Gold Bull Market Virtuous Cycle, Investor Essential Preparation for 2011
Stock-Markets / Gold and Silver 2010 Oct 29, 2010 - 01:59 PM GMTBy: DeepCaster_LLC
"Fundamental and technical factors for gold are now in total harmony and gold is entering a virtuous circle that will drive the price up at its fastest pace since this bull market started in 1999.
It is a fact that gold in US dollars (and many other currencies) has gone up 400% in eleven years or 16% per annum annualized.
It is a fact that the US dollar has declined 80% in value against gold since 1999.
It is a fact that the dollar and most other currencies have gone down 98-99% against gold since 1913 when the Federal Reserve Bank of New York was created.
It is also a fact that the Dow Jones (and many world stock markets) has declined over 80% against gold since 1999.
It is a fact that gold has made a new all time monthly closing high in dollars in August 2010.”
“Gold entering a virtuous circle”
Egon von Greyerz, HSL Jr, 9/6/10
Just over a year ago, Deepcaster noted the following Report, and its consequences for the U.S. Dollar.
“(In a meeting allegedly held by the Gulf States, China, Russia, Japan and France it was decided--) to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese Yen, the Chinese Yuan, the EUR, and a new unified currency planned for nations in the Gulf Cooperation Council.”
Report in The Independent by Robert Fisk October 6, 2009
“As a consequence in part of this unconfirmed report the U.S. Dollar took a real battering earlier this week.
Yet in spite of that and all the other market, economic and other uncertainties the U.S. Equities markets bounced blithely higher.
Indeed, anyone who thinks the U.S. Equities and other Major Markets are not rigged should seriously consider the report last week on zerohedge.com. Zerohedge reported that both the S&P and the DJIA returned exactly 14.98% in Q3 to the hundredth of a percent. The odds of that happening as a result of Free Market Action in two stock Universes containing a total of 530 stocks are, to say the least, infinitesimal.
And the policies of the private for-profit U.S. Federal Reserve are no cause for comfort either. Contrarian luminary Marc Faber joins Deepcaster and others who see that The Fed is and has been the Primary Cause of the Asset bubble creation, (and the suffering caused by Asset Bubble bursting) in the past few years.
“You have to give credit to Ben Bernanke and Alan Greenspan,” contrarian guru Marc Faber said at the CLSA Asia Pacific Markets investor conference in Hong Kong.
"They have achieved something no central bankers have achieved in history. They created a bubble in everything... The only asset that went down from 2002 to 2007 was the U.S. dollar."
And the only place that didn't grow in the final years of the latest bubble was Zimbabwe, which suffered hyperinflation and economic collapse and was "run by a money printer, Mr. Mugabe, a mentor of Mr. Bernanke," Faber said.
As for the stock market rally: Faber believes money printing is to blame.
“You can’t find anyone more negative about the world than I am,” Faber said.
“But stocks can still go up,” thanks to continued printing of money.
Faber said he actually expects stock markets overall will rise around 7 percent a year over the next decade. In the United States, however, he expects that much of that return will be eroded by inflation driven by an increasing money supply.”
Faber: Bernanke No Better Than Mugabe
Julia Crawshaw, Newsmax.com, 10/1/09
“They created a bubble in everything” has got it just about right.”
As the legendary baseball coach is reported to have said “Déjà vu all Over Again”. The U.S. Dollar is now (October, 2010) approaching 75ish basis the USDX, just as it did a year ago.
As we and others have documented, the private for-profit Fed is primarily responsible for creating the Asset Bubbles which have burst, or are now bursting, causing much loss and pain around the world, and for the U.S. Dollar’s Purchasing Power weakening by a third compared with other Currencies, and much more vis a vis Gold and Silver.
There is no need to recapitulate the dismal fundamental (and several key technical) indicators and prospects for the markets, and the economy.
