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
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 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