| |
| Imperfect Storms Create Gold Buyers |
| |
“Out of raging convoluted
markets and geopolitical events comes the seed of legendary
returns.” - Traderrog
Trading gold or anything else for that matter
gets dicey with increased volatility. We mentioned last
Saturday in our weekly letter about a “Creepy Calm-Utter
Stillness before the Storm.” This idea no sooner hit
the streets then today we learned the North Korean nutcase
is busy preparing to toss more missiles. Worse, Mumbai,
India, a major gold capital of the world suffered terrible
violence by terrorists against commuter trains. Additionally,
the enemies of Israel have kidnapped more soldiers and the
Israeli government has called up 6,000 troops for action
and attacked Lebanon.
China is running that puppet show in North
Korea and is now quite worried the little freak has stepped
too far over the line. Our best contributing analyst said,
“Bush would love to blast this unstable person into
oblivion along with all his naughty toys. All that’s
needed is a fearful Japan saying to push the button.”
Putting this into proper context, it’s analogous to
Fido in Cuba target practicing with missiles near Key West,
Florida. There are some things you just don’t do as
repercussions can be severe, swift and sure. Japan may be
unarmed but they have good friends who aren’t and
who could use the spring training in spite of Iraq commitments.
That American destroyer in the Sea of Japan has enough missiles,
with probably some being nuclear, that Mr. Kim’s notorious
criminal career and others around him could easily and suddenly
come to an abrupt end.
President’s Reagan and Kennedy negotiated
the USA and world at large out of deep peril with the communist’s
years ago. The gunslinger in our White House today would
have no compunction in our view of turning Kim’s capital
city into a smoking hole in the ground. The better solution
might be to tell China, to tighten the leash on their rabid
pit bull before he must be quickly euthanized. In our view,
this time the blackmail goes unpaid and Mr. Kim gets a Chinese
spanking. China is in charge of Mr. Kim and will not endanger
their 2008 Olympics being non-attended over his shenanigans.
The real concern here other than one of Kim’s
misguided missiles falling on Japan is little Kimmy’s
ordering the 10,000 artillery pieces to open fire from their
site along the 38th parallel within range of South Korea’s
capital. We noticed thousands of USA troops recently deployed
on a large nearby Seoul airbase have been moved away. As
is common in these matters, it is first a neat idea to remove
the head of the snake. China knows this and will probably
take charge after more dust-ups before quieting things down.
In our view, the worst thing Bush could do is give Mr. Kim
a nickel to go away and behave. If he is paid-off, he will
return for the next payment very soon. This is his history.
Mr. Kim Jong is attempting to perform a hold-up
on the USA to see how much blackmail American taxpayers
will allow before writing him some very large checks. Technically,
North Korea has been at war with 56 years of “Police
Action” since 1950 and it’s not over yet. They
might have signed an armistice but Mr. Jong has never honored
it and neither did his daddy. Historically, it has been
proven, the only way to negotiate with this kind of person
is to flatten him like a size 12 shoe on an insect. In our
view, the sooner it’s handled the better. Any signs
of appeasement or weakness merely encourage more trouble.
England’s Neville Chamberlain quickly learned this,
to his dismay in 1939 in trying to appease Adolph Hitler.
Weakness will only encourage more trouble.
The Mumbai thing, sadly, is only one page
in an on-going nightmarish novel. Hopefully the instigators
will be captured and squeezed until they squeal and give
up more gang members. Britain’s M-5 and Israel’s
Mossad seem better at this sort of thing than our gumshoes.
Perhaps they should be persuaded take over this task. We
were strongly impressed with the work M-5 did on their recent
London train and bus disasters. They got busy, caught the
perpetrators and persuaded them to talk with no restraints.
We think they did a very quick and professional job netting
a big criminal gang.
Politics is not our field, but these events
impact all global markets and as analysts we must work to
think these things through and help our readers and traders
find a path through the mayhem. When stock markets are weakened
and have zero buying leadership as in today’s situation,
these geopolitical events greatly add to the burden and
traders run for safety. Unfortunately, amateurs usually
call brokers and tell them to sell everything, even their
strong performing gold positions as they must sell good
stuff to cover margins and pay for other non-performing
investments.
Last week in our Friday reports we suggested
gold and oil were resisting and topping while traders shed
stocks and bought bonds for security. We think bonds are
no place to hide either as our U.S. Dollar and bonds are
forecast to sink together this fall along with stock markets.
If it all looks so nasty, where do we
go for both security and growth?