What good is it, if the Equities Markets rise 7(or whatever)% per year (Faber’s reasonable estimate), if that return is obliterated by an increasing money supply which decreases the Purchasing Power of the Fiat Currency and thus causes price inflation?
In other words, what good is an increase in the nominal dollar value of equities if the purchasing power of those U.S. dollars continues to erode as it has considerably (basis the USDX) since 2002? (See Deepcaster’s “Opportunities To Escape Paper "Wealth"” (11/7/08) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)
Harry Schultz, the Eminence Grise of the Newsletter Writers, was right when he said that Hyperinflation resulting from massive Fiat Currency printing is Coming to torment us.
Hyperinflation is the Penalty that Citizens of Major Industrial (and many) Nations will likely have to pay for allowing the private for-profit U.S. Fed and its Mega-Bankster Allies to Control their Financial Systems, and many Politicians.
Although Uncle Harry is right to see that Hyperinflation is in our future – How else to even begin to pay sovereign debts, to fund Bankrupt U.S. States, or Bankrupt Eurozone States or to provide enough credit to liquefy the U.S. Middle Class, 70% of the U.S. Economy, or Small Business, provides of 70% of all jobs without creating lots More Money and Credit – he fails to point out that it has already begun in certain Sectors (see comment regarding Shadowstats.com, below).
Such an inevitable (it has already started) explosion of credit and money is likely to result in, as we and others have long forecast, the severe degradation, or eventually even the destruction, of the U.S. Dollar, the World’s Reserve Fiat Currency.
This is a Result Devoutly wished for (or planned for) by the Globalists (but not the Internationalists), who yearn for their own “Global” Currency, (a wish already aborning in the IMF SDR’s), in order to further enhance their power.
But Opportunities abound for those who know Hyperinflation is coming, and prepare. To fully appreciate these we must first consider that as the Purchasing Power of the U.S. Dollar (and Many Fiat, including especially the Euro currency) continues to Fall over the next few years, the prices in Key Sectors will rise. Indeed this has already started.
But just as high inflation has begun in certain Sectors (e.g. U.S. CPI and Many Sovereign Nation’s Debt – see below), we also have an ongoing, but temporary Deflation in certain other Sectors, although Bogus Official Statistics (see below) hide it from us (M3 deflation at a negative 3.71% annualized in the U.S. is dangerously close to pre-Great Depression levels).
The Net Effect is the Worst of Both Worlds, a slow-Motion collapsing Economy and a Nascent Hyperinflation in sectors where it hurts most, e.g. U.S. CPI already at 8.48% (according to the October 15, 2010 Shadowstats.com report – see below). Not a Positive Harbinger for our Financial Future as it reflects the already-severely-diminished Purchasing Power of Main Street U.S.A., 70% of U.S. GDP, and of Small Business which provides 70% of all U.S. employment.
But, fortunately, looking ahead into 2011 Gold and Silver and certain Agriculture Commodities in relatively inelastic demand provide not only Safe Havens, as they have for thousands of years, but also are Profit Vehicles, but with certain Caveats described below. Fortunately too, Deepcaster has developed a Strategy to surmount these Caveats, also outlined below.
The first Caveat has to do with the fact that a Fed-led Cartel* of Central Bankers and Favored Financial Institutions overtly and covertly regularly intervenes in the Gold, Silver, Equities, Crude Oil and other markets. Since Gold and Silver are Real Money, they threaten the legitimacy of the Bankers’ Fiat Currencies and Treasury Securities. Thus, The Cartel* regularly intervenes to drive down their prices.
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
The Cartel has typically intervened massively to take down Gold and Silver prices when developments, like the collapse of Bear Stearns in 2008, should make them launch higher.
Though The Cartel has been weakened in Recent Months, by inter alia, Revelations that Major Gold Repositories do not have the Physical Gold they Claim they do (thus leading to greater demand for Possession of Physical, thus creating greater pressure on The Cartel), it is still potent.
