Many traditional chartists and seasoned traders are a bit wary of the “”unchartered” waters that Gold and Silver are taking us into, most of us without life-jackets. Many technical traders are a bit skittish as the only long term trend line is around $50/oz which occurred when the Hunt Brothers were such big buyers in the silver market.
There are several analysts and economists who forsee a sell-off in the gold market of $25-$30 dollars an ounce. That would be another sign of a HEALTHY commodity, as that is the ordinary % for profit taking, and with gold brushing new highs, the old Wall Street Mantra just plays through my head: “Bulls make money; Bears make money; but PIGS get led to slaughter.”
The Central Banks of India and China are in the process of selling $U.S. and EU Dollars. India and China are the two largest purchasers of GOLD bullion, and are not content to leave it stored in a Metals Exchange Facility. Last time there was some delay in an individual being given physical possession of his gold, rumors were swirling that the gold was not actually there; it had been oversold and a crisis was not to be avoided. This was not true.; however, China had just purchased something along the lines of $2Billion worth of gold totally stored in the London Monetary Market Exchange. The Government of China made it known that it would be picking up it’s physical position in gold the following day, by railroad cars, and that they had security under control.
When Mr. Fisher who is the President of The Federal Reserve Bank of Dallas, TX, makes remarks in Frankfurt in meetings with other financial officials from many other countries, it tends to carry a great deal of credibility when his message is that the United States is INSOLVENT and that the FIXES are going to painful. He then assured all present that the USA would NOT default on any of it’s Government Issued or Backed Instruments.
Approximately 6 weeks ago, I had mentioned in this column that the Municipal Bond market was due to implode, as municipalities, states as well as the Federal Government, would not be able to raise the monies needed to keep the interest rate payouts even, and also find the capital for any bonds that might be reaching maturity. Though almost all Muni Bonds ae insured by AMBAC or MBIA, there is no way that either company, even working in tandem, would be able to raise the money necessary to continue all interest payments and then capital at maturity of the bond.
S&P, a rating service, downgraded Portugal’s financial health score and intimated that even more cuts in their ability to pay might be forthcoming sooner rather than later. Portugal’s Prime Minister resigned this week, in protest that the other braches would NOT accept an austerity budget in order to keep from actually defaulting, or having to go the IMF for $Hundreds of Millions fromEU Backed Nations.
Once investors try every other avenue to safeguard their principal, perhaps participate in an up market, and maybe even pick up a dividend of two, and all that fails, then there will be a run on gold/silverplatinum/palladium/Cooper such as this country hasn’t seen since the Gold Rush to Alaska. The ONLY TRUE SAFE HARBOR at this particular time are the hard asset currency commodities.
As long as Ben Bernanke and the Private bank of the Federal Reserve continue to keep interest rates at near zero, and complete the QE2 infusion of MORE $U.S. Dollars. there will be NO significant move to the upside for interest rates in the USA, and that is one other thing that is causing the devaluation of our dollar.