Gold Manipulation...A Smoking Gun?

My Comments: This is a good commentary from Mike Shedlock on his blog. This is his commentary on a memorandum from then Fed chairman Arthur Burns to Kissenger and Greenspan amongst others.

Misplaced Fears

If governments today are still acting to suppress the price of gold by the same methods, let's have more of them because they clearly aren't working.

Given that the price of gold is roughly $1,000 an ounce, it goes to show that governments are not bigger than the market, and that such manipulation (even if it does still exist) can never work in the long run.

The fear should not be of government to government agreements that can never work in practice, but rather a fear that governments may tax gold sales profits at some phenomenal rate, thereby effectively confiscating gold a second time.

Link to original post here...
Link to Shedlocks commentary here...

My Comments: I think Shedlocks take is spot on. Its fun to read about the manipulation and to be informed...BUT...as he says these fears are misplaced. Over time govts. fail at everything. What you need to focus on is a plan of action to take advantage of their manipulations and use this informatin to protect yourselves. In my opinion the best way to do this is to have a plan.

Declassified Govt doc. Gold & Market Manipulation

My comments: Declassified govt document from the 1968 where they discuss gold manipulation calling themselves "the masters of gold". This is a telling resource document for anyone struggling to grasp market manipulation and governments role in it.

Full article here...

Weekly update by Puru

Global stock markets had become overbought and a near-term correction is now underway. Based on sentiment and technical indicators, our guess is that the overbought conditions will be alleviated via a sideways consolidation or shallow correction. At this stage, we do not expect a significant collapse in stock prices and our suggestion is that you should be buying the pull-back. It is worth noting that despite the disbelief and skepticism surrounding this rally, the markets are staying firm. When it comes to investing, sometimes the minority view is the correct one. Today, we do not know of many people who are forecasting a sustainable rally or a strong economic recovery and this bearish sentiment should keep a floor under stock prices. Furthermore, despite the strong multi-month advance, assets in money-market funds are still unusually high when compared to America's stock market capitalisation. So, if an autumn crash does not materialise, we suspect eager buyers will look for a higher return on their invested capital. In our view, emerging Asia will be the prime beneficiary of this asset reflation and we continue to like China, India and Vietnam. All these nations are fundamentally sound, their economies are growing rapidly and we expect long-term investors to benefit.

For a bigger perspective, it is worth keeping in mind that over the past decade, stock markets in the West have been a loss making proposition. Back in March 2000, the S&P500 peaked at 1,527 and almost a decade later, it is trading at 1,050. Today, the largest American businesses are trading roughly 32% below their decade-ago level and for the first time in years, they are fairly priced. For sure, during the most recent bear-market, stock valuations did not plunge to lows seen during the 1974 or 1982 recessions but this can be credited to the current near-zero interest-rates. Remember, in 1974 and 1982, interest-rates were significantly higher, therefore cash and fixed income securities offered stiff competition to stocks. Back then, this is what caused stock valuations to plummet below 10 times reported earnings. Today, interest-rates are much lower, which explains the relatively higher valuations in global equities. So, our advice is that you ignore the near-term economic uncertainty and buy into solid companies which are trading at attractive valuations. Currently, we have exposure to businesses in energy, mining, steel, agriculture, Asian retail, US healthcare, heavy construction, telecom and computer hardware.

Over in the commodites world, the price of crude oil is still caught in a trading range and we recommend that you keep your positions in upstream energy companies and energy services businesses. Whether you like it or not; the era of cheap oil is over and we will experience ugly energy shocks within the next 4-5 years. Given the grim reality of 'Peak Oil', our biggest exposure is to the energy sector and we suggest that you hold on to your long-term investments in this sector.

As far as metals are concerned, base metals have corrected over the past few days and this should continue for another few weeks. Diversified mining companies have sold off in sympathy but they should perform well as long as the equity bull-market is intact. So, we suggest that you keep your positions in dominant mining companies. In the precious metals sector, gold is still trading below its all-time high and it seems that the central bankers are trying their best to knock down the price of the yellow metal. It is our observation that over the past few days, whenever gold has rallied to challenge its all-time high of $1,030 per ounce, central banks have threatened to remove 'liquidity' from the system. The reality is that the economic condition is still fragile and central banks will not be able to tighten monetary policy anytime soon. It is our contention that short-term interest-rates will remain low for at least another year and this should be a big positive for gold and silver. If the bull-market is still intact, then gold should rise above $1,030 within the next few weeks. Otherwise, we will have to question the bull-market hypothesis. For now, we are holding on to our positions in precious metals mining stocks but if gold's price action deteriorates, we will consider selling our holdings.