Moreover, it is important to note that there is considerable evidence that The Cartel uses it Interventional arsenal to manipulate other markets as well, as the Graham Summers late September Article regarding Equities Market Manipulations – “The Only Reason Stocks Rallied This Month”, recently cited, supports.
Unfortunately, many of the negative consequences of these Market Interventions are hidden from investors and the Citizenry in General by the gimmicking of Official Statistics.
Shadowstats.com calculates the numbers the old-fashioned way they were calculated before the era of “Political Statistics” began in earnest in the 1980’s and 1990’s.
Consider, for example, the Official Statistics versus the Real Statistics courtesy of Shadowstats.com:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported October 15, 2010
1.14% 8.48% (annualized September, 2010 Rate)
U.S. Unemployment reported October 8, 2010
9.6% 22.5%
U.S. GDP Annual Growth/Decline reported September 30, 2010
3.00% -1.25%
U.S. M3 reported October 17, 2010 (Month of September, Y.O.Y.)
No Official Report -3.71%
One Pillar of our Strategy for using precious Metals for Protection and Profit despite Cartel Takedowns, is to recommend acquiring (mainly) Physical Gold and Silver to be held personally, but preferably only under certain conditions.
In sum, we have a Mixture of Inflating and Deflating Sectors – Deflationary forces are apparently overwhelming Inflationary ones overall for now, but not for much longer.
Thus, the Strategic Opportunity for Profit and Wealth Protection is to Play the Inflating Sectors “Long” and the Deflating Sectors “Short”.
So what are the Deflating Sectors? Well, prospectively (i.e. after the U.S. Election) Equities for one. As Graham Summers article confirms the Equities Rally from March 2009 to Date was merely a Bear Market Rally mainly generated by The Cartel* via their POMO injections, and, recently, by U.S. Dollar weakness. Indeed, overall Equities levels are not much different than they were a decade ago. And, adjusted for Real Inflation, they are some 30% lower.
Another deflating Sector is money supply, M3 has plunged from 16% growth in early 2008 to a Negative 3.71% Annual Decline as of the October 17, 2010 Shadowstats Report – the Deepest Decline since the early–1930s Banking Crisis, an unwelcome sign of an enveloping Economic Depression.
But note immediately that U.S. CPI is still raging at 8.48%. That means that the Purchasing Power of U.S. Dollar Holders is eroding at a rate of nearly 9% per year!
Holders of Equities and U.S. Dollar are unfortunately victims of this ongoing Trend.
And it is Delusionary to think it will get any better. Just consider that for 2010, U.S. Federal Tax Receipts are estimated to be around $7 Trillion. But Expenditures are expected to be around $11 Trillion. That implies $4 Trillion of Dollar “Printing or Lending” for just one year. And Fannie and Freddie were delisted last year from the NYSE and will potentially cost Taxpayers as much as $1 Trillion, as well.
And the Burgeoning Mortgage Foreclosure Scandal is but one more Canary in the Coal Mine.
Thus, overall, The Key is to ride the Deflating Sectors with short positions and the Inflating ones with longs. (We recommend ETF’s to “ride” the Sectors in our Letters and Alerts.)
But this is a Tricky Business, especially for Short Positions, and especially given ongoing Government/Cartel* Market Intervention.
To take one example, like the recent September, 2010 Equities Rally the mid-June, 2010 Equities Bounce was further Evidence of Cartel boosting the Equities Markets. What net-positive news was sufficient, we ask, to generate the Thursday, June 10th 273 Point Dow Rally. Indeed this Rally was a Conundrum only if one is Unaware of Cartel Market Intervention. Same for the end-of-day Mini-Rally on Friday, June 11.
And for the beginning-of-the-Day Rally on Monday on June 14. The fact that that beginning-of-the-day Rally later Collapsed into a loss is Emblematic of what the Equity Markets are telling us – the Markets “want” to Fall. But as the September, 2010 Rally tells us – The Cartel wants them to rise, for now, at least.
