Gold soared this morning, so I feel vindicated, if not fine.
You saw the gold chart I posted yesterday. Today’s chart is more of the same, only with surging volume, as gold rises to a 3-month high.
That’s usually a bullish sign. The question before us now is, is this a real breakout or the mother-of-all fakeouts? Remember, this is happening when the U.S. dollar is also very strong, and currency markets are much bigger than the metals markets.
I think it’s a risk worth taking. We’ll have to move fast if gold is lying to us, though, so if you’re one of my subscribers, stand by.
Now, here is news you can use for this Friday …
Goldman Sachs says the cost of shoring up banks could run as high as $4 trillion. That’s up from the $1.5 trillion already spent specifically on banks. Why, why, WHY aren’t we proceeding with a Resolution Trust Corporation solution to this? Like the one we used in the Savings & Loan Crisis in 1989. Instead, we keep pouring good money after bad. Yes, an RTC solution would cost money but not as much money as this cockamamie bailout we’re seeing now, and it would mean an end to the whole mess. Right now, the bailout is open-ended. How are we supposed to pay back another $4 trillion? The US economy is shrinking, tumbling the most since 1982.
And that, my friends, is one reason why gold is taking off.
Meanwhile, California — the world’s eighth largest economy – is so broke that the state is going to start sending out IOUs. This despite the fact that the governator is going to furlough ALL of the state’s rank-and-file employees for two months. He’d better not furlough the prison guards, because once you stop sending poor people their food stamps, what else do they have to lose? I have to think the chance of riots in California is rising. To make it more interesting, California is dealing with the worst drought in its history.
Another sign of impending apocalypse — scientists have invented carnivorous robots. It’s only a hop, skip and a jump to Skynet and machines turning on us.
On the lighter side, here are some cool electric concept cars. Let’s hope we don’t end up too bankrupt to afford them.
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{ 3 comments… read them below or add one }
I think Gold is being sold down by the east and bought up by the west.Who will cave first? I think it will be the ‘investors’ and speculators of the west,since nearly all the money likely to be pulled into gold in the west has been by now,while the east has plenty to sell.
If Gold starts to fall,holders in the west will start to realise that it isn’t a hedge against anything while it is falling,and turn from buyers into sellers.The result then would be quite brutal.All investors are jittery,and there are plenty of weak holders of Gold.
Sean Brodrick Reply:
February 3rd, 2009 at 1:20 PM
You could be right. And I like to hear alternative points of view, because I need to constantly challenge my own views to try and stay objective. Here’s what I see: A short-term pullback for gold, followed by a re-challenge of overhead resistance. We’ll see who’s right.
These inflection points are impossible to see looking forward, only backward, I’ll get out at 920 and back in at 890. But only time will tell if that was a good strategy.