Finally, in the currencies department, the US Dollar remains weak. Make no mistake, America is running a mind-boggling budget deficit and spending money it does not have. Under this scenario, short-term rallies notwithstanding, we expect the US Dollar to slide further over the medium to long-term. Our preferred currencies (Australian and Canadian Dollars) are amongst the strongest in the world and we suggest that you keep your positions.

My Comments: He is making lots of predictions and "For the record" I agree with him. BUT when someone make such bold statements as "this will happen" or " this is going to happen" they better have a very good exit strategy or process to protect themselves if they are proven incorrect. When you are so certain that an event is happening or is going to happen you can fall victim to being blindsided by the unknown.

Weekly Update from Puru

Global markets are heating up and the bull-run is gathering steam. This nascent bull-market is climbing the ‘wall of worry’ and this is encouraging.

Look. When it comes to investing, nervousness is your friend, overconfidence your enemy. At present, the vast majority of people do not trust this rally and most believe that this is a dead-cat bounce or a bear-market rally. Somehow, the skeptics are failing to take note of the fact that already, some emerging markets have almost doubled and even the lagging indices in the West have risen by roughly 60%. Such large rallies coupled with the almost universal bearishness prevalent today is an indication that the bull-market has much further to run. In fact, we would not be surprised, if the S&P500 rose by another 20% by year-end.

Yes, we are aware that all is not well in the American economy and several risks persist. First and foremost, unemployment is still rising, Option-ARM and Alt-A loans are coming up for resets and nominal wages are in decline. However, most of this negative news is known by most market participants, hence it may be fully discounted in today’s prices. Remember, stocks are claims on the very long-term cash flows of operating businesses. Moreover, the vast majority of a stock’s present value is determined by what the underlying business will produce over the remaining life of the asset.

Turning to the present situation, even if the economy remains weak for another year or two and business remains sluggish, it is not necessary that stock markets will plummet again. The reason why we say this is because during last autumn’s market panic, most stocks were decimated and were already priced for a long-lasting global depression. Fortunately, the worst-case outcome has not played out and this is the reason why we are witnessing one of the strongest rallies in history. Now, given the steep yield-curve and accommodative monetary policy, it is our contention that the bull-market will continue for several months. In our opinion, the time to reduce risk in investment portfolios will come when central-banks have raised interest-rates and the yield-curve is flat or inverted. When that occurs, we will liquidate our ‘long’ holdings and re-position our clients’ capital. However, for the time being, we are fully invested in our preferred businesses.

In terms of sectors, we are maintaining our exposure to energy, materials, industrial machinery, telecom and Asian retail. Furthermore, a couple of days ago, we have acquired quality businesses in healthcare and agriculture. In our view, the fundamentals have greatly improved for our new holdings and this should translate into solid long-term growth for our clients. As far as specific markets are concerned, we continue to favour China, India and Vietnam. So far in the bull-market, all these markets have been strong and we expect this outperformance to continue over the rest of the cycle.

Over in the commodities complex, the price of crude oil is staying above US$70 per barrel and this should not come as a surprise to our readers. As you are aware, we expect the price of oil to explode over the following years and our biggest investment positions are in the energy sector. Elsewhere in the energy complex, it is noteworthy that the price of natural gas has rallied sharply over the past week and the related stocks have ignited. Long-term investors should keep their positions.

Over in the metals department, the price of gold is finding some resistance at its all-time high. If the bull-market is intact, then gold must break above $1,030 per ounce and it should not fall below US$920 per ounce. In any event, given the rapid advance over the past few days, we have captured some profits and reduced our exposure to precious metals mining stocks. If gold fails to break out to a new high, we will liquidate our remaining positions in this sector. As far as silver is concerned, it has been outperforming gold and this is bullish. For now, keep your positions but if gold struggles over the following days, then consider selling into strength. Finally, the price of platinum has broken out to a new recovery high and this is another indication that auto demand is returning. Those who believe in an economic recovery should take a look at platinum.

Finally, in the realm of currencies, the US Dollar is getting crushed and this shows that the carry-trade is back in vogue. Our preferred currencies (Australian and Canadian Dollars) are super-strong and should continue to rally over the following months.

