Sol Palha submits:

Keep on sowing your seed, for you never know which will grow — perhaps it all will.
-Albert Einstein,1879-1955, German-born American Physicist

The dollar has rallied very strongly, easily taking out the lower end of the targets we projected several months ago. It almost closed above 81 on a monthly basis. Had it done this, it would have made the outlook even more bullish. The dollar has gone on to put in series of new 9 month highs, and thus by contrast, one would have expected Gold and the other precious metals to do the opposite. However, this has not taken place.

If we look at the chart of Gold, we see that while Gold went to put in a 9 month new high, Gold did not even put in a 4 month low. This is a very strong development and suggests that there is a very good chance that Gold could rally to the 1170-1200 range before pulling back. On the longer time frames, Gold flashed several strong intra-market negative divergence signals; the most important two are mentioned below.

The most impressive metal, however, is Palladium. The massive rally in the dollar has had almost no impact on the price of Palladium; it is still trading very close to its highs. If the precious metals sector continues to hold up like this, one can expect it to literally explode upwards once the dollar rally fizzles out. From late 2008 to early 2009, when no one was paying attention to Palladium, we were strongly pounding the table on it. Palladium turned out to be the top performing precious metal last year and is still holding up a lot better than the rest.

Silver has taken the most severe beating so far, and this breakdown could be (key word is “could”) providing an early warning signal. Silver’s inability to trade past its 2008 highs strongly suggests that all is not well in the precious metal sector, especially the gold sector.

On the longer time frames. Gold has flashed many strong negative divergence signals the strongest of which were:

1) The dollar putting in a higher low instead of a lower low when Gold went on to put in a series of new highs

2) The inability of the GDX (GDX), XAU (XAU), and HUI (HUI) to trade to new highs when gold bullion surged to new highs
The potential for Gold (precious metals) to remain in a prolonged consolidative phase is still rather significant. The longer Gold trades sideways, the more explosive the subsequent rally is going to be. However, there is the possibility that Gold could still mount a rather sharp correction if and when the Dollar surges past the 82 price point level.

A possible early warning of a longer correction/consolidation in the precious metals sector will be given if the dollar can close above 81 on a monthly basis, or it can trade above 84 for 3 days in a row.

So far, we have laid out the technical perspective for short to intermediate term rally in the dollar; our initial targets have already been fulfilled. It’s time to provide some fundamental reasons as to why the dollar is in trouble long-term and why the precious metals sector and the commodities sector stands to benefit from these dollar woes.

1) The U.S. has a massive current account deficit and it only seems to be getting bigger. The economist plays with numbers by stating that one month is less than the other and so forth, but the trend is up. It now comes close to 6% of our total economic activity.

2) The U.S. needs to attract a whopping 1.8 billion dollars a day to compensate for the current account gap. This trend is simply unsustainable.

3) While Government officials talk aggressively of a strong dollar policy, they actually favour a weak dollar. This serves two purposes: it helps increase exports and it allows the government to pay its debt with lower-valued dollars. As long as the Government continues to borrow at these mind-boggling rates, it is going to unofficially favour a weak dollar.

4) By inflating the money supply, the government is imposing a nefarious silent killer tax on the masses. The only way to hedge against this outright theft is to hedge yourself by getting into hard assets (precious metals, lumber, oil, etc).

5) Our national debt is 12.4 trillion an increasing. However, this does not take into consideration all our unfunded liabilities such as social security and Medicare. If these are combined, the debt levels soar to well unimaginable levels.

6) 44 states are facing budget shortfalls. California is leading the way. as it is expected to spend 50% more than it will generate this year. Now that is a really scary thought. Since 2007, U.S, states have collectively spent 300 billion more than they have generated. These deficits mean higher taxes, and so far, 33 states raised taxes but collections have plummeted to their worst levels in 46 years; you cannot squeeze water out of a rock. No jobs means no revenues, but states are selling new bonds at a record rate to raise funds; a recipe for a long term disaster.

7) Eventually the Fed is going to have to raise rates to continue attracting the huge amounts of money it needs to function. Overseas investors are going to start demanding higher rates. Higher rates will kill this fragile economy. Precious metals thrive in a high interest rate environment. From a long term perspective, the bull market has only just begun.

