Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UKGC Set to Make Online Gambling Industry More Risk-Free - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Silver Leads Gold Higher as U.S. Dollar Teeters on the Brink

Commodities / Gold & Silver 2009 May 07, 2009 - 11:51 AM GMT

By: Jim_Willie_CB

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleIn a bizarre exercise intended to defend legitimacy, the bankers are engaged in a complex game of propaganda. They pressured the USCongress to relieve Wall Street from the chains of FASB Rule #157, and the senators & representatives obeyed their paying masters. The result has been a baseless stock rally led by insolvent banks that have lied desperately about their capital and earnings. The announced audited Citigroup profit of $1.6 billion in the first quarter was actually a deep $2.5 billion loss, provided the $4.1 billion in gimmickry was removed. The gimmicks pertained to toxic assets valued at fictitious model, shell games on loss reserves management, and illicit debt markdowns on the balance sheet. Thanks to Martin Weiss for the autopsy of Citigroup, the biggest zombie strutting in the global financial sector.


Actually, that ignominy is a close race with Bank of America. The end result is the global financial markets are losing faith in the US$-based system, since the US is regressing in backward steps rather than working toward remedy. In my view, attempts at remedy would reveal a failed system that cannot be revived, broken irreparably since last autumn. The contradiction between the US bank fraud kings and the Intl Monetary Fund projections of additional bank losses is another big billboard message, again ignored. Maybe somebody should reveal to US bankers and their investors what is happening in the mortgage market, with losses to come on a broad basis. Future bank losses will continue in a torrent!!!

The President has uttered a total absurdity, that the USGovt will pay as you go, despite the fact that the PayGo has been violated if not trampled in the last few years, and foreign creditors have stepped back from USTreasury Bond sales. It should be called PrintGo, since the monetization card has already been put on the table. A very dangerous precedent has been initiated. Obama has led the charge against senior bondholders of corporate debt. Their right to be first in line during any bankruptcy process has been discarded carelessly, a legal contract violation, with certain unintended consequences in the corporate bond market issuance arena.

See the General Motors and Chrysler dictated conversion to stock, which favors the Wall Street firms in possession of vast amounts of unsecured debt. That puts the screws to hedge funds that hold vast amounts of secured debt (deserving senior positions). This war against hedge funds is more a defense of a syndicate in charge, and a gross betrayal of securities rules. Once again, the financial crime syndicate that has hijacked the USDept Treasury writes the policies that favor themselves. Foreigners are watching; confidence in the US$-based credit markets will suffer blows. The impact on the USDollar and gold, if not the USTreasurys, will be vivid.

The bank sector Stress Tests clearly are a sham designed to restore confidence after accounting rules were eliminated. USFed Chairman Bernanke continues to make clownish comments about the problems centering upon bank liquidity, when solvency remains their plague issue, and will continue to be the main flaw. What a lousy economist and a lapdog banker! He has not been correct on a single issue or forecast or analysis since taking the helm at the US Federal Reserve, yet he is given high praise. The Johann Gutenberg Award might be appropriate for printing press accomplishments, but no more than that! He claims the Stress Tests were extraordinarily detailed, yet they relied on ridiculously soft economic stress factors from months ago. My stance is clear, that the Stress Tests will eventually be used as weapons to force stronger regional banks to merge with dead ones lodged on Wall Street, with the FDIC holding the legal hammer. The cancer of Lower Manhattan most assuredly will force its metastasis across the nation and into its banks.

Financial market anchors and analysts debate whether the 30% stock rally qualifies as the new bull market, as nutty green shoots are identified. The supposed green shoots are nothing more than elaborate moss on exposed decaying roots of dead standing trees. These are sprawling sequoias with hollow trunks and decayed roots. Those sell-side optimists ignore that a 30% stock market rise after a 50% decline since October 2007 is a typical bear market correction. The green shoots cannot possibly be new attempts at legitimate growth when jobs are being destroyed on a massive scale, home foreclosures continue to rage, home values continue to decline closer to 20% than 10%, corporations are guiding lower on profits and investments, and the states are cratering financially. Besides, the S&P500 Price Earnings Ratios are at historic highs, not lows. Worse, the earnings are mostly fictions. Votes are being registered in the gold & silver markets, and in the USDollar and USTreasury Bond markets.

