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
Who is Spreading the Virus? UK Coronavirus 2nd Wave Analysis - 30th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part II - 30th Sep 20
The Only Thing Systematic Is The Destruction Of America - 29th Sep 20
Fractional-Reserve Banking Is The Elephant In The Room - 29th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part I - 29th Sep 20
Stock Market Short-term Reversal - 29th Sep 20
How Trump co-opted the religious right and stacked the courts with conservatives - 29th Sep 20
Which RTX 3080 GPU to BUY and AVOID! Nvidia, Asus, MSI , Palit, Gigabyte, Zotac, MLCC vs POSCAPS - 29th Sep 20
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Precious Metals Correction to End in May

Commodities / Gold & Silver May 12, 2008 - 02:02 PM GMT

By: Captain_Hook

Commodities Neither A Borrower Nor A Lender Be  - And most certainly, don't be a gold producer, as the deck is definitively stacked against you here too. We will get back to this subject in just a minute. But first, let's expand on that title, as it's a beauty given global monetary conditions appear to be progressing into a state of hyperinflation . Neither a borrower nor a lender be – is a line first penned by Shakespeare in reference to important lessons in life, which more recently has morphed into a forgotten mores rooted in lessons learned during hard times – or should I say ‘honest money times.' Honest money times – what the heck are ‘honest money times'? Such a terminology implies government and monetary authorities are attempting to pull a fast one in that they are issuing ‘dishonest money'. How can this be when foreigners accept our currency for manufactured ‘hard items', on top of the fact everybody has access to the information concerning currency debasement policies of the present day governing regime?


The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Friday, April 25th , 2008.

The answer to this question is based in the understanding that even in hard times, when people pay closer attention to such matters, a majority of the population would be hard pressed to define the term ‘ money ' in a proper and full context. And once ‘ easy money policies ' have been in place long enough, the living gets so good just about everybody forgets what honest money (money that holds value) is all about. That is to say unlike today, where fiat currencies are printed around the world in an increasingly unbridled fashion, money creation was previously retrained by a gold standard that prevented unfretted currency creation, and this in turn kept the rate at which humans were exploiting natural resources in check. Now unfortunately, because monetary authorities lack any semblance of discipline, we are using up our resources too quickly to remain a sustainable condition, causing huge price fluctuations, and making business increasingly difficult for all.

There is a solution to this problem of course, which involves pricing increasing percentages of people out of markets they require for survival, which as alluded to above, is exactly what is happening. Here, in an attempt to survive (and more), greedy bankers print increasing amounts of fiat currency to mask the vulgarities associated with past practice, which eventually leads to hyperinflation. This is of course theoretically good for borrowers, as debts are inflated away, at least in the earlier stages of the cycle. Problems do arise as the numbers get bigger however; which is part of the reason attempts are made to hide the inflation. How do they do this most effectively? Answer: Central planners suppress the main inflation indicator. This of course means they suppress the gold price by any means, going so far as to suppress silver prices as well given its association with gold, combined with the fact that up until more recently it's been easy to manage due to various factors, not the least of which was abundant supply.

So you see it's no mistake that even though precious metals prices have risen since millennium, mining companies cannot make a profit against rapidly rising input costs. And this is where the title for this study is rooted, in the observation that at present, neither soft (banks are going bust ) or hard (gold and silver) money manufacture is profitable? But this is set to change, as paper market derived schemes to suppress the price of precious metals are becoming increasingly less effective , with the present day banking establishment about to meet its nemesis – that being the very same exploding money supply they sponsor gobbling up increasingly diminished physical supply. The irony is profound here – no?

You bet the irony is profound, as implications associated with gold breaking up through the $1,000 mark carry an important message. If gold can go through the four-digit hurdle, and hold, theory suggests it can go to the next four-digit interval ($2,000), and then the next, and the next. So in relation to the theme of this piece, while it appears it's not a good idea to be a borrower or lender anymore, it does appear remaining (becoming) a gold owner will be looked back on as being a stroke of genius if it progresses as described in this manner. Notice I use the terminology ‘gold owner' here, because by anchoring one's wealth in gold, you are neither a borrower nor a lender, but an owner of lasting wealth that transcends the fiat currency world.

Of course near-term prospects for gold appear precarious given it's overbought from a technical perspective, and fiat currency trends appear set for a correction. But as discussed in our last meeting , and an argument that is substantially fortified in the above understandings, such considerations will not matter in the end, as all fiat currencies are being revalued against the commodities we humans need to survive on a secular basis . And the sheer numbers involved, combined with our greed, ensures this trend's continuation no matter which fiat currency is rising or falling against another. More specifically, and in terms of the dollar ($) because it's reserve currency status has theoretically been driving reciprocal debasement rates up until now, whether the States is debasing the ($) faster than the Euro (or any other fiat currency) does not matter in the end, because the point is all fiat currencies will eventually be worthless against commodities if this process continues, with the only question being which one(s) collapse first. (i.e. hence the catchphrase ‘the race to zero'.)

