Gold Editorials & Commentary

As the gold stocks have made a significant move since our last essay, we thought the time was ripe for an update.

THE BEAR STERNS HEDGE FUNDS

By requests, we are now including GLD and SLV in our weekly commentary.

As many of you may recall, on the site we had earlier been wary of a substantial dollar rally, which was a big reason for fearing that a Double Top may be forming in gold and silver.

This week, bond rating agencies Moody's and Standard & Poor's finally announced downgrades on billions of dollars of bonds backed by subprime mortgages.

Battle of Titans

There are several factors coming together now to suggest that a powerful rally in gold is drawing near, and because they are so clear and potent, they do not require a long-winded description.

Collateralized Debt Obligations are the CDO bonds under fire, soon to suffer huge losses, subject of debt downgrades, object of failed auctions. We are talking about hundreds of billion$ in bond losses.

Foreword

Elliott Wave Gold Update XV

As the Japanese government continues holding short-term interest rates near zero while printing yen like it is going out of style, getting out of the yen has now replaced pachinko as the national pastime for rank and file Japanese.

One chart only this week. The one which matters…

Summary

HOLIDAY

"Everyone loves an early inflation. The effects at the beginning of inflation are all good.

When the contagion (denied no longer) is systemic, pervasive, broad, multi-faceted, and ominous in its lethal potential, perhaps one can calmly conclude that the system is merely adjusting to a total change in the seas. NO WAY!!!

The meltdown in the subprime mortgage market is inexorably spreading throughout the U.S. economy. The first shoe dropped in February, when scores of mortgage originators went bust amid rising defaults and tightening lending standards.

Every ten years or so, we hear the ardent cry of "this time it's different" and/or "we have now entered another new paradigm that will lead to UP, UP and away." In the late 60's, it was The Nifty 50's.

$HUI - is on buy signal.

We have recently maintained a neutral/bearish stance on gold, which was not unreasonable given the way the earlier advance had petered out and been followed by weakness resulting in the failure of a long-term uptrend line that signaled a change of intermediate

"...What people don't fully appreciate is the extent to which our financial system has geared up over the last twenty years to finance the worldwide residential housing boom..."

Now that yields on ten-year Treasuries have cracked through 5%, on their way to infinity and beyond, many on Wall Street are wondering how high rates must go before bonds begin to draw investors away from stocks.

The cancer that is mortgage bonds does not linger in isolation. Everything in the bond world is connected to almost everything in the bond world, at least within the US sphere of speculative madness.

Tuesday afternoon, after hours, the phone rang, and an 82 year old man said that someone had told him to call me. He is very wealthy, and has gobs of money in CD/s and actual cash on hand. At least he says so, and he does talk like it.

The rising trendline on the weekly $XAU chart below (courtesy Bigcharts.com) has ten points of contact. It is therefore highly significant

A Fire Alarm went off in the markets last week.

Like many before him, Sir Isaac Newton was fascinated by Gold. Indeed, since time immemorial most of humanity seems to have been attracted by its glitter. Newton's reason, however, was different.

At a commercial real estate conference earlier this week, Alan Greenspan downplayed concerns that the Chinese might sell their significant holdings of U.S. Treasuries.

In late March, an article pointed out the massive powerful cross currents in the USTreasury bond world. We are seeing the forces described finally at work. The aftermath has generated more questions than answers.

As a kid, I always loved to play Monopoly. It's great game for kids to learn, as it teaches basic economics very nicely. I used to play a lot with my cousin Keith, and we used a term when we had to mortgage properties to pay off our opponent.