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What is Truth?
8th December 2009, 09:53
Stock Market and Gold Crash, Are We About to Repeat 2008?
Stock-Markets / Financial Crash
Dec 07, 2009 - 09:34 PM

By: Graham_Summers


A few weeks ago on November 10, I wrote an article Three Reasons Gold Might be Making a Head Fake.

In it, I noted that Gold’s recent rally was largely due to Dollar devaluation (Gold had failed to hit new highs in other world currencies) as well as several other factors that disconfirmed the precious metal’s explosive rise. I wrote:



Unless we start seeing confirmations of Gold’s breakout coming from other precious metals or gold mining stocks, then we could very well see Gold stage a massive reversal in the near-term. A Dollar rally (which I believe may be starting) would certainly hit Gold hard since most of the precious metal’s gains have come based on Dollar devaluation (see Reason #1 above).

Last week, Gold proved my point staging a sharp reversal falling 6% in two days’ time. Those caught on the wrong side of this trade got absolutely obliterated.



The reason for the reversal? A sudden, and sharp US Dollar rally (which I also predicted on November 11). Indeed, last week the “short the Dollar, go long everything else” crowd got hammered when the Dollar rallied more than 2% in a little less than 48 hours.



The question now is whether last week’s carnage was a mere blip in the continued Gold rally/ Dollar drop or if this is indeed the start of something more significant. To determine this, we’ll take a look at the bigger picture for both assets.

Since Gold’s rally is hinging on continued Dollar weakness, we’ll start with the Dollar first. Below is one year chart for the US currency:



As you can see, the Dollar has been in a steep downtrend since March 2009 when the Federal Reserve announced its Quantitative Easing program. Since then, we’ve seen multiple rallies to the 50-day moving average, but NO real test of that level until last week.

Taking a closer look at last week’s action, we see that the Dollar has staged its first real breach of its 50-day moving average. This is MAJOR as it is the first time the Dollar has achieved anything resembling REAL strength from a technical analysis standpoint in well over nine months.



Indeed, when we draw in the trend line for the Dollar, we see that we ALSO got a clear break of its downtrend. This development is also MAJOR since the trend-line has served as a point of resistance no less than nine times since May. To see the Dollar break above it AND the 50-day moving average is a strong indicator that this is no mere head-fake and may well in fact be the start of a serious trend reversal.



This is absolutely critical because it was a Dollar rally that CRUSHED stocks and commodities last year. Indeed, the first major warning sign of the October-November nightmare was the Dollar catching a bid, a process that began a massive short-covering in the US currency (the entire world was borrowing in Dollar or Yen at the time) which kicked Oil (black) and stocks (blue) in the teeth as more and more investors piled into the greenback on an increased flight to safety (see below).

I call it Financial Crisis “Round Two” Survival Kit. Not only can these investments help protect your portfolio from the coming carnage.. they can ALSO show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.

Swing by www.gainspainscapital.com/roundtwo.html to pick up a FREE copy today!

Good Investing!

Graham Summers

http://gainspainscapital.com

http://www.marketoracle.co.uk/Article15635.html

main1event
8th December 2009, 15:17
Things never happen the same way twice. Look to buy gold and silver on this pullback.

main1event
8th December 2009, 17:30
Of course, things never happen the same way but we should always be willing ,and indeed eager,to learn from history. Why do TA , for example? Despite repeated crises and talk of doom and gloom I don't see the dollar collapsing or the PM's ( or at least silver! ) exploding.

The dollar is down over 20% this year alone. Gold is up almost 100% this year. PMs arent exploding, think again. Gold and Silver are outperforming nearly every asset class. What more can you ask for?

Katwoman
8th December 2009, 17:33
The dollar is down over 20% this year alone. Gold is up almost 100% this year. PMs arent exploding, think again. Gold and Silver are outperforming nearly every asset class. What more can you ask for?

The moon and the stars....I want it all!!!

What is Truth?
8th December 2009, 19:19
The DOW was down over 100 points today. We currently are at... $17.61 silver....$1130 gold. Things may never happen the same way twice, but they sure can happen in similar ways often enough. ;)

paperplane
8th December 2009, 19:27
The DOW was down over 100 points today. We currently are at... $17.61 silver....$1130 gold. Things may never happen the same way twice, but they sure can happen in similar ways often enough. ;)

so yer mean santa does exist? :D

What is Truth?
8th December 2009, 19:48
so yer mean santa does exist? :D

It must be so. When I got home from work and my wife told me the precious metals prices we laughed and we laughed! :lol:

paperplane
8th December 2009, 19:55
It must be so. When I got home from work and my wife told me the precious metals prices we laughed and we laughed! :lol:

happy happy joy joy... i wonder who gets the bag of coals?

Relayer
8th December 2009, 23:20
Tuesday, December 8, 2009
An Obvious Question About The U.S. Government Gold Stock Goes Begging
Given the "robust" inventory of 100 oz. gold bars being reported by the Comex, how on earth is it possible that the U.S. has to keep suspending production of gold eagle and gold buffalo coins due to "a shortage of supply of gold?" The U.S. Mint announced yesterday that it is suspending production of 1 oz. gold eagles and buffalos for the balance of 2009. This is, I believe, the third time this year the Mint has suspended production:

"U.S. Mint now suspends all one ounce gold coin sales due to shortage of physical gold"

Here's the article link: http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=94091&sn=Detail

As a matter of fact the Gold Bullion Act of 1985 authorizes the U.S. Mint to use U.S. Government gold reserves if necessary:

In the absence of available supplies of such gold at the average world price, the Secretary may use gold from reserves held by the United States to mint the coins issued under section 5112(i) of this title. The Secretary shall issue such regulations as may be necessary to carry out this paragraph”.

It would seem that if the United States has 8100 tons of gold, as reported by the Federal Reserve and U.S. Treasury, then there should NEVER be a shortage of gold with which to mint coins. What gives?

Here is the complete text of Gold Bullion Act of 1985: http://www.izagg.com/WealthBuilding/Postings/goldinfo3.htm

Again, inquring minds want to know, where is all the gold? How come the U.S. Mint didn't foresee the same shortage everyone else in the market has been seeing and make sure that it had plenty of production blanks to meet demand? If the Comex supposedly has 9 million ounces of 100 oz. bullion bars, the Mint should have been able to take delivery of some of that gold in order to meet its legal obligation to produce gold coins in an amount that meets demand. How come the U.S. Mint is not using U.S. Government gold reserves, as per the law?

Something smells fishy here, and I think we all know what it is: the physical supply of gold is extremely tight, the paper shorts in gold (Comex, GLD, LME, etc) are in big trouble and the price of gold is now at the mercy of the physical market. I would suggest this situation is one of the primary reasons that the Federal Reserve and its supporters in Congress are going to any lengths to derail efforts to force an independent audit of the Fed, which would include a physical audit of the gold it supposedly holds.