Gold's Blood Relatives

1. "The banks are going to close! Street violence is coming!".

2. Remember those headlines going into Dow 6500? I do. I bought the Dow into those headlines. Of course, I kept up my insurance actions, removing money regularly from the financial system on a weekly basis. Nobody knew what would happen. Would the Dow make a bottom or go into an abyss with the thundering explosion of a thousand trillion dollars of OTC derivatives blowing to smithereens?

The decision was made to use fraud accounting to bury it all and attempt to print money to technically re-price assets, while actually devaluing them. That is a key concept to understand going forward as this crisis accelerates. Raising price of an item and raising the value of it are not necessarily the same thing at all times.

3. We are at a new Dow 6500 crossroads. An even bigger crossroads. This time, it is for the US Dollar. As the world's largest market, major action there brings the greatest debate and the most powerful players. While the global fear level is nowhere near as big as it was at dow6500, the dollars on the line are vastly larger.

4. Will the mighty US dollar stage a rally? Or will it melt down, possibly triggering a global paper currency crisis? Look at the indicators like MACD rolling over. This looks like the chart of an item that is preparing to crash, not rally.

5. The analysts are calling for a huge dollar rally and a stk mkt collapse are generally quite demoralized. The fundster technicians incorrectly identified the rising technical pattern in the Dow as an actual wedge, as opposed to the wedging action that is all it was.

I highlighted this repeatedly in my videos. Few listened. I kept seeing the same wedge drawn over and over. A costly error for those who bet large money on calling the Dow top with this "wedge". I would venture that the banksters kids have a joke about the fundsters with a Dow "wedgie". My bank trader friend told me his prime broker contacts told him a literal sea of fundsters were short the Dow on huge leverage at the recent Dow lows, sure they had the top. He pulled his own short positions. Dow top call number 10 zillion bites the dust.

6. The dollar could rally here. Jim Rogers says he's bought the dollar. My question to those selling commodities here to buy the dollar is alongside Jim "Mighty Man" Rogers is: Do you really think Jim Rogers is net long the dollar? Do you think he's bought more dollars than the commodities he holds as a core position?

The man opened up his bag of peanuts and he's chomping on a few US dollar peanuts. That is all that he is doing. Period. Many in the gold and fund community are already trying to eat the bag, shells and all, in a gorging on the dollar. Many of these players missed the move in gold from 905 or shorted it, and they are compounding one blown trade with another even worse set of tactics, to desperately "make back" their losses.

7. Play the dollar as an insurance trade or a simple counter trend play. Note the key word here is: Play. Not "sell all my gold at the market, it's going down!"

8. The possibility of a strong US dollar rally is very high, yes, but the odds of a dollar collapse followed by a global paper currency crisis, are even higher.

9. Remember when gold moved towards the $1000 marker, towards the neckline of the massive head and shoulders continuation pattern on the gold weekly chart? I said, "There is a 51% chance we go higher. I am long with an ultimate target of $6000 and no amount of possible gold weakness will cause me to take any action on the sell side with my gold positions".

10. When I look at the gold monthly chart, I see a stronger technical situation now than ever! Regardless of any minor trend rally (minor trends last 1-3 weeks in time), my view is the odds of a US dollar collapse are 55%. The odds of a major rally are 45%.

11. This is a time where put options on gold could be a good idea for those who are terrified of a dollar rally. You have solid profits in gold and related items, but the "will gold rise or tank" game being played out there is too much for you mentally. You could "insure" a portion of your gold portfolio for a small cost. If gold goes higher, your further gains should far outweigh the loss on the put options.

12. I personally will not be buying any put options. In fact, I'd rather buy call options here than put options if I was forced to choose one or the other. I will be buying more gold if it declines. All the way to zero in a pyramid formation. The buys growing larger as it declines.

13. There is no "gold top" and I don't care about gold 1100. It's a round number marker and I sold into it with bits of my trading position. End of story. Here's the chart. While the daily chart calls for booking modest profits, the monthly chart is on massive buy signals. Look the TRIX configuration. That is an enormous buy signal. Gold's major technical indicators are triggering buy signals, not sells.

