Thursday, November 30, 2006

 

Gold Shoots Past Resistance

The Associated Press reports on the currency markets. "The U.S. dollar fell against other major currencies in late European trading Thursday, dropping to a fresh 14-year low against the British pound. The euro was quoted at $1.3253, up from $1.3156 late Wednesday. Later, in midday trading in New York, the euro fetched $1.3265."

"The British pound was quoted at $1.9635. Earlier, it traded at $1.9580, its strongest showing against the dollar since the so-called 'Black Wednesday' in September 1992, when Britain crashed out of the European Exchange Rate Mechanism."

"London dealers said the dollar was weakened by mixed economic data coming out of the United States and positive developments in Germany, Europe's largest economy. The U.S. Commerce Department said consumer spending increased in October after two lackluster months, but the nation's retailers reported mixed results in November."

"'There are no major resistance levels until we hit $2.00,' said Monica Fan, global head of currency strategy at RBC Capital Markets. The pound has risen 13.5 percent against the dollar this year, outpacing the euro's 11.4 percent gain."

"Other dollar rates in Europe, compared with late Wednesday, included 115.69 Japanese yen, down from 116.31; 1.1983 Swiss francs, down from 1.2090; and 1.1427 Canadian dollars, up from 1.1380. In midday New York trading, the dollar bought 115.55 yen and 1.1967 Swiss francs, while the pound was worth $1.9680."

From CNN Money. "Worries about the slowing U.S. economy sent the dollar down to a 20-month low versus the euro and lifted bonds Thursday. A slew of reports showing the world's largest economy is cooling sparked the slide in the dollar as currency traders worried the Federal Reserve would have to start cutting interest rates to reinvigorate growth."

"The report to incite the most concern was one showing a decline in business activity in the Midwest. The National Association of Purchasing Management-Chicago said its measure of activity fell unexpectedly to 49.9 from 53.5 in October. A measure below 50 indicates contraction."

From MarketWatch. "Gold futures rallied to a 12-week high Thursday to end the month nearly 7% higher as U.S. data renewed expectations that the economy is poised for a growth slowdown, prompting the dollar to touch a 14-year low against the British pound and a 20-month low against the euro."

"Gold for December delivery closed up $11.40 at $646.90 an ounce on the New York Mercantile Exchange. It touched $648, its best level since Sept. 5, after losing more than $5 in the past two sessions. The benchmark contract tallied a gain of $40.10, or 6.6%, from the month-ago closing level of $606.80."

"'Unlike previous times, gold has not sold off after hitting key resistance around $640,' said Peter Grandich. 'This suggests a powerful move up is near and a run to $700 is likely.'"

"Meanwhile, oil prices extended their gains to a high above $63 a barrel following declines in U.S. petroleum supplies last week as well as to forecasts for cold weather across much of the nation. 'The threat of oil-driven inflation and bearish sentiment toward the dollar will continue to draw investors towards gold and its unique properties as a store of value,' said James Moore, analyst at TheBullionDesk in London."

"Other metals joined in gold's rally. December silver futures closed up 35.9 cents at $13.925 an ounce, ending 13.5% above the close on Oct. 31. March silver finished up 35.5 cents at $14.115, on higher trading volume."

"January platinum rose $24.30 to end at $1,176.70 an ounce, up 7.7% for the month. December palladium added $7.05 to close at $329.35 an ounce, up 2% from a month ago. March palladium added $6.85 to close at $334.35, on higher trading volume."

Comments:
The backdrop for all of this is the failing US economy, IMO. It doesn't look good for this country.

I guess the big question is, have the chickens finally come home to roost?
 
Yes, Ben. IMO, though, metals are just the canary in the coalmine, and we are just at the beginning of so much change. Still and all, gold and especially silver, are on fire.
 
Too fast!!!!

Personally, I was hoping for a little more time to save, invest (bearishly) and accumulate more PMs.
 
I knew it wasn't going to end nicely, but saying terrorists are going to take down Wall Street? Come on. Too many people knew it was toast due to our financial system. Am I to believe that we have the ability to track money flows all over the world per the NYT report on the NSA, yet the Taliban living in austere conditions have the ability to overpower our computer expertise? I don't think so.

