Thursday, November 30, 2006

World Economic Slow Down

The BDI (Baltic Exchange Dry [freight] Index) is a good indicator of world economic activity. It put in a major top at the end of 2004. That can be seen here:

What can also be seen is that the BDI is currently up against a resistance level. It could be making a lower top.

Currently happening in the US - from The King Report :
(right now, on the home page, is the real scoop on the US government's just released employment numbers)

"Merrill’s David Rosenberg: "Truck tonnage for October just came out and looked borderline recessionary, for lack of a more polite term. It was down 4% y/y in the largest decline since February 2001 (-1.8% m/m, and down now in two of the past three months) - and now down for 10 months in a row y/y (!). You have to - again - go back to the March/00 to Feb/01 period to find the last time year-on-year comparables were in the red for such a long stretch of time (and guess what happened in March/01?)."

Mr. Rosenberg notes it’s "extremely rare to have truck tonnage decline in October ahead of the holiday shopping season." The last times this occurred were 1981, 1982 (recession years), 2001 and 2002…"

The inverted yield curve on US Treasuries for over 3 months is saying the same thing.

A serious decline in economic activity means a serious decline in tax receipts for national, state, local governments that, combined, have massive unfunded promises to keep.

This means that managers at the central banks of large, government top heavy, countries are going to have to crank up the volume of that old '60s Stevie Wonder song 'Fingers' - parts I & II to properly motivate the employee responsible for typing on the keyboard hooked up to the computer that creates digital fiat tokens.

Here's a whopper. The Fed is trying to maintain a credible deniability defense as it increases credit to record breaking levels. Check out:
Jesse's Interest Rate Lie Detector
"... Many market watchers had been anticipating the dollar's slide for months, none more so than Paul Volcker, former Fed chairman. He said: "It's incredible people have gone on so long holding dollars."

Saturday, November 25, 2006

New Steeper Silver Price Channel?

Gold broke its most recent short uptrend line 3 weeks ago while silver did not. This can be seen on this 6 month silver price chart:

Here it again can be seen on this 2 year silver price chart.

Silver, since the beginning of the bull market has moved up more powerfully than gold has, about twice the move gold has made. It should not surprise people if the silver price has started a new more upward sloping trendline and channel.

Gold and silver are your protection from the USD and all other government fiat because they are money itself. The Saturday, November 25 edition of the Financial Times:

Here is a 6 month daily bar chart of the USD as of the end of Friday:

A series 1957 A, One US dollar bill says this:
"This certifies that there is on deposit in the treasury of The United States of America One Dollar [a weight]". "One Dollar [a weight] in silver payable to the bearer on demand". This was not all that long ago. Now a days, all a US dollar can be "redeemed" for is another piece of US paper dollar. What is wrong with this picture?

For all practical purposes, the US Treasury has no silver left and who knows how much gold it actually has since the US Treasury's gold has not been audited since the 1950s.

Gold can explode to the upside due to the impossibility of the major central banks to suppress the price of gold for a much longer period of time, and that is without the USD going down, which has recently happened during gold's last significant run up. One of Europe's biggest banks 'Credit Agricole' early this year endorsed this concept.
The US dollar taking a dive just adds powerful fuel to the gold price and silver price rockets.

Monday, November 13, 2006

The Ugly Looking US dollar Index

Nothing but bearish head and shoulder patterns right now in the US dollar Index charts. Long term, intermediate term, or short term. No wonder the gold price is looking so bullish.

The long term head and shoulder pattern is projecting a US dollar Index down around 50, so there are a number of years to go in the gold and silver bull markets:
(click on 10 year chart for enlarged view)

The less valuable a US dollar is, the more US dollars someone is going to want for the same amount (weight) of gold.
(click on 2 year chart for enlarged view)

(click on 6 month chart for enlarged view)

The smaller Italian central bank announced a while ago that they will be diversifying out of US dollar. The smaller UAE's central bank has announced the same. If some one wants to get out the small door first, the smaller central banks have the best chance as they don't have huge amounts of USD denominated assets to get rid of. They will not move the price of gold up and the US dollar down as much as the larger central banks would. It could be that beads of sweat are collecting on the foreheads of central bankers. Meanwhile they are probably all hoping that a panic does not develope.

Russia and China are making the same type of noises.

Remember a couple of years ago when Argentina announced more than once that they were actually buying gold for their central bank's reserves? Now that was getting a jump on their competition because there is not much gold out there compared to the monstrous amounts of US dollars that are going to increasingly be looking for gold.

Dubai gold trading volume reaching new highs:
"DGCX trading scales new heights"

"Something's up" and it's not the US dollar Index.

Sunday, November 12, 2006

Bullish Gold Price Charts

Most in the English speaking world are comatose, clueless about the 5 year old gold and silver bull markets that are underway. Is this merely because bull markets start in a stealthy manner with no announcements, horn blowing, bells, or fire works displays? Probably not, because of the age of these 2 markets. The English speaking world is probably just the part of the whole world market that will be getting on board during the mania (last) phase, probably because they don't care to "get it" right now, that they won't get it until they can't ignore incredibly high prices that cause a lot emotional pain to those that are still not in the bull market.

In between the stealth and mania phases is the wall of worry phase, where people worry about actually taking action, actually putting their "money" on the line, worry about whether the uptrend has ended. This recent gold price reaction since the top at the end of April of this year suggests that the bull is out of the stealth phase and into the wall of worry phase, particularly after gold's great run up from the time it broke up and out of its base late last year.

Has gold started a new more upward sloping trend line and channel on this 10 year chart:
(click on chart to enlarge)

Great looking bullish gold price action on this 2 year chart:
(click on chart to enlarge)

Bullish action to gold's right hand bottom on this 6 month chart:
(click on chart to enlarge)

Another indicator of a really good upward move in the gold price is the AMEX's HUI index of gold and silver equities. It looks to be chomping at the bit to make another substantial run up. A double from its break out level of the flag to around 700 by the end of 2007 could be conservative.
(click on chart to enlarge)

Why conservative? The combined value of world equities is estimated to be about $45 trillion. The combined value of gold and silver equities is estimated to be about $150-160 billion. It will take just a small amount of that $45 trillion to radically jack up the price of gold, silver and the associated equities as more and more eyes turn to the increasing gold price / silver price. 2007 should be one heck of a year. And even then there is still a lot more to go on the upside.

Thursday, November 09, 2006

Strong Second Gold Price Break Out

The gold price broke up and out (gapping up and out) of its triangle in early September only to immediately turn around and head down (closing the gap) to make a slightly lower price for this current reaction or base building period. This failed break out meant that gold's down trend line had to be adjusted just slightly upwards.

(A weekly bar chart. Click on graph to increase size.)

No big deal since the fundamentals are so screamingly good for the gold price and the silver price. That just meant that gold would take a little longer to turn around and start heading up in another major upward price move. 2007 should be an outstanding year for gold and silver.

This second break out is a biggy since gold moved up at least 3% ($18) above its break out level ($600), and held above the break out level plus 3% ($618) for at least 3 days.

The gold price highs of the last week in September and the 3rd week in October (which were lower than the earlier break out high), plus the downward sloping top side of the triangle, plus a Fib support level offer good support. Call that support a little above $600.

(A daily bar chart. Click on graph to increase size)

Sure, that 2 week break out up trend has just ended. That is a normal type of reaction for the latest short term gold price move. No big deal.

"What, me worry?" - Alfred E. Newman