While head and shoulders continuation pattern price targets are generally unreliable, this is one of the greatest examples of this pattern of all time. Targets of 1200-1400 are not unreasonable, just for the move from the head and shoulders. This pattern to me looks like price could soar far beyond that target. What happens now is not so important as insuring that you are in the gold rocket when it parks at moon $1400, on the way to mars $3000.

14. If a substantial decline of size were to commence in gold, well, I would suggest we are nowhere near that point yet. But if it did occur, you have to buy, not sell. We have the banksters, the fundsters, and now the Gold Topsters. My message to the topsters is this: Stop picking your gold nose. Or you will arrive at gold moon 1400 with bits of gold, if any.

15. My suggestion to those looking for real world tactics to manage your emotions and money on the gold rocket right now if you are feeling overwhelmed by both bull and bear pulls, is to focus on what I term "Gold's Blood Relatives".

16. I spoke about corn at length over the week-end. I don't view corn as better than oil or wheat, but I like to talk about one thing at a time so investors understand it, rather than just blabbing, 'oh yeah, corn is the big one, go go go!"

But you tell me, what makes more sense, a madman play to load up on dollars when there is a 55% chance of a global paper currency crisis, or to buy items like corn, one of the world's lowest risk investments, with a near-infinitely smaller chance of going off the board than the dollar? To repeat, I don't favour corn over any other gold-related item. Notice the Bloomberg headline that came out yesterday, right after my write ups. That Bloomberg story shows a stunning picture of what is going on in the Chinese corn market.

17. About 55% of all farms in China are about 3 acres in size. Or less. The six dollar a bushel marker is the corn market line in the sand. If Chinese farmers get less than $6 a bushel, the revenues needed to survive on a farm that is less than 3 acres in size just don't exist at less than 6 dollars a bushel. Chinese farming is not about profit margins. It's about revenues. The Gman is subsidizing the farmers, because the farmers are pouring out of the farms and into the cities.

18. Jim Rogers himself has stated while he doesn't think it will happen, he is clear that the risk is very real: water shortages could lay an unimaginable beating on the industrial revolution in China. No water equals: Starvation. The world bank notes the following about China:

o With 20% of the world's population but only 7% of global water resources, China meets with a severe challenge.

o More than half of China's 660 cities suffer from water shortages, affecting 160 million people.

o The per capita water volume in China is one fourth of the world average.

o 90% of cities' groundwater and 75% of rivers and lakes are polluted.

o As a result of widespread water pollution, 700 million people drink contaminated water every day.

19. Some cyclical forecasters believe an actual "dust bowl" type of event could occur in the 2011-2012 period. My suggestion is: If you are feeling like you can't go on in the gold market at this point in time, rather than trying to be king of the dollar bugs, simply shave off a FEW gold profits, and grab a nice piece of corn on the price weakness cob. Take a bite out of that, not US dollars, to kill your thoughts of gold suicide.

20. If gold goes to $3000, where will the dollar be? Focus on Gold's blood family, not gold's enemies. I would suggest you also consider the "cost of farming floor" with agricultural items like corn. It's not impenetrable by any means, but there is a price point below which the farmer throws in the towel. The odds of price going below there and staying there are small, never mind the odds of it going to a real price of zero.

The deflationists haven't factored starvation into their pipedream. There is much more Deflation of value coming to the world's economy, but there will be Inflation of Price. Earth to price deflationists on Mars: There can't be any deflation of price because we'll all starve to death. The global farming industry will collapse and we'll all die. The gold relatives advice applies to gold price chasers as well. Some have the thought, "I'm missing out, I just gotta buy, gold will be at 1200 and I'll have too little!"

If gold soars higher, do you think items like oil, food, and other hardcore commodities are going to tank? Not likely. But you can buy them without the adrenaline gusher that is present in the gold market right now. "I don't buy anything that just went to an all-time high" -Jim Rogers. Maybe you are smarter than he is. I doubt it. There are many items, like food and energy that are trading at low prices.

