Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Gold Intermediate Buy Signal Triggered

Commodities / Gold & Silver 2009 Jun 22, 2009 - 02:25 PM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticlePerhaps we should establish an official day of mourning for the loss of independent thinking now so widespread among today’s journalists. In the U.S., independent journalism has died. Most of the reporting media has now become the official apparatchik of the Obama Regime. With one national network  moving into the White House for daily supervision, all pretense of independence has been lost. We can probably, given access to the internet, learn to survive the death of journalism as a profession. However, our wealth may not survive the loss of an independent central bank. Since Federal Reserve actions are somewhat greater than a butterfly in Africa flapping its wings, the rest of the world may need to worry about yet to come financial chaos.

Text Box:  To explore the loss of independence at the Federal Reserve, let us consider the first chart above. In it can be found a blue line that uses the left axis. That line represents the cumulative monetization of U.S. government debt by the Federal Reserve since the beginning of the time period included in the graph. For most of that chart, the Federal Reserve monetized very little U.S. government debt.  Then, in January of 2009 it began to monetize debt at an explosive rate. Did something change at that time?

Since then, the Federal Reserve has monetized on the order of $700 billion. Now while percentages are more important than absolute numbers, that value is more than the combined GDP of Poland and  Ireland. It is about 2/3 the size of the Canadian economy. The change that arrived in January was that the Federal Reserve was to create more money in a shorter period of time than has ever been done in history. Certainly one change that arrived in January was the total loss of independence at the Federal Reserve.

That blue line has some important meaning for Gold investors. With the Obama Regime likely to run deficits of $2-3 trillion for the next few years, that blue line will continue to rise. The Federal Reserve is now the “printing press” for an out of control Peronist-like government. That blue path of debt monetization puts a long term floor under the price of $Gold. If ever an argument existed for long term ownership of $Gold, it now certainly exists with the end of independence at the Federal Reserve.

The red bars, using the right axis, also have meaning for investors. They represent the amount of U.S. debt monetization being done by the Federal Reserve on a trailing 9-week basis. Think of these red bars as representing the liquidity pedal, as in a gas pedal, for the U.S. financial system. When those bars are rising, the gas pedal is being pushed to the floor. The monetary carburetor is flooding the financial engine with liquidity. That burst of liquidity pushed financial markets higher. That flood of liquidity is what sent the stock and Gold markets higher, providing hope and optimism for all.

With those red bars now starting to fall, for whatever reason, the consequences are like taking one’s food of the gas pedal. The monetary carburetor is not sending as much liquidity into the financial system. The engine, or financial markets, then starts to slow. Such is what has been happening to both the stock and Gold markets. They are sputtering on a lower level of liquidity injection. 

Text Box:  Last Summer in addition to the normal seasonal liquidity decline banks and hedge funds moved toward near collapse. As all that happened together, a massive draining of  liquidity occurred. That development sent the markets for stocks and precious metals lower. A similar, though not as severe, situation seems to be unfolding this Summer. As the chart above shows, three buy signals built on over sold conditions were required last Summer for $Gold to find its final bottom.

Thus far, one intermediate buy signal has developed. As these over sold conditions develop this Summer, as a consequence of the loss of liquidity, investors should be adding to their Gold holdings. While this Summer’s low should not be as deep as that of last year, it should have true importance for investors.  A longer term perspective, both historical and future, suggests that $Gold will make $1,000 the new floor this coming Fall. The agony of Summer may be the last chance for investors to buy $Gold for less than $1,000.

By Ned W Schmidt CFA, CEBS

Copyright © 2009 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to

Ned W Schmidt Archive

© 2005-2019 - 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