Conclusion

The dollar has exhibited unusual strength; it simply refuses to correct, refusing to trade below 80 for any decent period of time. A close above 81 on a monthly basis will be the strongest signal that it could potentially trade to and past 90 before topping out. In the short term time frames, the Dollar is overbought and normally one would expect a pullback from current prices to roughly the 78 ranges.

Gold, on the other hand is also picking up strength; this is clearly illustrated by its refusal to match the dollar by putting in a new 9 month low, and instead it has gone on to put in a higher low.

On the longer time frames though, Gold has still flashed several very strong negative divergence signals that need to be neutralized; two of these negative divergences were mentioned above. Thus, the potential for Gold to correct/consolidate for several more months remains high, until of course, the above signals are neutralized or a new buy signal is issued on the weekly timelines.

Right now, Gold is holding up remarkably well In the face of a stronger dollar. If this pattern continues, then the next break out is going to be very explosive in nature; the dollar is not expected to mount a long-term rally. Our long-term outlook for the dollar is that it’s going to put in a series of new all-time lows in the next 12-24 months.

From a long-term perspective, all strong pull backs should be viewed as buying opportunities.

Long-term traders can use all strong pull backs to open up positions in Gold and Silver bullion and or in the following ETF’s GLD (GLD), GDX (GDX) and SLV (SLV). Short-term traders can use rallies in the next 1-2 months to open up short positions through GLL (GLL), DZZ (DZZ) and or DGZ (DGZ). We would consider selling half these positions if Gold trades to the 900 ranges.
Author’s Disclosure: we have positions in Silver and Gold bullion.

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Precious metals have been showing signs of an impending breakout to the upside. I’m not one for technical analysis or price action in equities or anything else for that matter, but the current rebound in the precious metals, notably gold, has caught my eye. While gold held its own around $1,100/oz, reaching a low around $1,080, it is currently trading above $1,125/oz.

My bullish sentiment on gold in the near and medium term and especially longer term is due to the following:

• Investment demand has picked up substantially, a trend I expect to continue for years to come.
• Gold has been rising despite a rather strong rally in the USD, currently standing around 80.53. This is very indicative of the increasing attractiveness of gold by central banks, institutions and retail investors. When gold peaked before the financial crisis, the USDX bottomed around 72, which cause gold to reach $1020/oz. Assuming investment demand does not continue to gain momentum, just returning to the 2008 low of the USD, gold would be 11.85% higher.
• The IMF is notorious for selling gold at the bottom of a bull market, a trend that remains intact.
• The announcement by the IMF to resume their approved 400 metric tons of gold onto the open market didn’t impact the price of gold, but actually may have spurred investment demand as it has risen approximately $35/oz over the last 10 or so trading days. The sale of gold to India last year saw gold have a $75/oz move from the day’s low-high.

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By James Turk, FGMR

Every once in a great while, the market offers a unique opportunity to buy precious metals ‘on the cheap’.  I believe today is one of those moments.

There is ‘panic in the air’ and ‘blood in the streets’, which are conditions that open up unique opportunities.  People who have used leverage to carry trading positions have been forced to sell their precious metals – throwing out the ‘baby with the bathwater’ – much like the panic that occurred after the Lehman Brothers collapse.  The trigger this time though is not an over-leveraged investment bank, but rather, the sovereign debt of Greece and Spain.

Years of profligate spending and weakening economic activity are taking their toll.  I highlighted in December that sovereign debt defaults were approaching as “countries around the globe run out of money and confront overwhelming debts that cannot be repaid.”

While Greece and Spain are now the trigger points, they are not alone.  Nor is this problem of countries with too much debt unique to Europe.  The debt of the biggest debtor of them all – the US government – is finally being called into question.

Reuters today reported: “If the U.S. economy grows anemically, already stretched government finances will be crimped, potentially putting downward pressure on the top Aaa U.S. rating, said Moody’s Investors Service.”  To emphasize and make clear its point, the article went on to say: “If the Obama administration’s budget projections for rising interest payments on government debt are realized, ‘at some point, we don’t know when, there would be downward pressure on the U.S. rating,’ [Moody's] said.”

