Teck Cominco Limited (“Teck”) pursuant to which Kinross will acquire the remaining 60% interest in Minera for approximately 5.6 million common shares of Kinross, plus a net cash payment of approximately US$40 million and a 1.75% net smelter returns royalty on 60% of future production, payable when the gold price is US$760 per ounce or more. Kinross expects the purchase from Teck to be completed before the end of 2008.

This is the stuff that builds value.  KGC has been hammered like all of the companies in the mining sector, but it has the potential for a major upward move soon.

KGC 12-17-08

The chart is showing a steady rise since bottoming in the low $8.00 range.  I sure wished that I had backed up the truck on that day.  There is huge upside potential from this level.  As gold really gets going I expect this stock to double, if not triple, it’s previous highs.

As always, do your own due diligence before purchasing stocks.  I am only indicating stocks that I have an interest in.  I have owned KGC for a long time and I like it’s approach to the business of mining gold.

Till next time. good luck and good trading!

Also Noteworthy:

• Gold Awaits the Fed
• Fed Ushers in Gold Era
• Gold Rising
• Power Shift Toward Gold
• Gold Going Down?

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