One Hour Gold Chart on 7-11-06 Reacting
to North Korean and Indian Problems.
August gold futures were primed for a
mini-rally with a double bottom last evening of 7-10-06
and in the middle of the night with overseas trading.
Long List of Persuasive Facts Tell Us
to Buy Gold.
1. Barclay’s bank issued a statement
on this morning of July 12th to stay out of bonds and purchase
commodities. When mainstream banks issue recommendations
to the public these statements typically carry more weight
than those of, shall we say lesser sources.
2. Citibank recently issued a gold forecast
for $850 with an uncertain timeline as I recall.
3. In my current review of selected top five
analyst’s forecasts for gold this fall and for the
first quarter of 2007, I find numbers that generally equate
to mine or in fact in some cases exceed my predictions.
These advisors all have stellar forecasting records.
4. Crude oil and its distillates have proven
themselves to be excellent forecasters of gold and its trading
action. The geopolitical problems we have just enumerated
will indeed, in our view, provoke gold buying with increasing
vigor. This is difficult to measure as the ferocity, frequency
and newsworthy effects are all strong gold price drivers.
5. Residential real estate is collapsing in
some markets to the extent property values will and are
being reduced by 50%. Trader Tracks
has forecast those re-packaged mortgages sold as derivatives
will be our national and subsequently the global Achilles
heel for economies. Several top Wall Street and Treasury
official meetings confirm this.
6. A little known situation which is just
as ominous, if not more so, is the regional and local banks
being horribly overexposed to highly leveraged real estate
loans. It has been reported there are significant numbers
of banks holding in loan portfolios, a naked exposure of
80% residential and small commercial real estate loans.
Under severe stress, commercial will fail faster than residential
as small business people have limited cash and credit. Most
cannot withstand more than a few months of shortages.
7. We find it interesting that as stocks cave-in
traders are moving to bonds which contain the seeds of terrible
destruction as packagers of these instruments are taking
risks far beyond the norm to gain yield. This strain for
gain could prove to be their undoing.
8. Junk bonds have gotten junkier as we recently
wrote and many of the least credit worthy have a living
shelf life of less than three years. In some cases, certain
issues have been downgraded within a few months of their
origination sales to investors.
9. Japan and China are each holding close
to a trillion in USA notes, bonds, bills and cash. While
in our view, Japan can withstand the storm, China’s
top four national banks are already technically bankrupt
and would have died a natural BK death if not infused with
more cash from foolish stock buyers in New York. China National
bank was an example.
10. Millions in fees from new equity and bond
sales providing cash to the Chinese have been skimmed and
stolen. The funds are returning to nations other than China
to fund individual safe havens for criminals if and when
China finally collapses.
11. The most important
reason why gold is a buy reflects gold’s regained
stature as a world reserve currency after the United States
Dollar and Europe’s Euro currency. Gold has
grown with new Exchange Traded Funds (ETF’S) and other
metal investment vehicles being offered to ease the investment
and trading path for gold buyers.
12. Conflicts among nations create fear and
cause gold buying which in some instances can be temporary.
Solid, long term investments in gold are the result of imperfect
monetary systems and their currency devaluations. This latter
reason is gold’s best friend.
Gold, Gold & Silver
Stocks and U.S. Dollar Weekly Trends
Forecast supports on these charts are:
Gold at $570 on the 41 day moving average. The trading range
is $540 to $640 with strong support at $600. XAU support
is 140 and dollar remains in a trading range of 86.00 to
88.00 with major support at 80.00. XAU 2006 high is range
of 173-226. Gold 2006 high $850 to $873 and Dollar November
low is 80.00 support.
Traders should expect a range bound period
of choppy trading for gold and the XAU until the end of
August. The dollar is trying to mini-rally and is struggling
as the primary trend is down. The Canadian dollar, a strong
proxy for gold, has been mildly down over national interest
rate news. Expect the C$ to rally this fall with the U.S.
Dollar sliding and selling to 80.00 support. Recent news
regarding disturbances in the Middle East has positively
affected both gold and oil. As we complete this report,
news of more trouble in Nigeria hit the wires while crude
oil charts are moving into a large three wave rally. The
Tracks has forecast a rally in energy until September 1-15
followed by fall selling with most stock indexes.
Gold and silver begin their fall rallies
near the end of August and should accelerate in later September
and all of October as mainstream stocks sell down with vigor.
Do not fear market volatility. When you are on the right
side of this trade it will plump up your pocketbook. Buy
gold and gold related investments and shun most of the rest.–Traderrog
|