But while Cartel Intervention can delay the Playing out of the Downward Momentum of the Markets for days, or weeks or even a few months, it cannot ultimately stop it.
So for us the only issues are “when” the next leg down in the Equities Markets will be launched, not “if” and, to what extent increased Fiat Currency Printing will dampen any such Equities Markets Takedowns. See Deepcaster’s latest Alerts for our Forecasts regarding Timing and Targets.
So what are the present and prospective Inflating Sectors? Presently, the Precious Monetary Metals, Gold and Silver and certain Agricultural Products in relatively inelastic demand.
But Cartel Manipulation is reflected especially in ongoing (for years) Cartel Gold and Silver Price Suppression Actions. Although Cartel Capacity to effect such price Suppressions has recently been considerably diminished, the Cartel is still Potent. Nonetheless, Deepcaster recommends their Acquisition, and has developed a Strategy which Minimizes the Risk of Suffering Financially from Cartel Precious Metals Price Takedowns. See Deepcaster’s “Defeating the Cartel... With Profit, Part 2” (6/19/2009) and “Defeating the Cartel... With Profit, Part 1” (3/28/2008) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com. We identify key components of that Strategy here.
Yet several weeks ago we explained an increasingly positive factor -- why it was likely that Cartel* Attempts to Suppress Gold (and Silver) Bullion prices would encounter increasingly heavy resistance from here on out. (See Deepcaster’s recent Articles in “Articles by Deepcaster’ Cache at www.deepcaster.com.)
Among the reasons were that Gold and Silver Bullion Price Suppression by a Fed-led Cartel* of Key Central Banks and their agents and allies was
- Becoming ever more widely known via Deepcaster, GATA (see above) and others, and
- Increasingly widely distributed Revelations that some of the largest Gold (and Silver) Repositories likely do not have nearly as much Physical Bullion as they claim they do. Thus, this is leading more and more buyers to demand delivery and possession of Physical.
Result: Record demand for Possession of Physical Bullion (i.e. not merely Paper Certificates ostensibly evidencing bullion ownership), with Consequent Robust Prices.
BUT Gold (and Silver) Shares prices, being “Paper” (i.e. more likely, electronic data on some remote server) are much easier for The Cartel* to manipulate. Thus the Precious Metal shares are especially vulnerable anytime Equities in-General are being taken down, just as their prospects are bright when Equities rise.
For example, is there any other Explanation for the Divergence in June 4 Market Price Action as between Bullion and Shares.
In any event, we should continue to expect periodic violent Precious Metal Price Takedown Attempts. And Deepcaster has developed a Strategy to minimize the adverse effects of these attempts (see Deepcaster’s Articles referenced above).
It is in The Cartel’s interest to try to delegitimize Gold as The Ultimate Monetary Metal and Authentic World Reserve Currency, in their ongoing attempt to legitimize their Fiat Currencies and Treasury Securities.
In sum, given the recently diminished potency of The Cartel in their attempts at Precious Metal Price Manipulation, other factors loom somewhat larger as price determinants.
Thus, for example, Short Term, we expect Mining Shares to move somewhat in harmony with the anticipated next move in Equities (see Deepcaster’s Recent Alert in the ‘Alerts Cache’ at www.deepcaster.com for our specific Forecast).
Even so, we expect further Cartel Takedown attempts in Shares Prices to the “resisted” by Bullion Prices, with Bullion perhaps moving modestly lower at worst, but not as much as the Shares. That said, we believe the days when The Cartel can effect dramatic and sustained Takedowns of Precious Metal Prices are over.
Most important, Moving into 2011, we should regard any Precious Metals Price Takedowns as Buying Opportunities for both Bullion and Shares. Indeed, we relish the prospect of the Buying Opportunities which are being created by prospective mini-Takedowns.
In sum, consider any such Takedowns in Bullion or Share Prices as a Gift and an Opportunity. Stay tuned for Timing and Targets.
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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