Long Bond/Dollar Say Buy Gold

The Long Bond/Dollar say buy gold coins , bullion and gold stocks.  There is a major change in the global markets that is telling me that buying gold coins , bullion and gold stocks is the right move going forward as the Long Bond/Dollar point the way higher.

It looks like “quantitative easing” is beginning to be felt in the long bond market.  The long bond price is falling  and yields are rising. This is a critical turning point for the global credit markets.  The Federal Reserve and US Treasury have been printing new dollars and bonds with no backing at an unbelievable rate. Because of this extraordinary dumping of liquidity into the system, rates have begun to rise.  What does this have to do with anything, you might ask?  Well it means that foreign buyers of USA debt are cutting back buying, forcing all bond sellers to offer higher rates to make a sale.  This is what is putting the floor under gold.  Gold is reflecting these higher bond rates and is rising even thought the the general equities are off to the races on the feeling that “green shoots” are appearing amidst the the cold snows of the recession.

This chart shows the bond price being squeezed into a tightening flag pattern. Then, with price nearing the end of the flag, you can see the “flight to quality” as it popped-up in one final rally beginning in October ’08 as bonds reacted to the massive sell off in the general equities after Lehman Bros. started the financial crisis.  As the evidence of the liquidity bubble enters the system, the long bond is about to breach 120. It looks like a rapid move  to between 115.00-116.00 is in the cards.  If we look at the big picture, shorting the long bond could be a very profitable trade.

The further out you go with the chart the easier it is to see that the long bond is headed to test the 80.00 support level at first, and it may go further than that if the situation really deteriorates.  Shorting the long bond is not for everyone, but for traders this could be as good a play as gold.  Gold is definitely starting it’s next leg up shortly, if not right now, and the long bond is going to be the motivator.  When foreigners will no longer buy our debt, the rates will have to rise as they are beginning to now.  This is extremely favorable for gold.  It is critical to take advantage of any temporary pullbacks in the price of gold to buy more gold coins and bullion.  The bargain basement prices of gold will not be around for long.

This past week the results were released on the banking sector’s stress tests.  The purpose of these tests was to provide reassurance to the markets that everything is ok.  They performed as expected and the general equities markets took off.  When you consider how much money the banks admitted to  needing to stay afloat, it is inconceivable that they are worth anything at all and yet everyone is happy thinking that everything is going to be ok.  “EGBOK” is not going to last long.  While all of this is lathering up the news, the dollar is quietly edging down.  Since reaching a high of just above 89 in mid March ’09, the dollar has quietly slipped off the cliff this week to 82.44.

Fridays close, 82.44, down 1.36 or 1.76% was significant.  If the dollar does not stop this drop shortly, and I am thinking that it won’t, it will likely re-test last summers low of  .72 as confidence in the dollar continues to erode.

This is another shot in the arm for gold because if gold does one thing well, it is to monitor the health of the dollar.  Things seem to becoming undone rather quickly and everything points to another uptick in the price of gold in short order.  I am more confident now that the next assault on $1000 per ounce will stick because gold stocks have been moving up even with the rise in general equities.  The game is afoot and the gold market knows that the the bond market action and the fall in the dollar is signaling the next move.

One important thing to remember is that most of what you hear in the news about the bank’s stress test results is a show designed to keep the markets under control.  This may lead to temporary swings in the general equities markets and the gold market.  Don’t be fooled by the short term picture!  Keep your eye focused on the big picture  because the prize is coming sooner than you might think.

Pay attention to what William Black says about the stress tests in this video because it is an eye opener.

There are always two sides to a story, so it is good to hear both of them.  I have to admit that Black makes a lot of sense to me.  Bankruptcy proceedings were put into law so they could correct excesses.  With the government controlling more and more of the free market, we are rapidly approaching the point where we will lose the free market to government manipulation.  This intervention is delaying the correction that the banking industry needs desperately and by so delaying it will cause the recession to be way bigger and deeper than it should  have been.

Protect yourself and buy gold coins and gold bullion on any and all dips in the price of gold.  Well managed gold companies with proven ounces in the ground are now a buy in my opinion.  As always, do your own do diligence before purchasing or selling gold or gold stocks.

Till next time, good luck and good trading!

More Gold Market Analysis:

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• Gold Undervalued?
• Buy Gold Coins And Bullion on Dips Under $900!
• Buy Gold Coins and Bullion Now!
• Where Is Gold Going?