Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20
Silver's Massive Undervaluation Relative to Gold Makes It Irresistible - 14th May 20
Bitcoin Halving Passes with no Fanfare, but Smart Money is Accumulating - 14th May 20
Will Job Market from Hell Support Gold? - 14th May 20
The Tragedy Of Missed Covid-19 Opportunities - 14th May 20
Worst Jobs Report In US Economic History - And The Stock Market Continues To Rally - 14th May 20
NASDAQ Sets Up A Massive Head and Shoulders Pattern - 14th May 20
Perceiving Coronavirus as a Disruptive Technology - 13th May 20
Why Financial Trouble Brews on the "Home" Front - 13th May 20
Stock Market ‘Sentiment Event’ Rally Grinds On - 13th May 20
The Fed Now Owns All Markets - 13th May 20
Fruit Trees Gardening to Beat Coronavirus Blues - , Apple, Cherry, Kiwi, Pears, Plums, Grapes, Bananas May 2020 - 13th May 20
Gold Investors Shouldn’t Be Losing Focus - 12th May 20
S&P 500 Bulls Again At Resistance – Now What - 12th May 20
US Fourth Turning Accelerating Towards Debt Climax - 12th May 20
Gold in the year of the Coronavirus Pandemic - 12th May 20
Hi Ho Silver : Away! - 11th May 20
The Great Stock Market Disconnect - 11th May 20
The Big Move In Silver May Be Right Now - 11th May 20
Finding Winners in the Wreckage of the Coronavirus Economic Downturn - 11th May 20
Brave New Corona World – A heated Debate between Steven Pinker and Aldous Huxley - 11th May 20
Coronavirus Catastrophe Stock Market Implications - 10th May 20
US Stock Prices are Ignoring the Economic Meltdown, Wait for it… - 10th May 20
Forecasting Crude Oil: This Method Has Been the Undefeated Champion Since 1998 - 10th May 20
Coronapocalypse and Gold - How High Is Too High for the Yellow Metal? - 10th May 20
The Illusion of Owning Gold - 10th May 20 - Nick_Barisheff
The Financial Crisis Will Continue To Lurk Even If the Lockdown Gets Eased - 10th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Buy Signal as Price Weakness an Opportunity to Accumulate

Commodities / Gold & Silver 2009 Mar 17, 2009 - 11:45 AM GMT

By: Ned_W_Schmidt

Commodities Best Financial Markets Analysis ArticleUltimately, supply has to equal demand. That reality most of us accept. We can, for example, only consume the amount of adult beverage residing in the refrigerator. Once we have done so, no level of wishing will provide any adult beverages. In a fair world, too, we would all have the same amount of adult beverages in our refrigerator at any point in time. And as we write those words, we wonder why government does not do something about adult beverage inequality. And as we wrote those words, second thoughts developed. Any attempt by governments to redress adult beverage inequality would result in all having less adult beverages. Certainly, that would be undesirable.


Extending those thoughts further brings us to the realization that only in government does the supply of money not have to equal the demand for money. Everywhere else, the supply of money dictates what can be consumed. Everywhere on earth, money is in balance. That reality of balance may be about to visit the U.S. Treasury. Those government agents residing there need to raise more than $2 trillion in the coming year from gullible global investors to finance Obama regime's plethora of pork and populism.

Our first graph is all about money, something about which greedy Gold bugs like to think. The black squares are a three-month moving sum of the U.S. trade deficit. Each month the U.S. buys from the rest of the world more than it sells to the rest of the world. Any balance due is paid with dollars, the fiat money of the U.S. Due to oil prices having fallen and the massive recession in which the U.S. finds itself, that trade deficit has been declining. In short, things are so bad U.S. consumers can not afford to buy as much as they previously did.

That black line is also the supply of surplus dollars in the hands of foreign countries. In the fall of last yeas, countries from which the U.S. was buying goods and services were receiving considerably more dollars than they were spending on U.S. goods and service. To keep the wheels of global commerce spinning and their own citizens working, they were more than willing to supply those dollars to the U.S. government and various formerly somewhat independent agencies.

That red line of circles is the amount of U.S. government debt that official foreign institutions bought, again on a three-month moving sum basis. For most of the time shown in the graph, foreign countries were receiving far more dollars than they were investing in U.S. debt. Recently, that has started to change.

Notice that those two lines in recent times are moving together. In the latest data, 90% of the dollars going to foreign countries to pay for the U.S. trade deficit was being reinvested in U.S. government debt . While mathematically that ratio can rise to more than 100%, practicality means it can not. A ratio of more than 100% would mean governments are investing more dollars than they are receiving in U.S. debt. In short, they would have to take dollars away from their citizens in order to help finance the U.S. government. That probably is not going to happen.

Should the U.S. trade deficit continue to shrink, the amount of U.S. debt to be bought by foreign central banks will fall. Unless the U.S. trade deficit rises, the amount of U.S. debt that can be bought by foreign institutions will be capped. In short, the supply of money for the U.S. government from gullible foreign official institutions is being capped at a new, lower level.

That means Obama will need to turn to the Federal Reserve to monetize a goodly portion of the more than $2+ trillion deficit of the U.S. government in the year ahead. Markets understand that, even if the Council of Economic Advisors does not. That continues to explain the reaction of markets portrayed in the graph below to the Obama regime.

Silver investors, in particular, have enjoyed the Obama regime. Perhaps that group understands more fully the implications of a Federal Reserve forced to monetize a national deficit. Gold investors, too, have prospered. Chinese investors, as portrayed by the Shanghai Stock Exchange Index(SSE), have realized that China's business climate and prospects for economic expansion are better than those for the U.S. under the current ruling regime.

With wealth confiscation a center piece of the policies of the Obama regime, investor choices are limited. U.S. investors should be moving to Gold coins. If possible, move financial assets outside of the U.S. Non U.S. investors should be moving financial assets out of the U.S., if invested there.

Globally, investors should be moving to Gold coins. As we will talk in a later article, the apparent, at least partial, capitulation of tax payer friendly nations to the demands of the U.S. and other tax payer unfriendly governments will increase materially the demand for Gold coins.

Governments around the world seem to be moving in two directions. First, wealth confiscation is becoming a higher priority. Quite worrying about Gold confiscation. Worry about the real threat, wealth confiscation by governments such as the Obama regime. Second, with rare exception government are intent on debasing their fiat monies. The rise of Gold on a global basis is a natural reaction to this widespread debasement of fiat money.

Last week, as shown in the graph above, we got another buy signal for Gold as traders toyed with paper equities. Each of these periods of temporary price weakness in Gold should be used as a buying opportunity . Finally, for those looking for a historical cookie cutter to understand unfolding events, look to the wealth confiscation schemes of Argentina in 2002 and 2008.

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 http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html

Ned W Schmidt Archive

© 2005-2019 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