21. My most important point today is this: Many gold stocks haven't joined bullion yet. Those that have risen have done so modestly in most cases. Do not dump them to chase the bullion rocket. That borders on insanity. Gold stocks should be bought aggressively into any and all weakness. If you think you are missing out on bullion now, magnify that by 100, and you'll have the picture of how twisted your emotions will be when the gold stocks join the party and you sold out to chase a $100 move in bullion.

22. The Dow is beginning to hyperinflate, as major institutional players sense a US dollar meltdown is very near at hand. Rising bullion prices coupled with a soaring Dow put you, the gold stock owner, in what I term "The Ultimate Driver's Seat". There is no better place to be invested right here, right now. My suggestion is you scan the gold stocks horizon and buy what you can that is weak.

Don't walk to those stocks. Run. Notice I said "hurry". Not: "back up the truck". You don't need much fuel in a toy rocket to shoot it 500 feet in the air. That is the gold stocks market. But do not waste time. Time is of the essence. The gold juniors rocket is on the launchpad in a situation in time that I would term as about like where gold bullion was at $960 as it moved towards the triangle breakout.

23. The pros are moving onto the gold stocks rocket and preparing for liftoff, while the gold topsters are jumping out of the rocket onto the US dollar cement below. The banksters are transporting their broken bodies to the US dollar oven and preparing for final roasting. Do I have a few longside US dollar peanuts in my bag like Jim Rogers does? Sure I do. I've bought the dollar into this weakness.

With the peanut capital it deserves. So far, while I've banged about 10 or 15 USD pucks into the net on strength out of the hole from the recent low, overall it tastes like bits of USD shell mixed with USD peanuts. Those who sell gold stock in major size here and buy the dollar in size, are going to find they have a mouth full, not of shells, but of poison. It will be a mouthful far worse than the poisoning they got shorting the Dow into 6500. Gold's blood relatives versus USD paper bills in the oven. Not such a tough choice. Is it?

Stewart Thomson November 12, 2009

Gold Taps Fresh Record Above $1,060

NEW YORK (MarketWatch) -- Gold futures climbed above $1,060 an ounce Thursday, marking a fresh record high for the third session in a row, as investment demand continued to rise and as the dollar weakened once more.

The gains appear likely to push the winning streak for the precious metal to five. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by physical gold, rose for a fourth straight session, reaching the highest level in three months.

Fostering the gains in gold, the dollar gave ground in currency trading, under renewed pressure as the European Central Bank and the Bank of England made no changes in their respective interest-rate policies.

Gold for October delivery rose as high as $1,060.40 an ounce, the loftiest level ever for a front-month contract. It was last up $16.30, or 1.6%, to stand at $1,059.60 on the Comex division of the New York Mercantile Exchange.

Gold for December delivery, the most actively traded contract, was up $14.40, or 1.4%, at $1,058.80 an ounce, modestly off its intraday high of $1,062.70.

"New records each day, as higher volume, higher moving averages, higher open interest and huge ETF demand from investors continue," said George Gero, a precious-metals trader for RBC Capital Markets. "ECB and BOE left rates at lows, cheap rates make it easy to hold gold for investors as they prepare for possible future inflation."

SPDR Gold Trust holdings reached 1,109.31 metric tons on Wednesday, up 8.8 metric tons from a day earlier. That's the highest level since July 13. "The fact that the gold price broke through the old high of March 2008 is obviously attracting financial investors to the gold market," said analysts at Commerzbank in a note.

If demand for gold ETFs continues to rise, "a further gold-price increase has to be expected, especially as short-term oriented market participants are likely to be jumping on the bandwagon."

'Top heavy' in the short term?

Some analysts questioned whether the rally in gold could continue, however. Christopher Ecclestone, mining strategist at Global Hunter Securities, said gold's strength was "like a feather being pushed up by the lightest of breezes. There is no substance to the rise."