The likelihood of sovereign defaults is growing.  Greece and Spain long ago gave up their domestic currencies to become part of the eurozone.  They cannot create euros out of ‘thin air’ to repay their debts with debased currency.

While both countries give lip service to reducing their annual operating deficits – but not their debts – in the future, neither is prepared to bite the bullet and make tough decisions to bring spending under control.  Given the weak economic activity in both countries, raising taxes is unlikely to produce further revenue, making the default all the more likely.  The discussion about default though is hiding a pernicious, developing force that portends a widening crisis.

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By CAPTAINHOOK, GoldSeek

A point I wanted to make clear with respect to our discussion the other day is hyperinflation must be justified in the minds of the doers, having the political will of the people behind them. This is why we will need another round of financial crisis for public consumption, and we know from comments made earlier in the week the set-up is for a possible black swan event in summer, with stocks topping out no later than spring. What’s more, and as you will see below, it should be noted that a top in stocks could come sooner this time, possibly by options expiry this Friday if a blow-off continues, finally snapping the desire of speculators to continue accumulating bearish bets on stock averages in the form of puts. In this regard, it should be understood whenever US index open interest put / call ratios begin trending lower on a lasting basis, which would finally signal bearish speculator exhaustion, the party will be over for the counter trend rally out of the March lows, the most extreme example of such an occurrence in history. It should be noted this, along with all the other reasons, is why a vacuum exits beneath stocks, which of course is the precondition required for a black swan event to be triggered later this year.

As a sidebar it should noted updated US index open interest put / call ratios will be published on the site next Wednesday despite the fact I will be on holidays. You will remember I will not be posting commentary next week, but will be back in action on the 26^th, where I will review the post January options cycle trends. In this regard, it should be remembered we are on ‘exhaustion watch’ for the bears, which would involve put / call ratios both falling and trending downward. There are a great many market participants these days, and reality stinks, which is why stocks remain buoyant as put buyers continue to be squeezed by the bureaucracy’s price managers. This will all come to an end when speculator attitudes change however, so keep an eye out for this next Wednesday and in my next commentary that will give us an opportunity to see how the February cycle is trending.

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By Boris Sobolev, GoldSeek

Five weeks have passed since the recent correction in the gold market commenced. Gold lost 10% in this time period, while the precious metals stock indices fell by 16%. Over the past two weeks, precious metals stocks stabilized ($XAU even climbed by 1 point). Is this a temporary breather before more downside or did $1075, set one week ago, mark the bottom?

If we are in the midst of a short term correction similar to those that occurred in December 2005 and November 2007, then in the next couple of weeks, gold is likely to find support and should commence its rally to new highs, likely to $1300-$1400. This scenario, from our point of view, is most probable. It will remain our preferred scenario if gold will be able to hold the main (black) uptrend line in January and not close below $1025.

If the black uptrend line and the $1025 level do not hold, this will mean that the high of $1225 set in early December was an intermediate period top and that gold has entered into a multi-month consolidation.

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By R. D. Bradshaw, GoldSeek

In the vein of looking at what might happen in the year 2010 in the financial markets, and particularly with gold, silver and precious metals, much depends on the work of the Rothschild Cabal and its owned/controlled central banks as found in most of the world. Of all of the Rothschild owned/controlled central banks, perhaps the most important one of all is the US Federal Reserve Bank.  As a part of its alleged rescue of the United States and the world’s financial system in 2008, the Fed commenced a vast program of increasing its balance sheet (to over $2 trillion) and reserves to allegedly provide liquidity to the financial markets.

Supposedly, this increase in Fed money (which is correctly US taxpayers’ money made essentially by the Fed out of the thin air) would counteract deflationary pressures and restore the US and world economies.  While this supposition sounds good, the truth was that the work of the Fed was not to increase liquidity to the US or the world, but rather to contract credit/money and further the Rothschild plan to intensify the current recession/depression started by the Cabal (this process was reportedly described by Mayer Amschel Rothschild some 250 years ago in his master plan to rule the world—on this, see Understanding Money and War XIV at www.analysis-news.com).

