Wednesday, February 17, 2016

Gold: The Historic Choice

Valentine's Day just passed and we find that the flower business continues to shrink. In fact, in Iran it is a felony to practice the West's concept of Valentine's Day. I hope that this was not a sub-agreement in the nuclear treaty. Anyway, I got to thinking about gifts that show a deep respect and possibly love. I could only come up with one, but it is time proven. It is one of the three gifts from the Three Wise Men. It has been used throughout history as a tribute, a store of wealth and that custom still lingers in India and China. I'm talking about the lustrous, precious metal, gold.

- "If you don't own gold, you know neither history nor economics."
- Ray Dalio

it is up 18% while everything else is down. The rally last Thursday caught the fiat people flatfooted as it rocketed higher than the North Korean test rocket. People who deal in gold attribute the surge due to investors and buyers from all global exchanges. The gold dealers were smiling and singing, "Love is in the air..."
Gold reflected this faith in it and flowing in the melody, it gained 25% for Russians against the ruble. Mexican avocadoes were no match to the 23% gain versus the peso. South Africans were rewarded with a 18% gain against the rand.
Gold spread the good feeling to the "old" hard currencies too. It gained 17% against the British pound. It rose 14% versus the Canadian loonie and another11% against the negative interest rate of the Swiss franc.
As for the US dollar, the Fed is turning red with its 13% rise.
RBC Capital Markets
George Gero, added that some investors were seeking to buy US treasuries, but they were crowded out by the Fed. They were seeking safety from negative interest rates. They found the all-time, number one, safe haven.
It Keeps Getting Better
Gold showed its permanent luster best against the yen and euro. It is up 10% in 60 days against the euro and 6% against the yen. That is one sweet move!
Looking Ahead
I see a rise to $1392 for gold and $16.28 for silver. From a technical stand-point, gold is above the 50 and 200 - day moving average which is very bullish.  If I'm correct and we get there, then, we will have to look at the number of contracts to see if it can activate a booster rocket. At the moment all systems are go!
In that vein I think that NASA's "LIGO" experiment blew a circuit because as you read this piece, you realize that the two biggest buyers, China and India are hardly mentioned. I consider them a known known like Jewelry buyers. However, with that implied, some gold dealers are reminding the followers of the precious metal that the market will be extremely volatile in the coming months. One reason is the current inflow of buyers and investors can be manipulated by the second reason, the Fed. Keep in mind both Wall Street and the Fed hate gold and they will attack gold at some point. Just as I dotted the sentence, Goldman Sachs declared that investors should "sell" gold as it will fall in price. However, they did not disclose that they probably had a short position and sweat was entering their brow. Citi says, "Buy until May, then, go away." If we keep applying the pressure, they will have to move money to cover their position losses or if they close and attack another day, they risk another surge in gold due to this short covering. I say that they may lose like in 1980. For example, their shills always remind investors that gold does not pay interest, but now, neither do the banks and it could get worse. By the way, dividend paying corporations are also cutting back their rewards. In fact, dividend cuts in 2015 were higher than in 2008 (295 v. 394). On the flip-side physical gold sales keep climbing. In the Shanghai Gold Exchange, 2,596 tonnes were sold. This figure represents 90% of the total global output. If you seek small by buying some gold coins, the US Mint and Australian Mint are over-loaded with orders, but today's price is a lot lower than the future cost. Buy now and profit later. The Fed hates gold and I hate them. They have a one hundred year history. The facts say that since the Fed started the US dollar lost 95% of its value which is why I say, End the Fed! 
Under a disclaimer: I have a long-term position in SLW and trade LSG and GFI.


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