SILVER LEADS GOLD

Silver has made an initial move over the 14 level, to challenge the March highs. The gold price has rebounded, but not enough to cause as much enthusiasm. The reliable respected Adrian Douglas has spread the word that both Goldman Sachs and JPMorgan Chase have been building option call positions on both gold & silver futures contracts. Normally, options are the contrary indicator of naïve money piling on, after a segment of the game has concluded. Not so with option futures, which is the province of insider trading. Both GSax and JPMorgan are kings of insider trading, with full impunity, all for the greater good (of private profits). The other inside story comes from overseas. The Germans have demanded the return of all their gold bullion held by US bankers in custodial accounts. The Arabs are accumulating gold, platinum, and silver. The Chinese admitted their gold accumulation. The Russians have not permitted any gold mining output to enter the markets in three years. Precious metals are being looked upon very favorably as the US$-based financial structures continue to dissolve.

The silver price is moving up the most rapidly, in lead fashion. The reasons are many, but they include the fact that the shortage in silver is far more acute. Both industrial demand results in depletion, and investment demand is growing quickly. The six billion ounce stockpile in silver once established by the USGovt has been long gone for at least five years. The next stop for silver is 15, which should occur easily, and then 18 in another easy leg up. The cyclicals are both nicely aligned in a positive direction. Enrico Orlandini demonstrates that the Point & Figure chart method indicates a 26 price target for silver, although the method has a timeless element in its elegance. Those investors who averaged their unleveraged silver positions since last autumn will be greatly rewarded. Silver has always sauntered in the shadow of gold, but it will sachet soon with a smirk and a wag.

One can pore over a gold chart, compare it to a silver chart, resolve some confusion, and unassuredly attempt to make some conclusions. The easier analytic step is simply to observe the gold versus silver ratio chart. One strange price factor is the lease rate. The one-month silver lease rate is under 0.5%, but the one-month lease rate for gold is stable and negative. So the criminals running the US gold treasure into the ground (see ‘Deep Storage’ gold on its accounting) are paying insiders to borrow it, in order to dump it on the market. They simply do NOT have the silver to give away. The ratio of gold to silver has finally favored silver again after three months of consolidating. Notice the 200-day moving average that supported the ratio. Some give little credence to technical chart support and resistance theories. They matter less during times of serious dislocations, to be sure, but they are evident even in the most obscure of ratios like this. Hedge funds and Wall Street firms both employ complex trading strategies. Their monitor and usage of the gold/silver ratio is definitely a tool. Notice the absence of support in this ratio, down to the 52-53 level again. The snap conclusion is that silver is bound to recover quickly toward the 18-20 level, while gold makes its smaller move back to the 1000 level.

USDOLLAR READY TO DECLINE

The threat of a triple top breakdown has highlighted last week. Clearly the 84 defensive line has failed. Next the 83 support line will be challenged. It is buttressed by the 200-day moving average. Some analysts claim that the DX index can once more mount a rally, just like off the December low, just like off the March low. Yet the more powerful argument is that the triple top exhibits a profoundly clear ROUNDED TOP pattern that could be jammed into a bearish Head & Shoulder pattern. A breakdown in the neckline of such an H&S pattern would indicate a move to 80 or below is assured. Gold will ride that burst of wind with ease over the 1000 mark. Silver will double the gain that gold enjoys.

