Taylor On Gold Stocks & US$
Financial Markets
"If you're going to perpetuate a fraud on the people, make that fraud so
big and so complex that the people are unable to understand it. That, dear
subscribers, is exactly what took place when the Federal Reserve was
created in 1913. And that is how and why the dollar has lost 95 percent of
its purchasing power since 1913." Richard Russell - May 25, 2005.
Unfortunately Richard Russell is right. The creation of the Federal Reserve
has enabled the United States to become a de-facto communist/fascist
country without ever putting our system of government to a vote.
Ideologically, Lord John Maynard Keynes made "pink" look all so respectable
and all so reasonable. Trouble is, his shade of pink socialism has not been
limited at say 40 percent or 50 percent government domination. Once set in
motion, one form of government intervention mucks up markets so that wave
after wave of additional intervention (manipulation) is required until
socialism and tyranny eventually conquer our individualism and freedom via
the back door. And we willingly go along with the program for a birthright
of materialism.
American kids are being fed the propaganda that they are going to war in
foreign lands for the sake of freedom. In fact, a read of "Confessions of
an Economic Hit Man" (John Perkins) or "The Creature from Jekyll Island"
(G. Edward Griffin), in combination with a biblical perspective, convinces
me more than ever that what is driving our foreign policy is wealth and
greed on the part of that same ruling elite who were responsible for
sneaking the Federal Reserve Bank into existence. In fact, without the Fed
and a denial of our Constitutional mandate for gold and/or silver as money,
the slow but sure march toward dictatorship of the left or right or
whatever direction it is coming from would be impossible.
But a march to tyranny is what we have to deal with. As such, markets are
becoming far less predictable, because they are being maimed exponentially
by our rising dictatorial powers that now lord it over us, much opposed by
our Founding Fathers. So we try to figure out best we can, with God's help,
which way the markets are moving.
GOLD STOCKS
At this still early juncture of 2005, gold shares are hurting our
performance very badly, given a 21 percent allocation to speculative gold
stocks, which are down 21.38 percent thus far in 2005. Any significant
turnaround here could quickly put us back in positive territory.
I hold out the hope that that day is close at hand. Indeed, this week we
witnessed a tiny rebound in the GoldColony.com Index of Junior Gold Stocks.
The index closed at 104.71 after briefly dipping fractionally under 100 for
the first time since about August of 2003.
Bob Hoye said in his May 27 Chart Works publication, "The XAU and the HUI have started stepping their way higher since the May 16 bottom. They now exhibit the type of bullish divergence relative to the gold price that we
have seen at tradable bottoms in both the gold and mining prices." I would
encourage you to visit Bob's Web site at www.institutionaladvisors.com for
some interesting, thought provoking, and creative but historically sound
ideas about how and why the current markets are doing what they are doing.
Larger gold shares are still in a funk, though, as Bob suggests, they are
showing healthy signs of divergence with the metal. The chart on the left
shows however that despite its poor performance of late, the XAU remains in a bull market. And so, we will stay with our gold share dominance in our
Model Portfolio in anticipation of a "golden" replay like we enjoyed in
2002 and 2003. What I do know is that so many of our juniors keep on
announcing excellent exploration results, but to no avail, as far as their
share prices are concerned. That will change and there are signs it could
come soon-perhaps before the much dreaded fall season for equities. What I think we need to see for gold and gold shares to rocket to new highs is for
the equity market to tank. I'm still expecting the next leg down-the one
that scares the daylights out of most investors-to get underway before the
end of 2005 and perhaps this fall when the equity markets generally get the
shakes.
Remember how a few months ago, everyone-except for Bob Hoye and yours
truly-was betting on the immediate demise of the dollar. Note again the
strong support for the dollar Index at 0.80. This line is most important in
allowing the U.S. to fund its oil-securing military escapades overseas. If
this line is broken to the downside, it all may well be over for America.
Can gold rise against a "strong" dollar? Yes, I believe it can and that it
will, because as Bob Hoye points out, in a post bubble era, the senior
currency (in this case the dollar) is the "strongest" when the system falls
apart, because it has the largest synthetic short position. That is true
because it has by far the most debt, and when debt is repaid in dollars, it
creates a short squeeze against the currency. But that short squeeze then
causes all manner of stresses and strains in the global economy.
Ultimately, the entire global monetary system will be under duress such
that the only alternative money will be gold/and or silver, which is what
our Founding Fathers wrote into the Constitution in any event. Yes, the
dollar is weak in that it is being created out of thin air and more and
more of it ensures its loss of purchasing power. But then all other paper
currencies are also fraudulent except for commodity based money, most
notably gold and silver.
Gold: Closed Friday at 419.30 and in after-hours was over 422.00. Serious illness announced after hours by Saudi head of royal family. Entire country is now on alert with troops in the streets. We expect a mild reaction should this leader pass on, but you never know. This could affect big oil, and big oil
affects everything. Gold seems to have bottomed at plus or minus 418, a
secondary pivot point. It seems to have based and rallied in a new wave
one, which can move it up 10-15 points to 433-436. Price has regained the
200-day average, which is very important. PMO lines are basing at -1, where
previous support existed in February. Euroland election could drive gold
next week if markets react to a negative outcome, which is expected.
U.S. Dollar Index: Closed at 86.46 -0.39. Price resisted at .8700 major
pivot, and reversed as we had forecast. Dollar's opposite, the Euro, had
been selling and has now supported at lower price ahead of election. Dollar
has completed five waves of a five-wave rally. Next we see an A-B-C selling
and sideways range-bound correction. Dollar has major support at .8508 on
the 200-day average. New dollar price range is 8500-8700. PMO is turning
over and should run sideways. Look for the dollar to begin a new selling
period in late June continuing through end of the year. Lower prices
develop very gently over the next six months with much apparent sideways
trading.
May 28, 2005
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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