Saturday, June 25, 2005

Gold Breakout

On a weekly basis gold has broken up through its 7-8 month long down trend line that is the top part of a big bullish triangular flag pattern.

You can see the breakout in this 2 year long weekly bar chart

The HUI (Amex Gold Bug Index) is still above its 7 week long uptrend line.
This can be seen in this 6 month HUI chart

Related to the Baltic Freight Dry Index is lumber prices in the US. Since the US stock markets topped out, the US housing industry has been a major factor in keeping the US economy from plunging. It looks like that factor is weakening.

Take a look at this US lumber futures contract that made a new 3 1/2 month low on Friday

It looks like US lumber put in a longer term double top the middle of last year.
This can be seen in this 2 year long weekly bar chart

What does the US Treasury and the Fed have a solid history of doing when the US economy is threatened in some way? They create USD out of thin air by hook or by crook. Sellers of gold then demand even more per ounce of these newly devalued USD.

"Hunter S Thompson said his beat was the death of the American dream. You can see why he ate his gun. Everything he hated has returned. Nixon is back in the White House, Rumsnamara risen from the dead, bombs falling on other peoples’ suburbs. The Pentagon is lying again and democracy stalks yet another helpless country. This time the young are already dead and there will be no joyous anarchy. The press, housebroken, pees where it is told. But he gave it a hell of a try."
- Fred


Anonymous said...

Who is 'Fred' and what do his fantasies and musings on the suicide of Thompson have to do with Gold ?

Anonymous said...

Of somewhat greater interest, who believes that Hunter Thompson committed suicide? What are the bits of evidence? Sure, the government has ruled it a suicide. Gee. Then there was the ever so convincing phone call to his sister or someone where a shot was heard over the phone. But, how hard is it to fake a phone call?

The important thing is not Fred's musings, but Thompson's musings on fascism, the police state, a totalitarian system, and the forever war on freedom.

Anonymous said...

I don't know who Fred is. But I thought his take on Hunter's take on the state of America was pretty real. This time, I expect America to turn into a shell of its former self. As Fred said "there will be no joyous anarchy". Maybe some wimpers as it turns into a shell. I think too many Americans have gotten too mentally lazy and therefore are too child like in their understanding of how the world really works for there to be anarchy. Maybe a lot further down the road. I don't know how it is gradually going to play out after the turning into a shell part.

The more freedom some jurisdiction has, the more economic prosperity it will have because freedom means individuals are responsibe for themselves. So, they act smarter and more responsibly. Something most Americans have come to dread, being completely responsible for themselves. I don't know if you've noticed but there is almost no freedom left in America anymore. I suspect that most Americans haven't noticed because it is way down on their list or not even on their list.

The more freedom there is, the more capable people are of defending their property. The more risky it is to steal, the more capable they are of getting ahead, the more incentive they have to work to get ahead because working pays.

The more lazy people get, mentally and physically, the more they try to get the government to do their stealing for them. After all, stealing is risky business and it takes some real effort. At some point government steals so much from the economy/people that it crashes the economy. The more people want the government to steal for them, the bigger it has to get, the more it has to steal to support itself and its supporters. Nothing new about this and its cycle.

I figure America is at the point were it is going from "dependency back to bondage". It's already made the switch "from apathy to dependency".

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.

The average age of the world's great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage." - Alexander Tyler

If management is running USA, Inc. into the ground, and its shareholders are allowing this, then that's what is going to happen to the value of its shares, the USD. In the future, one will need a huge amount of USD to buy the same amount of gold that substantially less USD buys today.


Anonymous said...

But who is Fred ?

Anonymous said...

We'll never know. :)