Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in the METAVERSE Stocks Universe - 8th Dec 21
Stock Market Sentiment Speaks: I Expect 15-20% Returns For 2022 - 8th Dec 21
US Dollar Still Has the Green Light - 8th Dec 21
Stock Market Topping Process Roadmap - 8th Dec 21
The Lithium Breakthrough That Could Transform The Mining Industry - 8th Dec 21
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

End of Private Banking System Era and the Gold Primary Bull Market

Commodities / Gold & Silver Oct 14, 2008 - 04:16 AM GMT

By: Brian_Bloom

Commodities Best Financial Markets Analysis ArticleSome months ago this analyst began voicing his view that what we are witnessing is the end of an old era and the commencement of a new one. Events of the past two weeks have certainly had no precedent. Comparing the market's behavior today with that of 1929-1933 ignores the fact that in those days there was not the quadrillion dollar derivatives risk exposure that some analysts argue exists today.


Over the past few weeks I have been attempting to inject a modicum of cold reason into the debate on gold

Whilst I am a long term bull on gold, I had a concern that there are too many chartists cheering from the sidelines just “willing” the gold price to explode upwards. Analysis of the longer term gold price charts did not confirm this widespread optimism, and one of the main charts to which I referred was a weekly chart with 20 and 42 week Moving Averages superimposed. Below is an updated version of this chart to October 13 th 2008. (Courtesy stockcharts.com )

A close look at this chart reveals the following:

1. The price is still moving within the confines of a flag (consolidation) formation and is above its long term rising trend line.

2. The 42 week MA is pointing up

3. There is resistance to further upside movement in priced at $896 (at the 42 week MA) and at approximately $960 (at the downward sloping upper channel line of the fan formation)

4. The price is below both the 20 week MA and the 42 week MA

5. The 20 week MA is below the 40 week MA – having recently given a “sell” signal when it crossed over.

Interim conclusion

Whilst the long term direction of the gold price is “up”, the intermediate term direction is less certain and some weakness is visible.

The issue which has been occupying this analyst's mind in recent months has been that if the derivatives market starts to implode, such a development will likely presage a collapse of the entire world's financial infrastructure. It is for that specific reason that he has been extraordinarily cautious regarding the possibility of an upwardly exploding gold price. From one perspective, the world's leaders would have to pull out all stops to prevent a catastrophic collapse of the system – even to the point where they changed the rules and closed the markets. From another perspective, such an upward explosion would represent a pyrrhic victory for gold bugs.

The Point and Figure Chart below shows a triangle consolidation with $825 as the key support level. Whereas this chart was recently calling for a price of $1400 on the upside, it is now calling for a price of $484.80 on the downside – based on vertical count measurement technique.

Given that the gold price is still clearly in a Primary Bull trend (and will remain so even at the target price) I am less inclined to accept the vertical count downside target than the horizontal count downside target – which is around $690 per ounce at this stage.

However, before we get carried away with our bearish observations, the chart below shows that gold has broken up relative to commodities. There can be no objectively defensible argument against the observation that gold is now no longer being regarded as a mere commodity.

So what does all this mean?

To this analyst, it means that the gold price may have some further downside potential within the confines of a Primary Bull Market.

But it's not as simple as it seems. The chart below shows that gold is now also demonstrably outperforming the gold shares.

This is counterintuitive in context of shares which are leveraged to the gold price. Theory would argue that the shares should always outperform gold in a bull market and always underperform gold in a bear market. How can gold shares be performing as if gold was in a Primary Bear Market and commodities be performing as if gold was about to become the currency of last resort? It makes no sense.

All of which now raises the question as regards whether the rules of the game may be changing. Are we entering a new era?

The past 100 odd years have been characterized by a dominance of private sector led policy makers who have come to accept as axiomatic that “money supply” is the driver of the economy. I strongly disagree with this argument. Logic dictates that if you lend someone some money today so that he may consume today then, yes, economic activity today will be stimulated. But the day will come when the borrower will have consumed that which was bought and is now faced with the obligation of repaying the debt. What started off as exaggerated economic growth on the upside will end up as exaggerated economic contraction on the downside.

