Stocks & Equities
So it would seem to me that Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures (and as the “financial economy” referred to earlier grows like a cancer) and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.
Not so, Bernanke and co. argue, since central banks can print an unlimited amount of money and take extraordinary measures, which, by intervening directly in the markets, support asset prices such as bonds, equities and homes, and therefore avoid economic downturns, especially deflationary ones. There is some truth in this. If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.
….read Faber’s Real US Economy Trampled by White Elephants HERE
The markets have made some very sizeable moves this morning, first reacting to the ECB cutting interest rate 0.25%. Sparking a huge sell off in Euro futures down over 200 pts to below 133!
The US GDP print came in at 2.84%, far above expectations of a 2.0% annualized number.
Gold has now traded below $1300 down over $20 on the day on the back of the USD Index rising above 81.50.
Canadian Dollar futures are down 30pts to 9560 but holding steady.
Drew Zimmerman
Investment & Commodities/Futures Advisor
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Let me de-brief you on Jim Sinclair’s track record. He predicted gold would soar above $850 in the 1970’s, when it was fixed at $35. He sold at the 1980 absolute top–to the day, at $875.
When gold was languishing below $300 a decade ago, he predicted gold would reach $1650. In 2011, gold reached a peak of $1923. With gold in the low $1300’s recently, he is forecasting price targets of $3,500–and $50,000.
I hope he is wrong. But over the last four decades, he hasn’t been – Greg Nguyen
….read Sinclair’s Annihilation of US Dollar Coming HERE
Sinclair predicts, by 2016, “Gold will be $3,200 to $3,500 an ounce.”
For months we’ve been writing about the major bottom to come in precious metals. It appeared we finally saw it in late June as the metals and the stocks surged during the summer. Yet, these markets trailed off in August and it continued into October. The equities were down seven straight weeks. That gave way to an oversold bounce. Unless precious metals can close above their October highs on a weekly basis, the outlook remains bearish. While this bear market is finally coming to an end, don’t expect it to end quietly. At present Gold looks eerily similar to both Gold in 1976 and the SYP in 2009 prior to their major bottoms.
The first chart below shows Gold in 1975 to 1976. Gold’s sudden decline that began in August 1975 took it from over $160/oz down to $128/oz. It was a 20% drop in one month. After it rebounded it formed a marginal new low (A) and traded around $130 for about five months. Once Gold failed at the declining 50-day moving average and lateral resistance it plummeted to its final low.
Gold in 2013 has formed a very similar pattern. The first panic low occurred in April which was followed by another low several months later. Gold then recovered back above the first panic low to point B. Point C labels the decline below the first panic low and a temporary bottom. Just like in summer 1976, Gold rallied up to a strong confluence of resistance (lateral and 50-day moving average) and failed.
I’ve aligned both of the above plots on the same scale starting with their first panic low. The blue is Gold in 1975-1976 and the black is today. The 1976 template has Gold bottoming in early March. However, we can clearly see that Gold today is a few months ahead of that.
Next, take a look at the S&P bottom from 2008-2009. It followed the exact same pattern!
Let’s compare the three situations. In Gold from 1975-1976 its bearish consolidation (from first panic low to failure at resistance) lasted nine months and its final decline lasted two months. In the S&P 500 from 2008-2009 its bearish consolidation lasted only four months and its final decline lasted no more than four weeks. Gold’s bearish consolidation lasted about six and a half months. Judging from this data we could project Gold’s bottom to come in about six weeks.
There are a few more important things to note. Gold from 1975-1976 had a very weak rally from point A to B. It was in a weaker position and then consolidated for the longest. That is why it had the steepest final decline. The S&P in 2009 consolidated for only four months. When it broke to a new low, it made its final low the next week. Like the S&P 500, Gold today had a stronger rally from point A to B. Also, unlike the other two Gold today has been in a bear market for over two years. Considering these things, I’d expect Gold’s final bottom to be more similar to the S&P in 2009 than Gold in 1976.
How would this final decline in Gold affect the gold stocks?
The chart below is a monthly chart of the HUI gold bugs index and the NYSE gold miners index (GDM) which is the parent of the GDX ETF. Both markets bottomed in late June not to far above the major support which dates back to 2004. In fact, we referenced this chart when we penned an editorial, one day before the June bottom. Maybe Gold will break to a new low but the gold stocks won’t. If the gold stocks do make a new low, this chart is telling you that it won’t last for long. There is very strong support sitting right below the summer lows.
Unless Gold is able to close above $1350 in the near-term on a weekly basis then consider the short-term trend bearish. Gold looks set to plunge to its final bottom. Gold bugs will cry manipulation, CNBC and Twitter types will be mocking the Peter Schiffs of the world and many will be calling for $900 Gold. I urge you to avoid all this nonsense and focus on one thing. Get yourself in position to take advantage of this bottom. It’s the very smart money that is looking forward to buying this bottom. I suspect the coming bottom will be the one the typical huge rebounds originate from. If you’d be interested in this kind of analysis and the companies poised to rocket out of this bottom then we invite you to learn more about our service.
Good Luck!
Jordan Roy-Byrne, CMT
FINANCIAL REPRESSION STARTS SHOWING ITS UGLY HEAD
Financial repression has truly shown its face in 2013. The year started with an epic event: a bail-in of major banks in Cyprus which laid the foundation of a bail-in template (recently released by the BIS).
Poland saw a major restructuring of its private pension funds; the funds were nationalized overnight. One could call it “pension fund confiscation.”
The Detroit bankruptcy was another major development. Recently, it became clear that pensioners, retirees and other unsecured creditors would undergo a 84% haircut on each dollar (source).
One of the newest inventions in the financial world in 2013 was “bank bail-ins.” The term achieved the status of a commonly accepted buzz word in a very short period of time. In its latest update, Taki Tsaklanos from Gold Silver Worlds discussed several recent cases which provided proof of the bank bail-in rumble growing louder. He also explained that bank bail-ins are the result of extreme banking leverage; excess liquidity provided by the central banking corporations do not prevent bank bail-ins, they feed them.
The 10% savings cut proposal by the IMF for European households has luckily not been implemented [yet?], but the fact it is openly being discussed as an idea is worrisome to say the least. In our view, it deserves adding it to our list as it is an indication of coming major unexpected measures.
….read more HERE
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