Are Foreign Purchases of U.S. Treasury Bonds Being Faked?

Everyone knows that the American government is gaming the market for treasury bonds to some extent.

For example, the government has itself bought some U.S. Treasuries.

Some writers, such as Rob Kirby and Ellen Brown, go much further, alleging that Bernanke and the boys have also used hedge funds in the Cayman Islands to secretly buy huge sums of U.S. treasuries using dollars printed by the Federal Reserve, while pretending that independent "Caribbean banks" are doing the buying. See this, this and this. I have no idea whether or not they are right.

My Comments: I keep reading about BRIC going away from the dollar and bonds but it hasn't shown up in the charts. Right now bonds are somewhat stable considering the dollar's downtrend and the index's uptrend. The articles posted are rather dated. I'd like to see updated figures of the "Caribbean banks" holdings. Important to note that I'd like to seen these numbers just for fun. Typically by the time somthing like this comes out the market has already made the appropriate move (gold breaking 1000?).

Full article here...

New Records in Gold and $ Update

My Comments: Gold has achieved a record recently withe its first weekly close above $1000. I'm watching the embedded Stochastics and they are hinting at higher prices until the Stochastics close below the green line 80 mark.

The pause in the dollar was just that. We still have MACD divergence but both the dollar and gold have broken out and the momentum is buliding for bigger breaks. Dollar still has some support at the 74 level. If that fails a big move down would almost certainly follow...stay tuned.

Dylan Ratigan: Americans Have Been Taken Hostage

The American people have been taken hostage to a broken system.

It is a system that remains in place to this day.

A system where bank lobbyists have been spending in record numbers to make sure it stays that way.

A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built.

It is a system that so far has forced the taxpayer to provide the banks with the use of $14 trillion from the Federal Reserve, much of the $7 trillion outstanding at the US Treasury and $2.3 trillion at the FDIC.

My Comments: Dylan is easliy one of my favorate finacial journalists. He makes some great points.

Full article here

Weekly Update From Puru

The stealth bull-market is gathering steam. Despite widespread skepticism and disbelief, global markets are staying firm and over the past week, a number of stock indices have climbed to a new recovery high. It is noteworthy that the market’s breadth is very strong and an increasing number of stocks are now breaking out to a new 52-week high. Moreover, the Volatility Index (VIX) has dropped to below 25 and the LIBOR has plunged to 30 bps. These are all positive developments which suggest that the market’s advance is likely to continue. There can be no doubt that on a near-term basis, the markets are overbought but so far, every pullback has been met with strong demand.

Even though the stock markets have risen significantly over the past few months, most people do not trust this rally and many are expecting another autumn crash. In our view, that time is running out for the bears and the longer the markets stay firm, the lesser the odds of a significant plunge. On the contrary, if the markets do not collapse over the next month or so, we could get an explosive year-end rally.

Please bear in mind that our investment strategy does not depend on the short-term price fluctuations and we cannot be certain as to where the market will be in a month or even six weeks from now. Instead, what we do know is that interest-rates are at record-lows in most nations, central banks are creating money and in this environment, stocks offer a formidable competition to cash and fixed income investments. Accordingly, we suggest that you hold on to your positions in quality businesses which are likely to increase their earnings in the future. As far as sectors are concerned, we prefer natural resources, infrastructure, industrial machinery and Asian retail. Yesterday, we have also added a quality health care business to our equity portfolios. Remember, millions of baby boomers all over the world are approaching retirement. As they age and their health deteriorates, dominant businesses in the health care industry should thrive. So, consider allocating some capital to the dependable medical industry.

In terms of markets, we continue to favor the emerging nations in Asia and have exposure to China, India and Vietnam. All these markets have done exceptionally well over the past few months and we expect this out performance to continue over the entire business cycle. Therefore, we suggest that you keep your positions and deploy more capital during pullbacks.

In the world of commodities, the price of crude oil is trading around US$72 per barrel and it should rise over the following years. At present, our biggest investments are in the energy complex and we suggest that you maintain your exposure to upstream oil companies and the oil services stocks. As far as metals are concerned, several base metals have climbed to new recovery highs and this is a good sign for the global economy. Investments in diversified mining companies should produce good growth over the following years, so keep your positions.

Furthermore, in the realm of precious metals, market action is heating up. Gold is currently flirting with the psychologically important US$1,000 level and the renewed weakness in the US Dollar suggests that gold may be on its way to an all-time high. For now, keep your positions in bullion and the precious metals mining stocks but if the price of gold falls below US$920 per ounce, then consider liquidating your precious metals related investments. Based on the recent market action, it seems to us that gold will climb to a new high. So, if a multi-month rally materializes (our expectation), then the precious metals mining stocks will be big winners and silver should outperform gold. Under this scenario, we will hang on to our holdings in precious metals and will probably sell into the euphoria next spring.

Finally, in the currencies department, the US Dollar has broken below important support and its weekly chart looks awful. This weakness in the American currency is a clear indication that the central-bank sponsored reflation is working and the US Dollar is again being used as a carry-trade currency. We suggest that you keep your cash in the Australian and Canadian Dollars.

The ghost fleet of the recession

My Comments: Good article making the rounds. The Baltic Dry Index collapsed and hasn't recovered at all. I leads me to ask "who is going to consume enough products to get these ships moving?". The BRIC nations have relied on the US to eat every thing they produce but that bubble has popped. The only way these ships get moving is if there is a new designated eater.

Full article with some good pictures here

Weekly Update From Puru

The stealth bull-market continues and the recent market action in constructive. As we approach the first anniversary of last year's crash, it is possible that we may get some near-term setbacks, however the trend for global stocks is up. We maintain our view that the bear-market is now behind us and that we are in the early stages of a multi-month advance. Today, considering the ultra-loose monetary policy and near-zero interest-rates, a case can be made that global stocks are moderately priced. Remember, in this low interest-rate environment, cash and fixed income assets do not offer much in terms of competition for equities and this is the reason why we believe that the current valuations are justified. For sure, stock markets valuations at previous bear-market bottoms (1974 and 1982) were much more compressed, however during those periods, interest-rates were significantly higher. This is not the case today and we continue to view last year's market sell-off as a superb long-term investment opportunity.

It is worth noting that last year's panic crushed all stocks and even some of the world's strongest companies experienced huge declines in their stock prices. If you are a long-term investor, such opportunities do not come around often and we suggest that you ignore the near-term uncertainty and allocate capital to dominant companies. Given the macro-economic outlook, we prefer the emerging markets of Asia and in terms of industries, we love the natural resources complex. We have considerable exposure in these areas and we also own world-class companies in several other sectors such as telecommunications, industrial machinery, heavy construction, consumer discretionary and retail. As an investor, pessimism is your friend and the negative sentiment prevalent today is providing you the opportunity to buy into solid companies at depressed prices. So, we suggest that you continue to hold on to your position in equities and perhaps add more capital.

In the resources complex, the price of crude oil is correcting its recent gains and we expect a rally over the following months. Therefore, we recommend that you maintain your holdings in the energy patch. The price of natural gas has declined even further and sentiment is now horrific. For the moment, there is no shortage of natural gas but once the industrial demand picks up, the price of natural gas will rally. So, long-term investors should hang on to their positions in quality natural gas companies. As far as natural gas ETFs are concerned, the excessive 'contango' in the futures market has turned them into a loss making proposition and a few weeks ago, we closed out our positions at a modest loss. Accordingly, we suggest that you participate in the natural gas sector via producing companies as opposed to buying an ETF which simply 'tracks' the price of the physical commodity.

The action is heating up in the metals department and over the past couple of days, we have seen some big moves in gold and silver. As you are aware, we were expecting a large move and now it will be most interesting to see whether gold can break past its all-time high recorded in March 2007. If this bull-market has legs, gold will be able to climb to a new high and stay there. Of course, we will be delighted with this development as we have significant exposure to precious metals mining stocks. However, for us to be totally comfortable with the bull-market hypothesis, gold must

Finally, in the world of currencies, the US Dollar is still bouncing along its support level and over the past few days, it has rallied in tandem with gold! This action is most unusual and we will have to wait and see. For the sake of gold's bull-market, we would have been a lot happier with the American currency weakening, however this is not what is happening. For now, we suggest that you continue to keep your cash reserves in the Aussie and Canadian Dollars, but if the US Dollar Index breaks above the 80 level, consider buying the American currency.reach a new high very soon. For now, our advice is that you stay with your positions in bullion and the related mining stocks, which should explode if gold manages to confirm its bull-market.

