Gold and Central Bank Shift

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe. In the last month a tectonic shift has taken place among central bankers. To be sure, the USDollar is aided if foreign central banks end their march to raise official interest rates. The USDollar has been propped up for over two years in large part from powerful credit market carry trades that used to exploit higher USTreasury bond yields, both the short-term and long-term variety. The US Federal Reserve has been forced kicking and screaming to reduce official Fed Funds rates, all the while denying a grotesque contagion from the bond world to the bank world to the economy on Main Street. The USFed looks bound by the bond market to continue to cut interest rates, much like a large dog is led by a spiked choker around its neck, urged to obey its master’s orders via vicious tugs. The gold price has stabilized. The flood of additional open interest to short gold contracts kept the gold price in check. It remains within the neighborhood of the critical 3/8-ths retracement area after the September breakout and the November established peak. Absurd pronouncements like that from Goldman Sachs of a gold decline in 2008 betray how gold is eyeing the 1000 level. GSachs is not a non-profit organization, so they attempt to deceive you into selling your gold, with the power of the press behind them. Some additional time might be necessary for the moving averages to catch up to the gold price, as unstable prices typically result when it extends far above even rising 20-week and 50-week moving averages. The stochastix cyclical gauge hints that gold is unwilling to remain near intraweek low prices, preferring instead to resist downward pressure (real and forced) and close strong each week. Gold remains very stubborn, with friends in Asia and the Middle East who are under siege from massive US$-based hoards of reserves at risk. They hedge with gold bullion quietly. They prevent gold price from moving too far below 800. Today in fact, the gold price might have responded favorably to the USGovt Mortgage Bailout Plan, smelling more money flooding the system. The benefits of higher gold prices to miners must exceed the pain of their energy costs. Personally, a smile comes to my face when gold is seen closing near 810 today while crude oil is back toward 90. CENTRAL BANKS SHIFT EMPHASIS The Euro Central Bank held rates steady today at 4.0%, still 50 basis points above the stodgy desperate US Federal Reserve. The ECB continues to sound concern over the price inflation threat, while economic growth remains steady. ECB Chief Trichet warned that some policy makers supported a move to hike the official rate. The Bank of England cut their official interest rate by 25 basis points to 5.5%, citing deteriorating conditions in financial markets and downside risks to their economy and consumer prices. The credit squeeze has intensified in England, a surefire consequence of adopting the insane US economic model of asset inflation dependence from an unsustainable housing bubble. The Bank of Canada surprised markets with a 25 basis point cut to 4.25% on Tuesday. They cited silly lower projected price inflation as political cloud cover, but very real threats to exports. So England and Canada cut, while Europe kept a pause when it clearly prefers to hike. By the way, the Reserve Bank of Australia held firm at 6.75% after having hiked the official cash rate in November. These maneuvers assist the hamstrung USFed, which operates in an ugly Catch-22, one which my preference is to describe as Sophie’s Choice. She was demanded by Nazis to choose her son or daughter to be executed in the death camps. The dithering USFed Chairman Bernanke, dripping with fear and oozing lack of confidence, has been aided for these foreign central banks. The dreaded choices left with the USFed are to defend the USDollar with an interruption in rate cuts, or to defend the stalled USEconomy and declining housing market and cratering mortgage finance market and seized up banking sector with continued rate cuts. ALL CENTRAL BANKS WILL SOON BE LOWERING INTEREST RATES, TO AID THE SYSTEM, WHICH WILL...

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