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Gold was a star performer during the month of August, outshining other assets in an impressive rally which took many investors by surprise. Many analysts attributed gold’s strength to investors’ expectations of another monetary rescue operation from the Federal Reserve. But as we’ll see in this commentary, such an action is not only unlikely but unnecessary to gold’s continued strength.
After a vigorous rally last week, gold investors adopted a cautious tone ahead of Friday’s annual gathering of central bankers and finance ministers at Jackson Hole, Wyoming. During the 2-day meeting, investors will be on the lookout for verbal hints that the U.S. Fed may implement another monetary stimulus, which would benefit the gold price. Ultimately, hopes of another quantitative easing (QE) program will likely be disappointed due to a recent spate of positive economic and consumer spending reports. But this doesn’t mean gold won’t be able to benefit from the other economic variables in the mixing pot. Let’s take a look at some of these variables.
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Why Everybody's Going To War in the Middle East
Monday, August 27, 2012 by Ron Holland - www.thedailybell.com
"Everybody's going to war but we don't know what we are fighting for." – Nerina Pallot, from "Everybody's Gone to War"
Iran Wants War
Although a peaceful nation for hundreds of years, Iran was invaded and occupied by the Allies in both World War One and Two. Then in 1980, at the urging of the United States, Saddam Hussein invaded them and used poison gas against both Kurds and Iran. Over 500,000 civilians, Iranian and Iraqi soldiers died in the longest war of the 20th century, which lasted until 1988.
Iran wants war because they believe they can withstand an Israel and US air assault and that unless they are invaded and occupied they can claim victory. No Middle East nation has ever been victorious against either the US or Israel and to declare victory against both will make Iran the leading nation across the entire region, at least for the people in the street. An Israel/US assault would also solve growing domestic political problems against the regime.
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Gold: First Mover Advantage
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
In the Investor Alert, our investment team shares charts and data that we believe provide readers with a first mover advantage. While markets don’t always move like we anticipate, recognizing historical trends can provide an edge if you act quickly.
Last week, gold bugs were rewarded with the long-awaited positive momentum in the yellow metal, and on Friday, bullion rose to about $1,670. After falling below the 200-day moving average, gold had been stuck in quicksand for several months. With the jumps in the price last week, bullion swiftly rose above this critically important long-term moving average.
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Gold Gets Stoked
Super Force Signals
A Leading Market Timing Service
We Take Every Trade Ourselves!
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Weekly Market Update Excerpt
Aug 24, 2012
Morris Hubbartt
US Dollar Top Hat Chart
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Contrary Gold Futures
With gold awakening from its usual summer slumber, traders are getting more excited about its prospects. Presumably this shifting sentiment will even grow to encompass futures traders, who’ve been incredibly bearish on the yellow metal for months now. While traders hold futures guys in high esteem, they are just as susceptible to groupthink as everyone else. They are actually a powerful contrary indicator for gold.
Just a month ago, it seemed like you couldn’t even give gold away. Bearishness abounded, and commentary and analysis were overwhelmingly pessimistic and calling for major new lows soon. Go back and skim the stuff published on gold in mid-July, and you’ll quickly see what I mean. Because it had languished in a correction since August 2011, shedding 18.8%, everyone was very negative on it.
Unfortunately this is typical in the markets, as traders tend to mentally extrapolate short-term trends out into infinity. When a price has been rallying for months, they assume it will continue powering higher indefinitely. And when a price has been falling, they convince themselves it will keep on grinding lower. These false assumptions blind traders, rendering them incapable of buying low and selling high.
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Gold's Little Brother Is Talking
Graceland Updates 4am-7am
Aug 21, 2012
1. Early this morning, gold may have achieved an upside breakout from a key symmetrical triangle formation. Please click here now.
2. This chart provides an overview of the situation; there is a symmetrical triangle (highlighted in black) sitting within a giant drifting rectangle (highlighted in green).
3. To view the possible breakout, please click here now. FOMC minutes are scheduled to be released on Wednesday. While that report could create some significant price volatility, there’s no question that this morning’s technical breakout is a very bullish event.
