Sound and Fury, Signifying Nothing!

March 24, 2009 Inflation, Physical Gold, Politics No Comments

The dollar is in trouble, but the news is all about the bottoming of the markets and the beginning of a new bull! Don’t be mislead, buy gold and gold stocks on this dip because it won’t last long and buying gold now may be the best investment that you ever make.

It is truly comforting to start a day knowing that the the global financial crisis has been solved by a combination of the greatest financial minds on the planet. The G-20 is soon to lay out it’s aggressive plan following Treasury Secretary Geithner’s unprecedentedly brilliant P.P.I.P plan which erases the mountain of OTC Derivatives by simply printing more money. We truly are the uneducated masses that need to be lead by the global intellectual elite! It is definitely time to sell ABX and put it all into GM!

While all of this wonderful brilliance has been unfolding, the DOW is down 89 at 7,686, the NAS down 27 at 1,527, the dollar is up.31 (.40%) at 83.78 while gold, the barbarous relic, is plunging, on it’s way to $250, down $15.20 at $923.00.

This Market Is Not Near The Bottom!

All kidding aside, now is not the time to watch, listen to, or read the news and feel that there is no longer risk in the world. Now is the time to watch the latest assault on “real” money and look for signs of the bottom in this latest test of gold and prepare to accumulate both physical gold and gold stocks before the myth of the end of the financial crisis dissolves as quickly as it was created. The markets are media driven and there is plenty of bad news coming for the global economy in the days and weeks ahead. All of the current talk of the bottoming of the markets and the beginning of a new bull is sound and fury, signifying nothing!

P.P.I.P. To The Rescue

The P.P.I.P. program has not even started, it has just been announced, so there is no evidence that it will perform as advertised, leading me to think that yesterday’s rally was a “buy the rumor, sell the news” type of event. There will be plenty of news coming out of this program as time moves on. It is very similar to what created the housing bubble. Let’s force banks to lend to the unqualified so that they can get into houses. Even if they get into the houses with no money down, no problem, owning a home is what America is all about! Now P.P.I.P. comes along to help the banks get rid of their “toxic” assets. We want public and private investment to do this, so we will have the FDIC insure the private investors portion of the purchase, thereby creating another set of “owners” with no skin in the game. Uncle Sap will print money till all of our problems go away. Did not work in the past, and will not work now.

Once again we will have to watch the $890 to $900 support level for gold. That should prove to be solid support, but if it fails, gold could quickly move to test the $845 support level. We have entered a phase where the dollar is being pressured and people are starting to wake up to the massive amounts of money that governments are, or will be printing, in so far, unsuccessful attempts at containing this problem. The governments of the world need to stop these assaults on the fiat currencies, or soon the angry masses that they have whipped into a frenzy, will do something stupid, like lose confidence in paper currencies.

On a speculative note, it would not surprise me to see the global governments, possibly through pushing by the G-20, dump gold on the market in order to lessen it’s attraction as an alternative to fiat currencies. I don’t want to go in the conspiracy camp, but it would be a logical way for central banks to stem the rush into gold. Just something to be aware of as a possibility.

In other developments around the world, currency specialist Avinash Persaud, told a Reuters Funds Summit in Luxembourg that a U.N. panel will recommend next week that the world drop the dollar as its reserve currency in favor of a shared basket of currencies. Persaud said,

“It is a good moment to move to a shared reserve currency”.

That cannot bode well for the future of the U.S. dollar. Central bank unloading the dollar could easily send it into a freefall.

On a similar note from Beijing, Jamil Anderlini reported this yesterday.

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money, said Qu Hongbin, chief China economist for HSBC.

Make no mistake, we are in the midst of an economic crisis, the likes of which we have never seen before. Extreme measures will be applied in order to contain it. Do you want your wealth in paper or in gold? The answer to that question is easy. Finding the right time to buy in is a little more difficult, but in the long run, purchases of both physical gold and gold stocks over the next weeks will be looked back on fondly. Take advantage of any pullbacks and buy gold in both the physical form and the stocks of the companies that mine it.

Till next time, good luck and good trading!