But people are big on game theory, and games are played in order to confuse and keep the weak minded from participating in the secular trend. Such is the nature of cyclical interruptions in pricing mechanisms (local currencies) to make it not only appear confusing, but to call into question the very existence of a secular trend. This is what is currently happening to gold, where central planners have hit the wall in terms of the easy way out (allowing the $ to depreciate), and now they must at least threaten to allow for a cyclical correction in the US Dollar Index ($) even though it's arguable the equity complex can't handle it. That is to say, both the US consumer and global economy remain weakened by a secular reversal in the credit cycle, weakened to the point that if continued relief is not maintained, consumption will fall even faster than is currently being experienced. Here, we should remember the consumer is two / thirds of the economy, and therefore if consumption continues to slow, this condition will spread to other sectors of the economy, which of course is already happening .

Naturally then, or perhaps I should say ‘unnaturally', as there is nothing natural about inflation, this is why central planners feel they have license to continue debasing our currencies / economies at accelerating rates in attempting to thwart the natural process of unwinding a human condition in excess, attempting to maintain access to precious commodities required for survival. And when paper economies are gaining on gold, this means central planners are winning the battle in this respect, with the most widely followed measure being the Dow / Gold Ratio. Here, although the secular trend remains in tact, we are currently entering a period that has historically provided relief from a cyclical perspective . (i.e. note that time lines are suggestive up to a two-year period of cyclical strength in paper assets lies directly ahead.) This is that unseen force (cycles) that confounds traders / investors unable to understand why stocks can rally while the news is still terrible, which of course is the situation at present.

And as you undoubtedly know, this is also the reason we are correspondingly enjoying a cyclically based correction in precious metals as well, where I say ‘enjoying' because we are using it to position for the big run higher later this year, and next. How can we be so sure gold is still engulfed in a secular bull market past our fundamentally derived suspicions? By looking at the charts of course. Here's the rub however. One must be looking at the right charts, where for example simply looking at a gold chart would tell most people nothing other than it appears a top is in place, and prices are heading lower. And prices may in fact be heading further down once the apparent head and shoulders pattern (H&S's) in the gold chart is broken to the downside. This is not an unreasonable expectation considering the H&S's in the Amex Gold Bugs Index (HUI) was violated yesterday, with precious metals shares characteristically leading the way. What's more, with the 21-month exponential moving average (EMA) (swing line) at 375ish ( seen here ), a trip into this price range to test the trend is expected (as mentioned previously), with the measured move in the HUI's H&S's down to 330 providing ample scope for such a move. (See Figure 1)

Figure 1

After this correction lower is finished however, which as you know from discussion over the past few weeks we expect to occur in May, if history is a good guide one should see prices advance afterwards, with potentially spectacular returns possible in junior shares based on our studies . Here, you may remember we were originally looking for a bottom in late April consistent with the 1978 model (see Figure 3 ), where circumstances (stagflation) / seasonal patterning at present are similar. Because of delays associated with excesses of inter-market relationships however, mainly predicated on stubborn dollar ($) weakness which is finally correcting higher now, the final corrective wave lower for precious metals should fall in May, which as you know is a common turn time within the context of the present bull market. And of course this hypothesis is heavily fortified in the above chart, where it should be easily discernable to you that like a beach ball held under water, gold is now popping straight back up to the surface, which is measured by peak 10-year returns witnessed in the 70's.

Along this same line of thinking, you should know that crude oil is already back to the peak returns witnessed in the 70's, which is not evident on the true monthly chart below because the data for April has not been added yet, but never the less the case. So, by way of example for the skeptics, and because we are looking at the right charts then, we know that crude oil has now set the precedent for the present larger cycle in returning to long-term highs, which is now the expectation for gold. Moreover, precious metals shares should lead this move if gold is set to outperform crude oil at long last. (See Figure 2)

Figure 2 – Click Chart For Sharper Image

Sound reasonable? Although it may appear counter-intuitive to many for gold to take off after crude tops (temporarily), it should not be surprising from the perspective for whatever reason(s), not the least of which being investor ignorance and official price management. Moreover, there is also the practical reasoning profit growth for producers will lag if input costs are rising faster than commodity pricing, which has undoubtedly held back a great deal of orthodox institutional investment as a result. It should be noted however that this condition is set to change recently coming off of all time lows extending back to the 60's, as can be observed in the Gold / Crude Oil Ratio seen below. (See Figure 3)

Figure 3

This is of course the primary reason precious metals shares have been held back, with the juniors decimated over the past few years despite rising commodity prices, albeit at a relatively slow pace. Correspondingly however, this is also the opportunity at present then, where as you can see above, the party is just getting started. As mentioned above, all we need to see is gold back over the large round number at $1,000 on a lasting basis and the party will be on. Here, it's important for you to realize that the money has already been printed to ensure such a result, as measured in the inflation adjusted gold price, conservative as the Consumer Price Index (CPI) measure may be. (See Figure 4)

Figure 4

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our newly improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts ,   to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key' information concerning the markets we cover.

On top of this, and in relation to identifying value based opportunities in the energy, base metals, and precious metals sectors, all of which should benefit handsomely as increasing numbers of investors recognize their present investments are not keeping pace with actual inflation, we are currently covering 69 stocks (and growing) within our portfolios . This is yet another good reason to drop by and check us out.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line . We very much enjoy hearing from you on these matters.

Good investing in 2008 all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2008 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook 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