4. The price of oil is rising in a near-perfect uptrend. Please click here now. Short-term traders can add to positions around the green horizontal lines on the chart.
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Love Trade Cools as Central Banks’ Gold Demand Heats Up
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
The two largest gold buyers in the world that largely drive the Love Trade, China and India, underwhelmed the metals market with their subdued demand for the yellow metal during the second quarter of this year.
According to the World Gold Council’s (WGC) quarterly Gold Demand Trends report, total demand was 990 tons, which was about 7 percent lower compared to the second quarter of 2011. When you break down demand and look at the jewelry sector, you can see that Chindia remains about 50 percent of the world’s total gold demand. However, this quarter’s jewelry demand of a little more than 400 tons makes it one of the weakest periods in two years.
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By Ron Hera
August 20, 2012
©2012 Hera Research, LLC
Gold, silver and crude oil prices are closely related to the movement of the U.S. dollar. After a healthy consolidation, gold began to move up in August 2012. At the same time, deteriorating expectations for crop yields in the American Midwest moved corn and soybean prices to new highs. Higher food prices in late 2012 or early 2013 could have far reaching and geopolitically destabilizing effects likely to weigh on stocks, putting the shine back on precious metals. While billionaires George Soros and John Paulson are buying gold, silver has been in backwardation in recent weeks and silver held in ETFs rose to $16.2 billion according to Bloomberg.
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Super Force Signals
A Leading Market Timing Service
We Take Every Trade Ourselves!
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it.
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Weekly Market Update Excerpt
Aug 17, 2012
Morris Hubbartt
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Gold in Stock Bears
With the odds for a new stock bear growing, prudent contrarian investors are looking for bear-resistant destinations for their hard-earned capital. Plain old cash tops the list, as it will not only preserve wealth but increase its relative stock buying power as the markets grind lower. But why merely sideline capital if it can still be grown even during a stock bear? Gold has proven its ability to thrive in such markets.
Last week I wrote an essay on the rising chances a new stock bear is looming. This primarily has to do with the bull-bear cycles. The stock markets endlessly march forward in a series of alternating bulls followed by bears. After a bull, a bear is pretty much inevitable. This is true at both scales of the bull-bear cycles, the great decade-plus secular moves and the smaller multi-year cyclical moves within them.
Our latest stock-market cyclical bull that was born back in early 2009 is long in the tooth. It is both older and larger than average for mid-secular-bear cyclical bulls. This means a new cyclical bear is increasingly likely. And since these fearsome beasts tend to maul general stock prices until they are cut in half over a couple years, they are not to be trifled with. Gold offers a great way to weather them.
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"The Perfect Storm"
Aug 14, 2012
1. Gold bulls have endured a long and frustrating year. Gold continues to move sideways. I believe the breakout will be to the upside, for a number of not-so-thrilling reasons.
2. First, the growing tensions between Iran and Israel seem to be close to a boiling point. “Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak have ‘almost finally’ decided on an Israeli strike at Iran’s nuclear facilities this fall, and a final decision will be taken ‘soon,’ Israel’s main TV news broadcast reported on Friday evening.” -The Times Of Israel newspaper, August 11, 2012.
3. A number of high-ranking politicians in Israel argue that Israel’s military is not adequately prepared to “manage” a military reprisal attack from Iran. That doesn’t seem to bother the pro-war crew.
4. Wars often progress a lot differently than originally envisioned by the war mongers. Unfortunately, I believe the continuing “triangularization” taking place on the gold chart reflects the growing possibility of severe and prolonged military conflict, between Iran and Israel.
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Which Way Will the Pendulum Swing for Gold?
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
One of the most fascinating aspects when watching a sporting event like the Olympics is the historical statistics highlighting the tremendous advances in athleticism over the years. In the spirit of the events this summer, BTN Research compared gold’s advancement from the beginning of the games in Beijing to the London Olympics.
