Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Currency Crisis Will Drive Gold During 2010

Commodities / Gold and Silver 2010 Jan 11, 2010 - 06:07 AM GMT

By: Neil_Charnock

Commodities

Best Financial Markets Analysis ArticleWe have a really big flightless bird Down Under called the Emu.  I will not draw absolute parallels between the European Monetary Union (EMU) and the Emu, even in jest, however the Euro looks like it will appear flightless at best this year.  Perhaps the myth that they (Emu’s) bury their head in the sand when facing danger may come true for the EMU this year however don’t count on it.  Dire monetary events may force a change of heart and a dose of reality.  This region will not be the only source of upheaval and volatility this year as I shall discuss below. 


The game has changed guys, things are not back to normal and the international spin machine will not make things any better.  Spin will not help any more than excessive stimulus funds could which was, after all, a dangerous policy “solution” that flagged further flippant & flagrant disregard for monetary history by the Central Banks.   You cannot print wealth or spend your way out of debt.  Bailing out the banks shifted the mess onto the Government balance sheets to avoid a total collapse of life as we know it.  This can only come to an ugly end as the piper still has to be paid eventually. 

Shifting the mess from the banking sector to Government is much like cleaning up your kitchen by throwing the dishes and food scraps into the bathroom.  This makes the kitchen look nice and perhaps you can then do some cooking however try using the bathroom and see how you go then.

The public are still mostly clueless to the fact that this set of economic circumstances is nothing like any of the recessions faced since the great depression.  The gold rally has hardly started – more on this below as well.

Sorry I made an error

But first let me apologize and retract a mistake I made in my last article.  I made the fatal error of not checking a comment that had been passed to me by email from a trusted source.  I added it to the last article as I thought it was an interesting snippet of data.  I should know better than to not check my data. 

I actually miss-quoted Glenn Beck on the Obama Administration which is a bit of an irony in itself given his reputation – any way I wish to totally withdraw that statement as false.   I will not be quoting Mr. Beck again.  Sincere thanks to all the good citizens of the USA that alerted me to the error of my ways - I stand corrected.

Back to business

Gold is going to shine for one very important reason – what other currency do you trust?  The upward pressure will remain as the fundamentals for gold have not changed.  Gold stepped up to the plate and resumed a stronger monetary role over the past few years and this will continue as funds chase capital growth and wise paper money owners chase safety.

Liquid assets will be well bid to start and this includes the equities – the stock markets.  I still like gold and energy as the main play in the first half as per my Outlook for 2010 article last week.  The investment and money flows do not look likely to include less liquid assets like real estate.  Bonds don’t look attractive by any measure either as indicated by severely reduced sovereign appetite and Pimco’s retreat from this investment class. 

There is still plenty of money out there and it has to go somewhere.  Take a look at the XGD already this year in Australia.  It bounced off the lower channel after retreating into the buying opportunity we predicted for the end of the year back in October / November.

The XGD is now beginning to climb the stairs up along the top Bollinger Band and is looking good so far.  One of the key stocks identified in a special report in our Gold Members area last year (on the 27th August at 2.7c) is now trading at 7.4c with further upside.  We are working on two similar reports and planning a third as I write this article.

Currencies

Europe is a problematic economic region and now the stronger economies of Germany and France are also faltering.  Of course Spain, Italy and Greece found out that their monetary policy arsenal of sovereign interest rate controls were no longer available under a joint currency.  This year is shaping up even worse for Europe than the US as things potentially come to a crunch.  The US hogged the limelight last year for all the wrong reasons and none of those conditions have really changed to any significant degree. 

Could we see new sovereign near or actual defaults this year?  Structural imbalances still abound in most parts of Europe but what about Japan?  As the IMF said of the global economy; "Nonetheless, vulnerabilities remain and complacency must be avoided."

And:

“Financial institutions will likely face "somewhat lower" write-downs on bad debt than expected in the last report in April, when the fund estimated that global losses could top $4 trillion through next year, but it didn't provide a revised figure”.  Editor: this is what I am referring to when I talk about buying time for restructure of balance sheets – phew $4 trillion!)

While progress has been made in recapitalizing U.S. and European banks, financial instability remains the main risk to an expected recovery next year (2010), the fund said. Moreover, though it is too soon for governments to start unwinding crisis measures, clear and coordinated exit strategies need to be laid out to avoid a potential new wave of turmoil in sovereign debt markets, it said.  The IMF also warned - A number of emerging economies remain vulnerable to external shock, with corporate borrowers facing limited access to financing for rolling over debt.

