Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Short-term Topping Signal Setting Up for a Further Buying Opportunity

Commodities / Gold & Silver 2009 Aug 18, 2009 - 03:21 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleGiven the currently low level of the VIX, optimism among paper asset investors has been converted to outright enthusiasm. The world has been saved, according to many of these enthusiasts, and now unlimited and happy growth awaits us. All that is required is patience, for economic growth will blossom and paper equities will again shine. That optimism exists in light of the historical evidence that no market that has been run up by a credit bubble avoids a long, painful, ongoing lateral correction that last years. Were the optimists correct in their beliefs, the Japanese stock market would be at a new high. A recent check confirms that not to be the case, almost twenty years after the peak.


Seems like the only other indicator heading south as fast as the VIX is the approval rating of the Obama Regime. Per the much respected Rasmusen polling organization on Sunday, the Presidential Approval Index was at -9%, a record low, and only about 47% give a thumbs up to the Obama Regime. With the fading and failing of that group comes financial risk. How does one save one’ s political prospects, and maintain the power to make policy? There in lies the problem, the risk, and the potential reward for Gold investors.

1

Our first chart this week looks at the growth rate of the U.S. money supply and $Gold. The line of red circles, using the right axis, is the cumulative growth rate for U.S. money supply, M-2 NSA, since August of last year. That date is chosen as it is when the Federal Reserve unloosed a torrent of liquidity to stem the financial collapse. Green line, using left axis, is the price of $Gold.

The rate of growth in the U.S. money supply rose dramatically from late Summer of last year through about March. That rapid increase in the money supply growth rate was like pushing the gas pedal to the floor. That burst of money supply growth pushed the price of $Gold up dramatically. A sudden increase of dollars relative to the supply of Gold pushed up the dollar value of Gold.

Then the growth of the U.S. money supply stalled, as indicated by the line moving laterally. The U.S. money supply ceased to grow. The U.S. money supply has not grown for several months. That failure of the supply of U.S. dollars to grow made dollars more valuable, on a relative basis. That failure of the U.S. money supply to grow capped the price of $Gold, as the chart portrays.

Dangerous trend line in place, and NO classic inverted head and shoulders pattern.

2

Our second chart, above, portrays $Gold and a short-term oscillator. As part of this broad topping process, the short term oscillator has given multiple Do Not Buy signals before each rally failed. Most recently it has given a second Do Not Buy in this most recent up move. Short term view would likely be that the final correction before the Fall rally may be in process.

We do note that should Monday’s sell off of $Gold persist, a buy signal on this indicator could develop. As can be observed in the chart, several short-term buy signals usually are required to find that final bottom in a correction. Those multiple short-term signals are necessary to generate the much more powerful intermediate term buy signals. We have been expecting another over sold low this Summer, and expect important buy signals to follow from that.

That all said, the longer term view is more positive for the price of $Gold as the U.S. economic policy situation is so bleak. Reason for that is politics. Obama Regime will take action in an attempt to bolster its collapsing political power. Second, Chairman Bernanke is in reelection mode as his appointment as Chairman is up for renewal in January. Together, these factors mean more U.S. government spending and the Federal Reserve monetizing the U.S. deficit created by that spending.

Slowing money supply growth in the U.S. translates into slower economic growth, regardless what the statistics for the last six months might suggest. Without aggressive monetization of the U.S. government deficit, U.S. money supply growth will continue stagnating. Slower money supply growth translates into lackluster U.S. economic growth which does not fit the political agenda of either the Obama Regime or Chairman Bernanke.

No government, and that includes the U.S., can make a money supply grow without direct monetization of the national debt. Federal Reserve policy is clearly headed in that direction. As money is fungible, whether the Federal Reserve buys U.S. Treasury debt directly or around about by buying other debt in the U.S. market makes no difference. Consequences are the same, and the discussion on the matter is trivial.

The Federal Reserve has no choice but to move toward direct financing of the Obama Deficit. The equivalent of cash delivery from the Federal Reserve to the Treasury is about to begin. The U.S. money supply will again grow as that is done. Owning Gold may be the only way to protect wealth from the political agenda of the Obama Regime and the Federal Reserve “printing” dollars without restraint in order fund that agenda.

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_GETVVGR.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