A better look at the USDollar breakdown in progress can be seen in the five-day chart. The defense of the 83.7 support level is the primary location of the battleground. It is trading at 83.75 at the moment of this written sentence. The battle is on. The USDollar is delivering a strong vote against the faulty green shoots claims motivated by ill-advised analysis, vested interest, if not survival. The USDollar is voting NO confidence to the sham bank sector claims of viability, when they are zombies with hollow cores. The USDollar is saying hard times are coming to the USEconomy, led by the manufacturing (cars in particular). Industry is ALWAYS the most important part of any economy, its fundamental value added sector, a chapter lost in the US economic history teachings in compromised universities across America. Wall Street hucksters need to read that chapter of economic history during detention after class, or better yet in prison cells.

USTREASURY YIELDS BURST UPWARD

Last week, the USTreasury Note (UST) principal value was charted. It was noted that the 3.0% level of resistance was giving way. It broke, and it did so suddenly to the upside. The TNX measures the 10-year USTreasury yield. It zoomed to 3.25% and has stabilized in the last few days. The USTreasurys can act as a gigantic feeder system into gold. Obviously, the bond loss and often the gain for stocks, but the gold market is much smaller in magnitude. Many reasons can be offered for why long-term rates are rising. Leave the litany of reasons for the May Hat Trick Letter out next week. The overriding message is that the entire gain from the mid-March announcement of USFed monetization of $300 billion in USTreasury Bonds and $750 billion in USAgency Mortgage Bonds has been lost. The rally seen in mid-March immediately afterwards was based on the notion that the USFed and USGovt together would provide a powerful bid on the USTreasurys. That is now gone, as something bigger can be sniffed in the ill winds over Wall Street and WashingtonDC.

The triangle pattern has been broken. The indicated target for long-term USTNote yield is 3.5% at least. However, the larger triangle has even more potential lift in long-term yields. The larger triangle indicates a powerful damaging move in long-term yields up to the 4.0% level, where they were last autumn. That is a strong feeder channel for gold & silver. The process is global, as the European Central Bank just today announced a 25 basis point cut down to 1.0% in the official interest rate. Cheap money, negative real rates, are a primary impetus for gold, as currencies are almost uniformly damaged, debauched, and this time probably destroyed.

CREDIT CRISIS AUTOPSY

Here is fine piece of analytic work from a friend named Trace Mayer. He comes to the gold community with a different slant and background. He has a law scholar with emphasis on the Constitution, especially how it applies to the gold and currency topics. In his e-book entitled The Great Credit Contraction” one can read about the historical significance of a crisis that will surely reshape the world. The global economy is built on an illusion currency that is evaporating before our very eyes. This book is an autopsy of the current worldwide systems and begins with financial history, discusses the current great deflationary credit contraction, projects the future environment, and concludes with suggestions on how to generate and preserve wealth in this challenging time. An appendix analyzes important topics. (CLICK HERE TO ORDER)

THE HAT TRICK LETTERPROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.

“I have found your commentary to be excellent in helping to insulate my clients from much of the malfeasance and market manipulations that occur in our markets by avoiding certain sectors such as banking even when all of the commentary says how well they are doing. You have been proven over the years to be very accurate.” -    (RickW from Iowa)

“A few years ago, I was amazed at some of the stuff you were writing. Over time your calls have proved to be correct, on the money and frighteningly true. The information you report is provocative and prime time that we are not getting in the news. I was shocked when I read that the banks were going to fail in one of your prescient newsletters.” -    (DorisR in Pennsylvania)

“You seem to have it nailed. I used to think you were paranoid. Now I think you are psychic!” -    (ShawnU in Ontario)

“Your unmatched ability to find and unmask a string of significant nuggets, and to wrap them into a meaningful mosaic of the treachery-*****-stupidity which comprise our current financial system, make yours the most informative and valuable of investment letters. You have refined the ‘bits-and-pieces’ approach into an awesome intellectual tool.” -    (RobertN in Texas)

by Jim Willie CB
Editor of the “HAT TRICK LETTER”
Home: Golden Jackass website
Subscribe: Hat Trick Letter

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com

Jim Willie CB Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules