Sunday, March 31, 2013

What's Happening To Gold...L&C

Lately, the news on gold has not been good. Shares of gold mining companies, no matter how strong are all in decline. The media has declared that the twelve year rally is over and they offered "second" opinions to prove their point. Goldman Sachs sees a fall to $1200 and Citi says it is over! However, allow me to question the surveyed. Would you ask a blind man for directions? When Ron Paul asked Ben Bernanke, " gold money?" He said no! Do I have to remind you that these people are all anti-gold? They are all fiat. The media rarely interviews advocates of gold, but they do inform you when a gold bug throws in the towel like Soros and Paulsen. Now, I will give my two cents since the US still mints pennies.
gold set a record high average for 2012 at $1669. True, this has been and continues to be, the longest stretch for gold without setting a new high. Nevertheless, this is how gold performs and although past records do not guarantee future levels, I would remind you of this: a rally in anything does not just end. It changes course due to an event or capitulation either up or down. We have had neither.
The irony of the rally has been the fact that anti-gold central bankers around the world have been buyers of gold. In fact, the largest purchases were achieved in 2012 going back as far as 1964 by these bankers especially in China, Russia, Turkey, Mongolia and India.
As noted above, gold in a rally can have large pullbacks. Historically, gold retraced from $200 per ounce in 1974 to $100 per ounce in August 1976, only to rise 721% after to $800 per ounce. That was the capitulation, bubble all in one.
Gold did a similar movement when it retraced from $729 in May 2006 to $560 in June 2006 before doubling to over $1200. However, this was not a capitulation as the long term contracts were roughly the same except more buyers than sellers.
The worst feature of gold at present is it broke its long term rising channel at $1663. If gold cannot get back into the channel, it could continue to drop with support at $1525. At the same time the US dollar is rising against all currencies because of the safe haven aspect even though Bernanke has debased the dollar. The global market senses some fear, notably coming from the euro zone and out of Cyprus. This economic difficulty had no effect on gold which is very bearish. Gold could fall further than the support level.
Personally, I have a inner fear about all the gold that central bankers have been buying. It could be to cover hidden leases of gold that these same bankers claim to own, but they don't actually possess or will ever be able to reclaim. It could also be used at a critical point in price to destroy the price of gold since at heart they are still fiat and anti-gold. The worse case scenario is that a secret deal is in the works to replace the dollar as the world's reserve currency. The IMF already uses SDRs concept for money even though it is not an official currency.
The BRICS also announced that they are forming a exchange value between the group to circumvent the dollar. Still other emerging market nations are looking for ways to not utilize the dollar in market exchanges, however almost all commodities are valued in dollars.
Bottom Line
nothing goes straight up or down. We are at a pause while at the same time all central bankers are printing money in excess to which gold only rises in value. Keep the faith, our Founding Fathers had it and put it in the constitution to which the Fed violates along with our represented government.
Liars and Crooks:this week and next goes to the troika because the bond-holders of the defunct Cyprus banks will cause a financial crisis or at least a repercussion.