Borrowings should be for the purpose of funding capital investment, not consumption. It's a simple concept that is not difficult to grasp. Borrowing for consumption makes you poor. Borrowing for genuine capital investment makes you rich. Entrepreneurial activity is the engine that “drives” the economy, not money. Money is grease for the economic wheel, and “energy” is the fuel for the entrepreneurial engine.

In the twilight years of the twentieth century, our morally corrupt leaders (or amoral leaders, it doesn't matter which) moved to protect the legacy energy industries from competition when they should have been moving to stimulate the emergence of competitive alternative energies. That act (evidenced by a failure to ratify Kyoto, and FURTHER evidenced by their predisposition to want to support carbon emission trading) is what rang the death knell of the old era.

Whether we enter a new era or whether we collapse in a heap will be dependant on whether the alternative energy technologies emerge quickly enough to facilitate entrepreneurially driven wealth building activity on a large enough scale.

The technologies are there. They need to be supported with gusto and enthusiasm. If the authorities are so hell bent on throwing $700 billion at someone, then they would be better advised to throw it at the entrepreneurs who will be leading the charge to dig us out of this quagmire. $700 billion to wallpaper over the cracks? Just how counterproductive do one's actions have to be before they are recognizable to everyone as counterproductive?

You want to stop the banking industry from collapsing? Simple: Nationalize it.

Why does banking have to be a Private Enterprise activity? It should be a not for profit activity. Any profits made by the banking industry should be for the benefit of the community.

By all means, let's have a Capitalist based Free Enterprise market. That's the proven way of unlocking entrepreneurial energy. But there's no logical reason for banks to be privately owned. Why should peddling grease justify excessive profits? That is the argument of silver tongued bullshit artists. It is entrepreneurial activity – not banking – that should be excessively rewarded. It is entrepreneurial activity that builds true wealth. Private Sector banking is an oxymoron. Private Sector banking is a contradiction in terms and it represents a massive conflict of interests between government of the people, by the people for the people; and those who seek to leech off the people.

Welcome to the demise of the era of private enterprise banking. Welcome to the new era of entrepreneurially driven economic activity, fuelled by non fossil fuel energy technologies, and funded by a central government controlled banking industry operating in the interests of society as a whole.

There will be those who react violently and negatively to this argument. To those people, I make the following response: Read my novel, Beyond Neanderthal. Your testosterone is showing. As the medical profession has accepted for eons: Primum Non Nocere (first do no harm). A private enterprise driven banking industry is structured to do harm in the long term. We are witnessing that harm now and it is unarguable. Private Sector banking has caused the problems we now face.

The issue has not been related to which currencies are in circulation. The issue has been the egocentric orientation of those who decide how much currency to make available. Gold may be part of the solution to the currency problem, but it can never be “the” solution. It represents one ingredient of the cake.

By Brian Bloom

www.beyondneanderthal.com

Beyond Neanderthal is a novel with a light hearted and entertaining fictional storyline; and with carefully researched, fact based themes. In Chapter 1 (written over a year ago) the current financial turmoil is anticipated. The rest of the 430 page novel focuses on the probable causes of this turmoil and what we might do to dig ourselves out of the quagmire we now find ourselves in. The core issue is “energy”, and the story leads the reader step-by-step on one possible path which might point a way forward.  Gold plays a pivotal role in our future – not as a currency, but as a commodity with unique physical characteristics that can be harnessed to humanity's benefit. Until the current market collapse, there would have been many who questioned the validity of the arguments in Beyond Neanderthal. Now the evidence is too stark to ignore.  This is a book that needs to be read by large numbers of people to make a difference. It can be ordered over the internet via www.beyondneanderthal.com

Copyright © 2008 Brian Bloom - All Rights Reserved

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.

Brian Bloom 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