The market hits a new record high in gold! What is driving the gold market and is it entering a “bubble” phase? I will address these issues and more as we look at the facts behind the record high in gold.
A couple of things to get out of the way before I get into my thoughts on the current gold move and the many caution calls for consolidation of this latest move in gold. This writing may come to you a little earlier this week and a little later next week because the wife and I are off for a vacation in Puerto Penasco (aka Rocky Point), Mexico. Those of you that follow buygoldco.com know that I usually post on Saturday afternoon. Because of our vacation I will post this either late tonight (Friday) or early Saturday morning and next week it will be either late Sunday or midday on Monday, depending on how long it takes me to readjust from quiet days on the beach.
The Definitive Book On Gold Investing Is On The Way!
On another matter I want to let you know that I have just finished the definitive book on purchasing both physical gold and gold stocks. There are so many books out there that provide specifics in different areas of investing, but I have yet to come across one that provides the basics and the discipline required for both the novice and the experienced investor to profit from the current gold bull market. This book covers it all in the same style that I write to you about the markets in my buygoldco. articles. Everything is explained so that the new investor can understand it and the experienced investor can put some discipline and prospective into the “what, why and how” of their investing. Look for it in November!
The Price of Gold Is Stacking Up!
Record High Gold!
Gold reached a record price, $1069.92, this week before profit taking settled in. The central banks are beginning to lose control of the situation. They cannot have it both ways. They want you to believe that the economy is recovering and that trillions of newly printed dollars will not effect the value of the dollar. The media has a vested interest in keeping the public uninformed because the Obama administration is working out a plan to fund the print media in order to counter the truth that is readily available on the internet.
Thank God that Al Gore created the internet! Freedom of the press, or freedom of information, is what will keep this country free from the Socialists/Marxists that are trying to bring about freedom destroying “change” to this country. Freedom is not free and America is rapidly coming to this realization.
As I have said until I am blue in the face, this gold move is directly tied to the currency event that the dollar is currently going through. If the dollar were to regain strength through a concerted effort of the Fed and the government to strengthen the dollar by moving away from quantitative easing and by cutting government spending, then the gold price would ease and return to more “normal” levels. Gold’s rise is telling us that the dollar is in trouble and that nothing is being done to fix it. This is not a political statement, nor is it a “gloom and doom” prediction, it is a fact. This is what gold does and has done for centuries. Gold is the barometer for the condition of a country’s currency.
All of you “Obamatons” can dispute this for all your worth, but before you waste your time, simply name the country that has ever devalued it’s currency into prosperity. It has never happened yet and this group of “progressive” Neo-Marxists is not going to succeed with this tired old philosophy just because they think that they are better than those that have tried it in the past. I am sure that you are aware of the definition of insanity, trying the same methods and expecting different results. Sometimes the truth is like a baseball hitting you in the head. It hurts!
Currencies and How They Effect The Price of Gold.
In general, currencies usually move in long deliberate sweeps. We are witnessing one of those sweeps now in the U.S. dollar and in this case the sweep is in a downward direction. Sure there are brief spurts up, but if you look at the chart of the dollar they are not long lived and none are strong enough to change the general down trend in the dollar.
The dollar falling below .76 is significant because there is no support until around .74 and that is not major support. The dollar finds major support at .72, and that is exactly where the dollar is headed. The only thing in question is how long will it take to get there. The dollar is headed to .72 and below because the U.S. Government wants a weaker dollar.
It is pretty clear that the U.S. Government wants a cheaper dollar. Their spending has increased to unprecedented levels with more and more entitlements in the pipeline. ‘Obamacare” is the next trillion plus boondoggle to come out of the the “comrades” in congress. Anyone with even one ounce of comm0n sense can figure out that you can’t give away the store without losing the store.
If you refer back to the dollar chart, you will see that the little blips up coincide with Fed speak about a strong dollar policy. All the Fed is willing to do is “talk” a strong dollar because what they really want is a weak dollar. If talk slows the fall of the dollar, it achieves exactly what they want, a slow and orderly devaluation of the dollar.
So how will the government foist this dollar devaluation on the U.S. public without them becoming alarmed?” Simple, they will use the the “useful idiots” in the media to spread their propaganda. This next article was published on Monday, Oct. 12 before gold moved to the new record high of $1,069.92 later in the week.
Media Spin trying to bolster the dollar!
