Gold On the Cusp

May 24, 2009 Gold Investment, Politics, Predictions No Comments

Gold is on the cusp of another significant leg up. It is important to buy gold stocks with an initially targeted selling point. Buying and holding gold coins and gold bullion should be the order of the day. Take advantage of this as gold is on the cusp of another big move.

The Perfect Storm!

It looks as if the perfect storm is brewing for the destruction of the U.S. as we have known and loved it. The left wing domestic and foreign agenda is being implemented by the “Community Organizer in Chief” and his willing accomplices in the House and the Senate. On the domestic front we are looking at adding power to the unions, more welfare, the total destruction of free market capitalism, driving wealth and investment out of the country, an explosion of government programs funded by printing press money and in the end, higher taxes. On the foreign agenda we are seeing appeasement raised to new heights. Our new aggressive stance with our enemies is to drop apologies rather than bombs. This rush to mediocrity does not serve the country well and will only increase our problems going forward. To use an old quote, “You ain’t seen nothin’ yet!

The ultimate result of this “Socialist Folly” will be a crushing debt burden, increasing unemployment, and a steady tamping down of the U.S. growth rates until they attain parity with the low to no growth rates of socialized Europe. We are going to experience a world with no economic standout (until China takes over that roll) and no world policeman. With no one to control the “bad guys” that abound in the world, the U.S. will experience Middle East type turmoil on it’s southern border.

While speaking about the “bad guys”, it is important to note that the new U.S. President will not back Israel. He wants to talk to Iran, which plays right into their strategy of delay until they have nuclear capability. Unfortunately, President Obama is so inexperienced that he will probably talk until they have time to gain a nuclear arsenal, instead of a single warhead, before he acts. This will force Israel to act on it’s own which could have dire results in the region. This video clearly shows awkwardness and hesitation on President Obama’s part.

He is clearly out of his Chicago league and a little uncomfortable playing with reality on the world stage. Iran’s latest missile test was another yet another warning that did not seem to appear on the President’s radar.

After the meeting between Obama and Israel’s new prime minister, Netanyahu, Israel most likely will begin to prepare for all-out war in the Middle East, if they have not already started . The likely hood of all out war could probably have been prevented if the U.S. had continued it’s stand as a strong backer of Israel. It is strange how, sometimes in history when you need a true leader, the electorate is only capable of delivering a shadow of a leader, and not the real thing! Let’s hope that the price of this inability of the electorate to grasp the truth will not crush what is left of a once great nation.

When all is said and done, gold is going to be the only refuge for investors in the next two years. We will see gold move up and test the $1000 mark once again shortly. This time I think it will stick.

The Dollar

The dollar, as I have said many times before is a “dead man walking”. Like everything else in the world, it will not go straight down, so don’t let this chart of the last five days fool you.

us dollar may 18 thru 22 09 Gold On the Cusp

Next Stop, Basement Bargains!

The dollar is beginning it’s journey from the artificial highs brought on by the economic collapse, to reaching a series of lower lows. The numbers to look for are .82 (which it blew through this week), .72, .62, and finally .52 or lower, which will bring on a new era for the dollar, namely that of a currency in a “banana republic”. I wonder if that moniker will work, considering that we don’t produce many bananas. As the dollar loses value, gold will rise.

GOLD!

Let’s take a look at some numbers and see what they are telling us. The average price of gold during the first quarter ’09 was $908 and change. This price is actually down 2% from the first quarter ’08, but that is not a surprise since there was this little thing called the “financial crisis” that occurred between the two time periods. At first glance, one would assume that the demand for gold should have gone down by a similar amount, 2%, but that is not what occurred. Gold demand in the first quarter ’09 was up 38%. Why would that be? This comment from World Gold Council spells it out.

The biggest source of growth in demand for gold was investment. Identifiable investment demand reached 595.9 tonnes in Q1, up 248% from 171.3 tonnes in Q1 2008. Taking into account inferred investment, which in the first quarter largely reflected investor flows into bullion accounts, total investment off-take reached 711.2 tonnes, up 173% on the levels of a year earlier.

The bold face and underline were my addition to their statement. This clearly counters those that have been touting the drop in jewelery sales as a reason for gold to fall. Investment demand has far out weighed the fall in the jewelery demand as I have mention before in these articles. Gold is rapidly reverting to what it has always been in the past, real money.

Gold prices will have to rise in order to reflect the supply and demand situation of the market. In order to compensate for the numbers from World Gold Council, the price would have to rise to $1273 just to reflect the supply and demand situation that is presented to us by the World Gold Council. That means a $313 rally from the current price of roughly $960 per ounce of gold, is in the making.

Gold has, as usual, not performed well when general equity markets are on a tear. Now that the the “dead cat” bounce in general equities is beginning to wobble, gold should move up to restore order to the supply and demand numbers. So far the move in gold has been modest and orderly. If the DOW steps off the precipice and tests it’s low, the action and price swings could become very violent. Let’s hope that things stay orderly, because the alternative is not very pretty.

If we break through $1,000 per ounce and the DOW continues to struggle, gold could easily hit the $1,200 by the end of summer. If not, we are in for a delay and another retest of gold’s lower levels. As the price moves up I will advise taking profits based on your initial targets for the stocks when you purchased them. There is no point in getting greedy. There will be another pullback in gold to a higher low and it would be wise to sell some of your shares to build cash so that you can take advantage of the next adjustment.

Till next time, good luck and good trading!