Indeed, gold's performance in the euro, the British pound and other currencies has been lackluster compared to its rise in U.S. dollars, a trend suggesting that investors are more interested in bullion as a hedge against the greenback than global inflation. "The short-term outlook is again beginning to look top-heavy with gold vulnerable to a correction should the dollar recover," said James Moore, analyst at TheBullionDesk.com.

In foreign-exchange trading, the dollar index moved down 0.4% to 76.191, leaving the benchmark just slightly higher than the one-year low hit about two weeks ago. A weaker dollar typically pushes up dollar-denominated commodities prices. The European Central Bank, which sets monetary policy for the 16 nations that use the euro, left its key lending rate unchanged at a record low of 1%. The Bank of England did likewise, its key lending rate unchanged at a record-low 0.5%.

For now, "gold prices continue to trend higher, driven by the same factors as in previous days -- a weaker [U.S. dollar] and still-low bond yields," analysts at Credit Suisse wrote in a note to clients issued Thursday.

Also in metals trading, December silver futures rose 17 cents, or 1%, to $17.67 an ounce. October platinum gained $8.80, or 0.7%, to $1,329.30 an ounce, and December palladium rose $4.95, or 1.6%, to $319 an ounce. December copper added 8.85 cents to $2.868 a pound, a 3.2% advance.

Gold Futures Advance on Inflation-Hedge Demand; Silver Gains

Sept. 15 (Bloomberg) -- Gold rose, closing above $1,000 an ounce for the third straight session, as commodities climbed on demand for a hedge against inflation. Silver also gained.

Federal Reserve Chairman Ben S. Bernanke said the worst U.S. recession since the 1930s has probably ended, while warning that growth may not be strong enough to reduce unemployment quickly. The Fed has kept its benchmark lending rate as low as zero since December. It authorized $1.45 trillion in purchases of mortgage-backed securities and other housing debt this year.

“The market believes that the Fed is not going to be able to withdraw the funds fast enough and that would cause inflation,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “I don’t believe that for a minute, but this is what the market believes.”

Gold futures for December delivery gained $5.20, or 0.5 percent, to $1,006.30 an ounce on the Comex division of the New York Mercantile Exchange. On Sept. 11, the metal reached a record closing price of $1,006.40.

The price for immediate delivery gained $6.63, or 0.7 percent, to $1,006.93 at 2:54 p.m. New York time. Eighteen of 19 raw materials in the Reuters/Jefferies CRB Index rose today, led by a record surge in corn.

“The debate on gold’s price prospects remains alive and well among both fundamentals-followers and technicians poring over charts,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said in a note.

The dollar fell against a basket of six major currencies, extending a slide to the lowest in 11 months. Gold futures have rallied 28 percent since the demise of Lehman Brothers Holdings Inc. a year ago as investors bought precious metals to protect their wealth amid the first global recession since World War II.

Possible ‘Reversal’

“Charts indicate that if the $1,050 level is not attained during the current ‘break-out’ or if a double or triple top is confirmed under that same level, then gold could signal a reversal such as the ones that occur on average about every six years,” Nadler said.

Futures reached an 18-month high of $1,013.70 on Sept. 11. Gold may climb to as high as $1,100 in the next six months, researcher GFMS Ltd. said yesterday.

Sales at U.S. retailers in August surged 2.7 percent, the most in three years, from July, government data showed today.

“Gold is continuing to knock on the $1,000 door without making a concerted effort either way to test resistance or support,” GoldCore Ltd., a brokerage in Dublin, said in a note. “Gold needs to push above $1,012 in the short term and $1,020 in the longer term for the upward momentum to be regained.”

Net Longs

Hedge-fund managers and other large speculators increased their bets on rising New York gold futures to a record in the week ended Sept. 8, the U.S. Commodity Futures Trading Commission said last week. Net-long positions jumped 22 percent to a 224,676 contracts, the biggest increase this year.

Silver futures for December delivery in New York rose 37.7 cents, or 2.3 percent, to $17 an ounce. The price has gained 51 percent this year.

Platinum futures for October delivery was little changed at $1,320.30 an ounce on the Nymex. Palladium futures for December delivery gained 0.2 percent to $296.25 an ounce.