Gold Editorials & Commentary

YOU HEARD IT HERE FIRST

The Junk to Treasury spread is widening rapidly and you ain't seen anything yet.

A certain nerve has been struck a few times in recent reading on my part by the description of the USDollar as a subprime currency. How true!!!

"Gear Today, Gone Tomorrow" is an old saying in the market place, referring to the propensity for over-leveraged entities to implode. The continuing crisis in the global banking and credit markets has caused the clock to tick past midnight.

GOLD UPSIDE BREAKOUT ALERT! Gold is now in position to break above last year’s highs and embark on a major uptrend.

Below is a Relative Strength Chart of Gold:Silver (courtesy sharpcharts.com)

GLD - no buy signal yet.

The general meltdown in credit is the ideal macroeconomic scenario to launch gold into all time high territory.

This week, Larry Kudlow and others strongly chastised Bernanke for his failure to read the writing on the wall and urged the Fed Chairman to quickly slash the Fed Funds rate. Methinks the pundits doth protest too much.

That the direction of the gold price has been in a state of indecision can be seen from the following chart, courtesy stockcharts.com.

MISINFORMATION

TRIBUTE TO KURT RICHEBACHER. He was a valued colleague and an inspiration to my newsletter. Our week together in Cannes will forever be etched in my memory.

The Normal Business Cycle

GLD - on sell signal.

The current economic debate really boils down to one essential question: "Will there be a recession?" To me, the question has about as much vitality as debating whether Roger Clemens will be inducted into the Baseball Hall of Fame.

The US financial system is experiencing a combination of a heart attack (fibrillation from absent trade recycled surpluses), a massive hairball (subprime debt securities) working through the bank arteries, and a realization (like Wiley Coyote in cartoons) that

As everyone knew gold (spot) was going nowhere in the past week. During those days, the market has been developing a flag pattern in 4-hour charts. Technically, a flag is a consolidation pattern. What would happen at the end of a flag?

Gold held up remarkably well last week given the carnage all around, with silver and Precious Metals stocks cratering, and despite the sharp drop on Thursday it did not break below critical support, unlike silver.

The Gold Price is telling an important story at present. It's telling us that the days of Financial Engineering are over.

GLD - on sell signal.

The current weakness in domestic markets has recently been magnified overseas as panic spread to foreign investors with exposure to U.S. asset backed debt.

Precious metals have been one of the top performing asset classes over the past six years, and investors wanting to add a precious metals component to their portfolios are often overwhelmed by the number of investment vehicles available to them today.

This Market, including stocks, bonds, real estate and commodities have all been built on a massive amount of credit and "out of thin air" monetary creation.

Maximize life, not profits!

Summary

As the man said: "Rumours of my death are premature". Huckleberry Fed (huckster that he is) seems to have done it again.

For years, Americans have been able to pay for enormous trade deficits by exchanging IOU's for imported consumer goods.

Fannie Mae is being groomed to be the central clearing house for mortgages and their bonds, sponsored by the USGovt and the US Federal Reserve.

The outlook for gold turned decidedly more bullish last week when it broke above the confines of its “Distribution Dome” for the second time in the space of as many weeks.

Preface

Berenanke's hands are tied, he cannot lower rates for fear of a US $ collapse. On the other hand, the money out of thin air creation machine cannot work while lending standards are being tightened.