High speculative positions in gold raise sell-off worries
Oct. 12, 2009, 12:48 p.m. EDT
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) — Gold futures held by speculators reached a record high in the most recent week as prices climbed to an all-time high above $1,060 an ounce, raising worries that a possible switch in positions could lead to a slump in gold prices.
On the Comex division of the New York Mercantile Exchange, net long, or buying, positions held by speculators rose to 239,668 contracts in the week ended Oct. 6, according to the market regulator, the Commodity Futures Trading Commission. That’s up 6.7% from a month ago and nearly doubled the level at the end of last year, when gold was trading below $900 an ounce.
The CFTC’s weekly Commitments of Traders report, released late Friday, also showed that speculative net long positions accounted for 50% of open interest, or the amount of total contracts outstanding. Speculative net long positions topped 50% for the first time ever in mid-September, when gold prices rose to an 18-month high above $1,000. The percentage has since stayed around 50%.
While a reflection of investors’ rising interest in the precious metal, high speculative positions also raised worries that gold prices could fall if speculators start to leave the market.
“As long as gold is on the rise and the most recent long positions remain in profit, this does not represent a risk factor just yet,” said Carsten Fritsch, an analyst at Commerzebank. “However, there is the risk that speculators will square their long positions and, in this case, one should expect a price correction.”
“This will become a real risk only, once the gold price has fallen below the $1,000 an ounce threshold,” he added.
This is just one of many articles that immediately popped up as soon as gold moved dramatically through the $1,050 level. If you want to read the best gold gloom and doomer, and by that I mean the high priest of “gold should not be trading at these levels”, check out Jon Nadler daily at Kitco.com. I can’t wait to see what he will be saying when gold is trading at $1,650 and beyond.
For more on the wherefore and the why, listen to the master on gold, Jim Sinclair
Is The Gold Bubble Talk Based In Reality?
“Journalists” are repeatedly telling us that there is a bubble developing in gold. Is there any truth to this? In a word, no. The rise in the price of gold is directly tied to a currency event with the dollar. The only thing that will return gold prices to normalcy would be the elimination of the nation’s debt problems and putting a stop to the deficit spending and currency printing. This is unlikely to occur due to the the government’s desire to spend their way out of the current recession/depression.
If we look back on past “bubbles” we see that the general public always piles on and raises prices to the point of collapse. There are no signs that the public is embracing gold at this point. The rise in gold ETFs are touted as a sign of a building gold bubble, but let’s look at who the predominant holders are.
Paulson and Co, owns 31.5 million shares of SPDR Gold Shares, the largest holder of the ETF, and the next largest is J.P. Morgan Chase with 6.4 million shares. The general public lags well behind those to behemoths, unless you count the taxpayers money that went in J. P. Morgan Chase.
The next part of a “bubble” is the phase where anything that you buy goes up. The gold stocks have lagged behind the price of gold, so we have not yet met that requirement of a “bubble”.
Finally, a bubble gets to the point where shortages develop in the market. When coins and bullion bars are unavailable at any premium, you will know that a “bubble” is approaching. For the gold market to enter a “bubble” phase, we need a broad based demand, and we are no where near that now. What we have now are savvy investors who want in before the market goes ballistic.
One last note on the dollar and how it is perceived around the world.
Dollar Reaches Breaking Point as Banks Shift Reserves (Update3)
By Ye Xie and Anchalee Worrachate
Oct. 12 (Bloomberg) — Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991.
Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it, said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. It looks like they are really backing away from the dollar.
Don’t be deterred by all of the talk about the strong dollar policy that emanates from the Obama Administration’s mouthpieces. They have a vested interest in a weaker dollar.
I hope that those who read BuyGoldCo regularly took proportional profits during the strong rise in gold this past week. If not, I highly recommend that you get my book when it comes out in November so that you will be able to maximize your profits in gold in the years to come.
We hit a record high in gold this week, but it is still early in this gold bull run! There is much more to come and the consolidation phases will be shorter as we go forward, because if we learned anything this week, it is that talk is cheap.
I am out of here because there is a sunset and a Pacifico with my name on it in Puerto Penasco, Mexico.
Till next time, good luck and good trading!
More Gold Market Analysis:
- New Record Gold Price!
- Record Gold Prices!
- Why The Chinese are Buying Record Quantities of Gold: Revealed
- Hyperinflation Will Drive Gold’s Rise In 2014!
- Market Musings