Do the terrorists not read the news? We are grasping at straws in Iraq. Are they dumb enough to rile the American masses to ensure their destruction? Are massive bank failures and hedge funds blowups not already a certainty in the US? Why would they give us a scapegoat? Why would the DHS elect to report the news @ 1835 Eastern Time to incite a panic? Are they not supposed to prevent just such a thing? Where did the info come from...a major US bank or hedge fund on the brink of disaster looking for a cover up?

This whole thing stinks, but it isn't like it's been debated at length as to the cause. I knew blame was going to go everywhere but where it belongs. Heck, I even wrote either here or the HBB that when it unravels, the most important thing is to rest the blame right where it belongs, on banking practices. I even said it is important to not listen to claims of immigrants, terrorists, democrats, etc. The blame will pointed in a lot of places, whether it happens soon or later, but it is exactly what Washington, Jefferson, and Jackson warned of regarding fiat money. If you don't believe me, read what they wrote in the late 1700s and early 1800s on banking and paper money. They were deadly afraid of giving banks a monopoly on money, hence the way the Constitution is written. I'd say they were experts on what the intent is.
 
TJ, I wouldn't worry about "too fast". As loudly as the alarm bells are sounding today, we'll have plenty of spin coming from the Fed which will provide temporary dips in gold and silver. The trend for PM's of course will be up, up, up. But the ride will be full of bumps. IMHO we'll see a serious stock market plunge also -- which will drag metals down with it. (I've never understood why that happens, but it always does).

The question I always ask myself though is whether or not I should be more motivated to own physical, and not just GLD & a broad basket of miners.
 
something is going on here with the dollar. it's weird, something doesn't feel right.
 
...you mean, something other than the fact that its toast? ... and something other than the fact that all of the official metrics are hilariously manipulated?

The thing that I want to know is: behind the curtain of the Federal Reserve, what's the panic level? Are we at Defcon 3 or Defcon 5 in terms of concern?
 
Sono, TJ: For what it's worth, I "play" with GLD/SLV to try to get a little ahead of the market. You know, sell into strength, buy weakness, though I really burned myself in May. Even still, my goal is always to migrate to physical, hence my holdings are about 50/50 paper vs. physical. I will migrate entirely to physical at first signs of a monetary crisis. Hopefully there will be some time. TJ, I don't think that time is now. I too have a plan and will purchase more physical in the first quarter. AU seems a bit overbought to me again, so I have been taking some GLD/SLV profits this week, but many of the people I listen too are sounding alarm bells on the dollar and predicting that the next few weeks could be exciting.

I'm hoping for a dip today (Friday) or next week and I'll pop back in, although I may get left behind, on paper that is:

Marketwatch/Brimelow
Gold is Golden
Commentary: Harry Schultz sees $1,500 for yellow metal
http://tinyurl.com/yj7z3o


Here's Fekete's latest:
Where Freidman Went Wrong
http://www.safehaven.com/article-6411.htm
 
sohonyc,

Yeah, as I stated earlier this week I still expect one more huge correction, probably when the stock market really tanks. That said, I'm surprised you're not bigger into physical.

Fred,

Hear you on the "play" aspect. The ETFs provide a nice trading vehicle, although I have yet to go there myself.

JLII, yes, something's off. Where's thejdog? He usually had some interesting insight...
 
TJ -

I used to hold physical, but really, I'm just not into physical right now because its slow to trade -- but I recognize that its clearly the safest of all. Afterall, what's safer than something in your hands. I think if things start to look like they're getting really crazy, I can move from ETF's to physical.

I keep hearing people express doubts about the ETF's but I haven't heard a really sound justification for the fear. From what I can see the ETF's are audited and closely correlate (thus far) with the PoG.

But I'd love to be convinced otherwise if anyone's got solid evidence/reasoning for why the ETF's are bad news. I'm considering a GoldMoney.com account, too. But right now, nimble-ness is probably most important to me as I do a fair amount of equities trading as well.

--Soho
 
I also hold positions in ETFs as well as physical. What I like about GLD is that the gold is not stored in the US. Let's face it, if the government gets serious about confiscation, they are going to take the gold out of your bank vault anyway. Unless you are going to bury it in your yard and hide a map somewhere, there will always be risk of confiscation.
 
rights on cue, the idiots on wall street say the falling dollar is good for US companies if it doesn't get out of control.
 
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