My Comments: The last paragraph is what we have been watching in the charts over the past few posts. One point he doesn't make is that if the dollar breaks over .80 it would more that likely coincide with sell off in stocks.

Gold and the Dollar Update

My Comments: Gold has broken out of the wedge and is testing the $1000 mark...my guess is that it break over $1000 and on to new highs soon. Also note that the dollar remained range bound during this period. If the continues it is deflation, not inflation that is driving gold. no one knows for sure but the charts will give us hints/probabilities.

Click on the charts for a larger image...

China Set to Buy $50 Billion in IMF Notes

WASHINGTON -- China is on track to become the first purchaser of notes issued by the International Monetary Fund, a move that would diversify its foreign asset holdings and could give the IMF's quasi-currency more clout.

The IMF on Wednesday said China has signed an agreement to purchase approximately $50 billion in notes from the fund. The notes are denominated in Special Drawing Rights, a quasi-currency issued by the fund and promoted by China as a potential replacement for the dollar ...

My comments: They continue to look for a new asset classes to move into...I dont know enough about IMF notes to comment on them. The real issue is that China seems committed to move away from the US notes.

Full article here...

Special Update from Puru

It looks as though the multi-month correction in precious metals is coming to an end and very soon, we are going to get a major move. If the bull-market is still intact, then gold should break above US$1,000 per ounce within a few weeks. However, if the price of gold fails to do this, we could see a sharp decline in bullion and precious metals mining stocks. Put simply, if the price of gold falls below US$920 per ounce, it will be a negative omen and at that point, our suggestion would be to immediately sell your precious metals and related mining stocks.

My Comments: These are around the areas that gold has been trading in its wedge that I posted yesterday.

Yes, the macro-economic environment is bullish for precious metals but this has now become a very crowded trade. Most investors are positioned for an explosive rally and if gold fails to climb to new highs soon, we may get heavy liquidation from the frustrated bulls. Under this bearish scenario, the price of gold and other precious metals could plummet rapidly and this is the reason why we are suggesting that you exit your 'long' positions if gold breaks below US$920 per ounce. Although the chart pattern for gold looks like a gigantic 'inverse head & shoulders' bottom, it could also turn out to be a massive double top. Remember, gold's chart pattern is almost identical to copper, which staged a spectacular decline last year. So, we will have to wait and see how things develop.

In our view, the direction of gold's breakout will depend on the US Dollar Index, which is currently trading above a major support level. Yesterday, the US Dollar Index managed to break out of its declining trend line and this is good news for the greenback. Over the following days, if it closes above the 80 level, it will be a big positive for the American currency and a drag on precious metals. Conversely, if the US Dollar Index breaks below the 77 level, it will usher in the anticipated rally in precious metals. So, in the near-term, we suggest that you keep a close eye on the US Dollar Index as movements over here will determine the fate of precious metals.

My Comments: This is what I was highlighting in yesterday's charts. However he doesn't account for a possible recouple of gold to the green back...During the panic of 08 gold proved that it can be more then an inflation hedge...Time will tell.

In summary, if gold breaks below US$920 per ounce, we urge you to liquidate all your holdings in precious metals. Moreover, if the US Dollar Index breaks above the 80 level, we advise you to convert all your cash reserves to the American currency.

The above strategy may seem flippant to some of our readers but given all the uncertainty in the economy, we want to keep an open mind. More importantly, we want to ensure that we are prepared for all eventualities. Remember, Wall Street is littered with the graves of those who got married to one market forecast and failed to smell change. Instead, we prefer to be vigilant and will continue to adjust our investment positions based on market action.

My Comments: This is what I was showing on yesterday's post. It looks like Puru and I are on the same page...or he reads my blog. I bet its the former.

S&P, Gold, and the Dollar

My Comments: Big sell off in the S&P. This is expected being at the top of a channel and could continue towards the bottom of the range as MACD and Stochastic divergence are indicating. These arenot sure fire indicators as they were indicating a selloff in late June that turned into the July blastoff.

Gold is remaining within its consolidation range. However with the S&P selling off and gold closing up with the dollar is hinting towards deflation or more deleveraging. I still think its best to wait on gold to either break out of its triangle and as we approach the apex of the triangle, gold should decide soon.

Dollar broke over its trendline that I have been highlighting in past posts. Im watching its relationshionship with gold and im seeing signs that they could be recoupleing. If this develps I will post the charts and show you what I'm talking about.