On the day of China’s auspicious opening ceremonies on August 8, 2008, gold was $857.80 an ounce. By the time the world watched the opening ceremonies of the 2012 London Summer Olympic Games, the precious metal had climbed to $1,617.90 an ounce. This represents a remarkable increase of 89 percent in four years.
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The year 2012 has been relatively peaceful compared with the past 10
years. The lack of military aggression on the part of the U.S. has led
many to believe that the America’s days of military adventures are
over. But as we’ll see here, 2012 is simply a temporary respite in a
longer-term “theater” of war that has only just passed the opening
act.
The past decade has indeed been one of near constant strife and
turmoil. Starting with 9/11 and the U.S.-led NATO invasion of
Afghanistan, and later Iraq, the 10 years between 2001 and 2011 were
characterized by ceaseless warfare. The military invasions in the Middle
East have been followed by civil and military uprisings in Egypt, North
Africa and elsewhere in the region. By contrast, 2012 might be styled a
“quiet” year for the Mideast. A withdrawal of U.S. troops from Iraq
began in mid 2009 and formally ended in late 2011.
Meanwhile, the so-called “Arab Spring” revolts have subsided and
revolutionary fervor has temporarily died down. Soldiers have returned
from overseas and the nation has breathed a collective sigh of relief
that the Middle East adventures of the past decade are apparently over.
There is reason to believe, however, that the abandonment of Iraq and
the proposed wind-down of U.S. involvement in Afghanistan is merely a
brief intermission in a long and bloody theater of war. The second act
will likely be the most intense one yet.
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The Gullible States of America
By Carl Andersen
There is a consistent pattern in the impetus for the United States of America to embark on foreign wars.
That is a catastrophic, “cowardly” or “terroristic” attack upon US interests or citizens.
The Spanish American War (1898-1901) occurred during a period of growing “anti-imperialism” on the part of Americans. It’s no surprise that Americans at the time were not interested in conquests to obtain colonies. The average American was interested in his/her own personal quality of life.
The USA became embroiled in the conflict over Cuban independence from Spain and public sentiment seemed to favor staying out of it until the Battleship Maine exploded in Havana Harbor. The yellow journalist, William Randolph Hearst’s battle cry, “Remember the Maine” helped to garner support for war with Spain.
The USA came out of that war with the Phillipines, Guam, and Puerto Rico as new territories….
In 1912, Woodrow Wilson was re-elected as President of the United States, largely on a platform of “He Kept Us Out of the War,” reflecting American’s desires to stay out of Europe’s wars. Despite Warnings from the German Embassy that it would sail into contested waters, the S.S. Lusitania sailed for England, was abandoned by its British Destroyer escort in an area known to be infested with U Boats, and was sunk.
The resulting outrage in the USA propelled Americans into their first world war.
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Stock Bear Looming?
With the US stock markets challenging a major multi-year high, investors are feeling pretty complacent these days. But unseen below the placid surface, a serious risk is arising from the depths. With each passing day, the odds grow that a new stock bear is imminent. As these merciless beasts typically maul the markets until stock prices are cut in half, they are dangerous threats that cannot be taken lightly.
The stock markets perpetually march forwards in great bull-bear cycles. All bull markets eventually mature and top when greed and complacency grow excessive and everyone willing to buy has already bought. Then bear markets are born, which don’t run their course until fear reigns and everyone susceptible to being scared into selling has already sold. And then this endless cycle begins anew, bull bear bull bear.
The problem today is our current bull market is long in the tooth, running longer and higher than average. And the older any trend in the markets gets, the greater the odds of an impending major reversal. After a bull market, a bear is absolutely inevitable. The only question is when it will awaken from hibernation. And thanks to our position in the bull-bear cycles today, probabilities favor that tipping point being soon.
Understanding these bull-bear cycles is crucial for investors and speculators. If you wrongly buy near the top of a bull, or sell near the bottom of a bear, it will derail your wealth-building progress for years. There are two distinct species of bulls and bears, secular and cyclical. The secular ones persist for the better part of two decades, while the shorter cyclical ones alternate every few years within the secular ones.