Gold And The Big Picture

April 3, 2010 Global Economy, Politics No Comments

Keep your eye on gold and the big picture. Attention to the day to day action of prices and stocks can set you up for a kind of tunnel vision that will lead you to buy and sell at the wrong times. Preservation and accumulation of wealth is the object when considering gold and the big picture!

Stacked Numbered Gold Bars Gold And The Big Picture

GOLD: Real Wealth Preservation

Markets move both up and down and, over time, this movement points to patterns that enable chartists to make reasonable predictions of what direction that they will take in the future. There are no guarantees that come with these predictions, but over the long haul they provide very useful information. They represent the big picture that affects the stocks or commodity that you are looking at. If you position yourself to profit over the long term, you will not be so tempted to trade in and out at exactly the wrong time, which is usually what happens to most traders when the short term momentum turns against them.

GOLD: The trend is obvious when looking at the BIG PICTURE.

It is pretty obvious that gold has been in an uptrend for the last 9 years when you step back and look at the 10 year chart.

The BIG PICTURE on Gold!

The move started in 2001 after gold had bottomed around $250. From that time till the present, gold has been steadily moving up. Gold has been the best investment of this decade and it it is currently selling in the $1,120 range. The chart clearly shows a major up trend and, we all know that the trend is your friend. Every dip in the price of gold should be looked at as a buying opportunity, not as an occasion to panic and sell.

When we shrink the time frame down we tend to see more clutter which makes it harder to keep our eye on the prize.

8 Month Gold 4 2 2010 Gold And The Big Picture

As The Time Frame Shrinks It Becomes Harder To See The Big Picture!

The parallel lines define the trading range that gold has been in since mid December 2009. The bottom is in the $1,080 area and the top is $1,120. The longer that gold is boxed in this trading range, the more the pressure builds which will lead to a break out in one direction or the other. I think the break will be to the up side and I think it will be pretty violent when it does occur.

The Markets Speak To The Future

Markets react to all sorts of events, whether they be political, current events or natural disasters, they can all have an impact on the markets. In general news related stories have a short term effect and are quickly absorbed by the markets that are looking forward in time. The markets tend to predict what will happen in the future, not what is happening right at the moment.

If gold is rising, it is forecasting higher inflation which, if you are following what the government is doing, should be no surprise.

We have seen the general equities markets rising for the last year and they continue to rise which indicates that they see the economy recovering. It may not be a very strong recovery and it is dominated by the wrong area, but it is still an improvement from the early days of the financial crisis.

When I say that the recovery is dominated in the wrong area, I mean that the recovery is based on government money spent on increasing the size of government. Comrade Obama is deliberately sacrificing the private sector in order to build his socialist government utopia. These policies have never worked before and they won’t work now!

Even the 100,000+ new jobs that the administration is currently touting are based on false readings. These jobs are temporary hires for doing the census, not real private sector jobs that will last more than a couple of months. Watch for revisions going forward and for the jobless rate to increase in the coming months.

The house of cards that is America today is being built on sand and it will come crashing down before long. The list of examples goes on and on, but the most important one clearly depicts the financial condition under the “progressive party”.

It took 200 years for the U.S. to reach $1 trillion in debt. That figure includes WW I, WW II, Korea, Vietnam and the “Muslim Campaigns”, from Desert Storm to the present. One year under “The Community Organizer in Chief” left us with with a doubling of that debt to $2 trillion and today the debt level has risen to $13 trillion.

The U.S. Is Between A Rock And A Hard Place!

“Experts estimate that in about 10 years just the expenses for the interest payments on the debt and Social Security will take up about 80% of all of the government’s income.”

That statement should scare the living C&%$&@#P out you. If it doesn’t, you will be one of the first to go down the drain once the U.S. starts circling it.

To add insult to injury, just wait until the REAL costs of Obama Care come to light. Get ready to pay through the nose for inferior care!

Make no mistake about it, inflation will be the result of the Fed’s aggressive monetary policies. It appears that inflation is already getting started since producer prices have had sporadic surges in recent months with a 17% annualized rise this past January.

Everyone is worried about the affect Greece’s financial problems will have on the Euro, but it would be wise to take a look at what is beginning in the U.S. Just wait till California rolls over!

And So It Begins In The USA!

Fitch Downgrades Illinois to A-minus

Monday, March 29, 2010Â The Bond Buyer

By Yvette Shields

CHICAGO: Fitch Ratings late Monday downgraded Illinois’ general obligation rating one notch to A-minus and warned of possible further action by leaving the states credit on negative watch ahead of $1.3 billion of short- and long-term GO issuance in three deals over the coming weeks.

Gov. Pat Quinn had hoped that the General Assemblys passage last week of pension reforms would stave off any negative rating actions and buy the state some additional time to address a nearly $13 billion budget deficit and liquidity crisis in the current legislative session.

But Fitch analysts said the states challenges are too severe and persistent. They believe it is unlikely the fiscal 2011 budget will sufficiently address either the annual operating deficit or accumulated liabilities.

The results of the current session will drive analysts decision as to whether Illinois holds on to its current rating level. Fitch dropped the states $23.4 billion of GO debt two notches down to its current level last July.

Fitch’s action follows Standard & Poor’s decision on Friday to place the states A-plus rating on negative CreditWatch. Moody’s Investors Service on Monday affirmed its A2 rating and negative outlook.

Gold (plus gold’s little brother, silver ) Is The Only “True” Safe Haven Asset

Gold has been trading in the $1,080 to $1,120 range since Mid December 2009 with only a couple of quick pops above and below the range. Gold stocks have been under performing in relation to the price of gold. To put it simply, gold is undervalued in relation to the dollar at this time. The longer gold stays in this trading range, the more violent the move will be when it breaks out of the range.

While the run up in the general equities appears to be losing steam as the DOW approaches 11,000, gold is over sold and should correct soon. Central banks are doing everything that they can to cap the price of gold in order to maintain the credibility of their fiat currencies. Every time gold touches $1,120 they come out in force to push it back. These moves can only be successful for so long. Gold is a very small market, and once the sentiment shifts, the banks will not have the power to hold it back.

There are trillions of dollars sitting in bond markets that are about to be rocked as more and more states approach bankruptcy. This will most likely be the trigger that sets off gold’s next run to the upside. There is no question that sovereign debt and currency problems are extremely bullish for gold and that they are the reason why there is so little downside in gold at this time.

Gold is pricey for the average buyer today, so don’t neglect silver when considering purchases in both physical bullion and stocks. Once the next leg up gets the public’s attention, silver will most likely out perform gold on a percentage basis.

Remember, preservation and accumulation of wealth is the object when considering gold and the big picture!

Till next time, good luck and good trading!