True, the Fed’s Balance Sheet did climb astronomically high–starting in 2008 and thru 2009.  But what few people grasped is that the secret work of the Fed was not to provide liquidity to the people of the United States or any other nation, per se.  What happened was that the Fed provided financial support and liquidity to the Rothschild Cabal owned and controlled big banks and financial institutions.  Here, quite a paradox developed because while the Fed was busy pumping up liquidity to the Rothschild Cabal banks the same banks were simultaneously contracting the credit markets to dry up liquidity by the American people.

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Przemyslaw Radomski submits:

This essay is based on the Premium Update posted November 10th, 2009

In my previous essay, apart from commenting on the current situation and suggesting that gold did not reach a major bottom yet, I also examined the situation in China. I wrote the following:

Considering the high savings rate in China (mostly in the 30% – 40% area in the previous years), gold is a logical investment for the Chinese and it’s possible that billions of dollars in Chinese private investment could move into gold in coming years. Already there is talk of China overtaking India as the world’s largest consumer of gold.

It was only in April of this year that the world found out that China had increased its gold reserves by a whopping 76 percent to 1054 tons since 2003, moving from 10th place to 7th in terms of global central bank rankings. The Chinese government now owns 30 times the gold it held in 1990. And China is believed to be a leading candidate to buy some or all of the gold the International Monetary Fund still has to sell, after India bought the other 200 a few months ago.

Keep in mind that as China’s reserves continue to grow, it will have to purchase gold just to maintain the small gold-to-reserves ratio of 2 % that it currently has, let alone increase it. Therefore, the country must continue buying gold.

Even with the increase in its gold holdings, as a percent of China’s total reserves, (about 2%), gold is still a pittance, mere pocket change. Compare that with the international average of 10.2 percent held by central banks worldwide and you can understand why China is so eager to catch up. Last year China overtook South Africa as the world’s leading producer of gold and apparently a good portion of this gold is finding its way into its central bank vault.

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9:05p ET Monday, November 23, 2009

Dear Friend of GATA and Gold:

GoldMoney had a big part in Edelmetall & Rohstoffmesse’s annual International Precious Metals and Commodities Show in Munich this month and has just produced a couple of commercials that promote the conference as much as GoldMoney’s product. They have been posted at YouTube and your secretary/treasurer turns up in a few places in the English-language version here:

http://www.youtube.com/watch?v=aqHBvCSmN6A

The German version can be found here:

http://www.youtube.com/watch?v=EQFxsV6SDMw

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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6:42p CET Saturday, November 7, 2009

Dear Friend of GATA and Gold (and Silver):

What a delight it was for your secretary/treasurer to attend Internationale Edelmetall & Rohstoffmesse’s Precious Metals and Commodities Show this weekend in Munich, Germany. While the precious metals sector in the United States seems subdued if not disheartened right now despite the surge in gold and silver prices, the Munich show was jumping with high attendance, enthusiasm, good sales at the many coin and bullion dealer booths, and serious interest in the junior mining companies that exhibited.

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GDP: Great Day to Play

Good Day,

Friday’s market sessions in precious metals started off on a tamer note, following the best gains in gold in three weeks. Explanations follow. The recapture of the $1045 area is noteworthy, although analysts we polled during the wee hours overseas are trying to define the move as everything from a ‘one-hit wonder’ to the ‘re-ignition of what we saw during most of October.’

The Bloomberg weekly survey foresees weaker gold prices come next week - not by a large margin (57% bearish)- but still focusing on a potential comeback by the US currency, the early signs of which became visible this past Monday. Demand for the yellow metal once again slipped away in India, following signs of life during the earlier part of the week when values came close to $1025 per ounce. The country recorded its sixth straight month of declining gold imports, despite a decent gain during September – in anticipation of festival-related sales.

New York spot dealings opened with a $2.60 loss in gold bullion, which was quoted at $1043.20 bid, as against a euro-dollar seen at $1.4798 and the USD index steady-to-higher, at 76.05, with little in the way of fresh news thus far this morning. Oil prices gave back about 50 cents of their whopper-sized Thursday gains, slipping to $79.32 per barrel. Risk traders took a latte break this morning, and this gave the dollar a moment to try to re-group.

(…)
Read the rest of Gold, Silver, Metal Prices: Commentary – 10/30/2009 (2,324 words)