I would have thought that this warning should be applied to the global economy and global corporate community not just emerging economies.

Japan's economy is also showing signs of stabilization, with aggressive fiscal policies and strength in regional economies expected to provide further support to growth, the fund said. The economy is expected to contract 6% this year, instead of a previous forecast of a 6.2% decline, with the 2010 growth estimate raised to 1.7% from 0.5%.

Well that is the official line from the IMF and I hope they are right.  My analysis indicates that the figures for Japan are optimistic and that they may need to stimulate heavily this year.  If this comes to pass it will be due to ill winds and the printing (stimulus) will cause weakness in the Yen.  Here is a long term USD: YEN chart showing a falling wedge.

You will also note a major divergence has formed between this ratio and the RSI on this weekly chart.  The MACD has turned up and may cross the zero line in the coming weeks.  This tends to suggest that the Yen strength in relation to the USD may be nearing an end.  These long term patterns and trends change slowly so I will be watching for the move when it comes and breaks out above the down sloping resistance line. 

Is the chart pointing to problems in Japan or just relative strength in the USD.  Time will tell. Standard & Poor’s Ratings Services expect a slowing of the quarter on quarter growth in the 2nd and 3rd quarters of last year. 

On the local scene - The XMM All Metals and Mining 300 Index is also shining on growth expectations and current numbers including a projected 8.5% growth in China this year.  The XEJ Energy Index is showing great strength also so I am preparing a report on a highly promising and highly undervalued energy stock for Gold Members only (initially before full public release).
Australian Gold Sector

We have just introduced a new low cost mid tier producer into our Members and Gold Members areas this week and will now assess a major merger.  All is on course from my intraday prediction from the 18th December when I highlighted the exact bottom of the XGD before it recovered over 10%.  We announced the initial breakout earlier in the year as well. 

Our projections still run out to April for a top in gold stocks and May for physical gold and silver.  I am not prepared to attempt to predict any further out than that as I need to see what the markets and technicals are telling me as we progress into the highly interesting year.

The chance of the gold and gold stocks taking charge and running their own race is increasing so any corrections may be smaller this year.  Just because we see some chance of USD strength against the Yen and possibly the Euro does not mean gold will correct.  It could out pace the USD even in a stronger relative USD environment.

We see the stimulus continuing despite the talk of withdrawal.  These measures aimed at the necessary task of keeping the game afloat will be great for gold.  The demand from those in the know will keep the upward pressure on gold too.

The chance of the AUD appreciating against the Euro and the Yen should keep investment flows coming into the Australian gold sector and energy equities as well.

Good trading / investing.
Regards,
Neil Charnock

www.goldoz.com.au

GoldOz is currently developing a Member area and has added further resources for free access. We have stepped up our research and stand by to assist investors from all walks of life. We sell an updating PDF service on ASX gold stocks from only $AUD35 for 3 months – the feedback is grateful and enthusiastic because we are highlighting companies that have growth potential and offering professional coverage of the sector. GoldOz web site is a growing dynamic resource for investors interested in PGE, silver and gold companies listed in Australia , brokers, bullion dealers and other services.

Neil Charnock is not a registered investment advisor. He is a private investor who, in addition to his essay publication offerings, has now assembled a highly experienced panel to assist in the presentation of various research information services.  The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are his current opinion only, further more conditions may cause these opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.

Neil Charnock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Paul
11 Jan 10, 17:07
Glen Beck

The less said (or quoted) about this pathetic O'Reilly wannabe the better. Beck is symptomatic of all thats gone hideously wrong with American media.


Don
12 Jan 10, 00:57
Glen Beck

Glen Beck is the greatest educator on television. If you can't stand the truth, then don't watch him, but you can't deny his facts.


Star
12 Jan 10, 09:19
Glen Beck

He's a pathetic piece of work and a prime example of how low standards have become for quality in our televised programming. Like the "pied piper," however, he's certainly drawing rats along with him... right over an intellectual cliff and into a dark abyss of fear, ignorance and intolerance.


n
12 Jan 10, 10:40
beck

beck told us to buy gold and silver years ago. back when cramer was telling us to buy a bigger house.

my silver is worth twice what i paid.

score one for the "pathet peice of work"

n


ccGoh
12 Jan 10, 22:41
Glen Beck

He is entertaining and an honest type of guy based on the few videos I watched.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules