Freegold

FoFoa's well explained theoretical solution to our economic crisis: click link: Freegold

Gold & Silver Charts

Recent upturns are directly related (a flight to safety) to all the new market liquidity generated by Global Central Banking systems.

The dollar on the other hand is falling fast, while Oil just crossed back through the $100 mark again this AM.

Charts to ponder

Dollar - Severely Overbought Condition

OIL - Severely Oversold Condition

Gold - Severely Oversold Condition

DOW - Slightly Oversold but look at recent PPO Downturn - Going Lower

Volatile Markets Ahead

Significant market volatility is likely next week as a result of the numerous economic releases that are due.

Looking at a chart of the DOW below, notice how it has spiked above its 50 Day Moving Average (50 DMA--blue line) ? Well, I think it'll fall below it once again -- starting a new leg down - once all the new economic news is digested.

DOW Daily

Due for release this week:

Monday 10:00 Existing Home Sales
Tuesday 10:00 Consumer Confidence
Tuesday 10:00 New Home Sales
Tuesday 14:00 FOMC Minutes
Wednesday 08:30 Durable Orders
Wednesday 10:35 Crude Inventories
Thursday 08:30 Chain Deflator-Prel.
Thursday 08:30 GDP-Prel.
Thursday 08:30 Initial Claims
Friday 08:30 Personal Income
Friday 08:30 Personal Spending
Friday 09:45 Chicago PMI
Friday 10:00 Mich Sentiment-Rev.


Additionally, many analysts/investors feel the dollar's rally has been overdone and now expect Gold to start rebounding:

US Dollar Index

Bloomberg: Gold May Extend Rebound on Demand for Alternative to the Dollar

Gold may rise for a second straight week on speculation the dollar's rally against the euro will stall, boosting the precious metal's appeal as an alternative investment.

Twenty-two of 28 traders, investors and analysts surveyed from Mumbai to Chicago on Aug. 21 and Aug. 22 advised buying gold, which rose 5.2 percent last week to $833.50 an ounce in New York, the first gain in a month.

My thoughts:

In addition to the above, physical demand from India and Middle East countries is expected to rise in the coming months - potentially causing supply/demand issues and driving a sharp rise in prices. For the short-term however, gold will need to get/stay above $850 for a while before the next leg up.

GOLD

Regards

Randy

Unbelievable - Now US Mint suspends "Gold" Eagle coin sales

This is big folks! First Silver and now Gold... hmm, could TPTB be aware of something bad that may be about to happen in the world?

From APMX: News Alert - US Mint suspended sales of the 1 oz Gold American Eagles

We just received word, the US Mint has suspended sales of the 1 oz Gold American Eagles until further notice and are not accepting new orders from precious metals dealers. This is in addition to the shortage of 1 oz Silver American Eagles.

This comes at a time when many investors around the nation are scrambling to locate silver bullion and US gold coins while prices are attractively low. These low prices seem to be one of the driving factors in this recent shortage, as investor demand has dramatically increased.


From Reuters UK: Mint suspends red-hot Eagle gold coins

NEW YORK (Reuters) - A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins.

"Due to the unprecedented demand for American Eagle gold one-ounce bullion coins, our inventories have been depleted. We are therefore temporarily suspending all sales of these coins," the U.S. Mint told authorized coin dealers in a memorandum dated on Friday.

Michael White, a U.S. Mint spokesman, said that only the one-ounce 22-karat American Eagle coins are sold out, but the half-ounce, quarter-ounce, and 1-10th ounce coins as well as the less popular 24-karat American Buffalo coins are still available.

"We are working diligently to build up our inventory and hope to resume sales shortly," the Mint said.

Coin dealers from the United States to Canada reported a surge in buying of bullion coins and other gold products since prices plummeted from highs last month. The buying spree contributed to supply fears and helped boost gold prices sharply on Thursday.

Rand LeShay, senior vice president of Los Angeles-based A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, said that there was a big spike in demand for gold and silver coins and ingots after a recent price tumble.

He said that A-Mark currently has no one-ounce American Eagle gold coins for its customers.

"Until the U.S. Mint can supply us with more coins, we won't be able to supply any to our customers," LeShay said.

The move by the U.S. Mint to halt sales caught market participants by surprise as it came at a time when the metal was sharply falling, rather than rising.

In contrast, the Mint needed to allocate its Silver Eagle coins to dealers due to overwhelming demand as the price of silver soared earlier this year.

Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.

COIN DEMAND SPIKES

Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins are sold out.

"Nobody has the Eagles or the Buffaloes right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said David Beahm, vice president of New Orleans-based Blanchard.

"If we don't have them, nobody has them," Beahm said. He added that he has been recommending customers to buy the one-ounce Canadian Gold Maple Leaf gold coin instead.

Jon Nadler, senior analyst at top Canadian dealer Kitco, said that the shortage of the Eagle coins could be due to a combination of high demand and a temporary lack of supply in coin blank, which is a flat metal disk used to mint coins.

On Thursday, spot gold surged as much as 3 percent to $839 an ounce, while U.S. gold futures for December delivery scaled a one-week high at $845 an ounce. Gold hit a five-month peak of $987.75 on July 15, and it set an all-time record of $1,030.80 on March 17

In hindsight, A-Mark's LeShay said that neither the U.S. Mint nor the coin dealers could anticipate the coin shortage.

"This kind of spike in demand is something no one can foresee, and no business runs itself waiting for this to happen," LeShay said.

Shifting gears a bit for a closing comment:

This is certainly a supply/demand driven situation as people rush for real money and an inflation hedge (at a good price).

Just think for a moment about the problems we're going to see when the US runs out of dollars...

What - come again? With a total US money supply of $14T and growing, how in the world can we ever run out of dollars? What an idiot!

Ok, I agree, but allow me to explain my point...

Currently, the FDIC is backing over $4 TRILLION of insured electronic deposits (of ~ $6T total electronic deposits) w/~$38 BILLION in insurance money. When we finally see the inevitable major banking system failures, followed by a nationwide run on banks (which WILL follow), people will quickly find out that there is only ~ $400B in COLD HARD CASH circulating in the US (the rest are ones and zeros on computer hard drives) and the majority who try to "get theirs" will soon find themselves completely out of luck.

Bottom Line: You may want to get some cash on hand too - while you can... Before it too runs out of stock.

Regards

Randy

The Disconnect Between Supply and Demand in Gold & Silver Markets

Absolutely the finest explanation I've had the pleasure to read regarding the recent manipulation activity used to smack down Gold and Silver prices of late. A Must Read!

Big Kudos to James Conrad!

The Disconnect Between Supply and Demand in Gold & Silver Markets



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Could this be the day?

On Monday this week, I stated the: DOW will fall below 11K this week. Thus far, it's been a rollercoaster ride and we've come close, but it hasn't yet happened -- but today could change things!

Consumer confidence, Mich Sentiment and import/export inflation all come out shortly and current DOW fututes look to be down 120 (Ouch!) -- merely 98 points from my threshold!

With that said, GOLD is looking swell -- see chart below.

Hold on to your hats folks!

Randy

Peter Schiff: $5000.00 Gold By 2012 - Dollar Never Recovers - Game Over

Though a bit dated (mid May 08) Peter Schiff states that gold will see $2,000 in 2009 and likely $5,000 by 2012. (Ironic Note: I predicted the same target range back in my Jan 08 post -- Gold: how high?)

Additionally, Peter says silver will probably do better than gold and that the US dollar will NEVER recover.

US Economic Outlook 2008-11+

All is not what it seems, and our US economic troubles are far from over!

Note: If it's hard to see/read the briefing below, please click on this link and view the updated briefing in full-screen

| View | Upload your own

Best regards

Randy

Daily Economic News

It's been a long day and there is so much I want to say, but there just isn't enough time.

I just got in... Attended my son's H.S. Graduation Awards Ceremony tonight and I'm proud to report that he's graduating with High Honors (4.2GPA).

One wonders, with the economic situation being what it is, what opportunities will be available to him 4 years from now when he has a B.S. Degree in hand. Scary to even contemplate...

Anyway, much happening in the markets of late. The US Dollar index is plummeting again. Will it make another historic "all-time low" this time around? I think it's quite possible, though 70 will provide very tough downside resistance.

And how about that Oil? Holy Crap--Light Sweet Crude Oil just broke through $135 in Asian Trading tonight! The Chart below hasn't even had a chance to catch up yet.... Anyway, with that said, I want you to note the severely overbought condition in Oil. Don't be surprised to see a pullback sometime soon, but I honestly don't think it will fall below $110 and when it does, it won't stay down for very long. Expect $150 tops before a nice correction.

Gold, as I've been forecasting for weeks now, is rebounding nicely. It has cut back through the 50DMA and the MACD has decidedly turned upwards. I still stand by my earlier comment: $1,200 gold by end of 2008.

The DOW on the other hand is looking pretty ugly -- it sliced back through its 50DMA and the MACD is also turning down. I don't think we'll test the March lows just yet, but think it's inevitable over the longer run -- and when we finally do: look out below!

I expect tomorrow to be a very interesting day also... All the Asian Indexes are currently in the red on inflation concerns, and existing home sales data gets released tomorrow at 10:00 EST. Consensus expects the numbers to come in at 4.85 Million (annualized) sales -- keep your eye on market reactions.

With that, I'm going to have to call it a night (told you I didn't have much time). I hope all of you have a great evening.

Regards

Randy

UPDATED: US Economic Outlook 2008 -2011+ Briefing

Recently, as part of a broad based financial education class for younger folks (in their 20's-30's), I was asked to provide an economic outlook assessment/briefing to help these young adults gain a better understanding of the very complex problems the US economy is dealing with -- both current and future.

Other people will provide generic information w/regard to: balancing a checkbook, living within your means, using credit wisely, investment options, compounding interest, etc... My main objective is: try to make a very complex issue (economic problems/future forecasting) easy to follow, so that these young people can make wiser decisions based upon the knowledge they have gained.

With that said, I have yet to give the actual briefing (it's scheduled for early June), so I thought I'd take advantage of the available time and ask some of you smart folks to review and provide feedback w/regard to content, complexities, general flow/digestibility, accuracy, missing content, etc...

Please remember -- this briefing was tailored for folks who know little about the history of money, the broader economy, inflation or the many issues in play. Additionally, I plan to expound upon many of the points made in the briefing (when presenting it).

Would really appreciate your comments/feedback.

NOTE: briefing updated based on reader feedback and 207 reads today -- very much appreciated!

The following topic's were added/corrected:
- 20% annual growth = 4 year doubling of money supply
- Short history on Federal Reserve
- US Dollar as World's Reserve Currency
- Oil/OPEC issues (imbedded w/Dollar and Current/future outlook)

US Economic Outlook Briefing (Use full-screen mode for best results)


Thanks in advance!

Randy

Gold Charts

At the beginning of May, I pointed out that gold was likely in an oversold condition and may have found a bottom (~$850). I then illustrated how the Price Oscillator (PPO) was starting to turn upwards and how the 200 Day Moving Average (200DMA) was providing strong resistance for any further downside movement.

Well, the updated gold charts below confirm (somewhat) my earlier intuition as gold is gaining on the 50 Day Moving Average (50DMA) while the PPO is making positive strides.

Daily Gold

Weekly Gold

Bottom Line: Updated charts are further confirmation of my previous closing comment: As credit crunch phase 2 kicks in, people will once again flock to gold and it is likely we will see it reach $1,200 by the end of 2008.

Regards

Randy

Gold Rebound?

Gold closed up over $18 today as 1) the dollar fell and 2) oil soared to a new new record. Has Gold found its bottom; will we now see an upturn? -- I think it's quite likely.

Look at the black Price Oscillator (PPO) line -- top section of the graph below: As you can see, gold was significantly overbought when it crested $1,000 back in March, but the severe sell-off since seems to be overdone. Notice how weak (oversold) the PPO line is now? Additionally, did you note the recent upturn in the PPO -- an indicator of things to come?

Regardless of what the shills are now saying, our financial crisis isn't anywhere near over and when phase-2 hits us (soon), safety (gold) will be sought after once again.

Take recent Fed actions as the first clue things aren't "all well" in our economy again:

As of last Friday, the Fed now accepts Auto, Credit Card, and Student loan bonds as collateral for new monetary injections. (Buyer of last resort?)

" Action taken by the Federal Reserve on Friday targeting the global credit crisis, in concert with European central banks, included an injection of cash into the stricken student loan market through a special lending operation... In the move, the Fed is allowing investment firms and banks to use bonds backed by federally guaranteed student loans as collateral for the loans of safe Treasury securities that the central bank is making available."

" The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards."

Second Clue:

Bernanke gave the green light Monday to congressional efforts to prevent foreclosures of homeowners caught in the recent sharp nationwide decline in home prices.

"Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy," Bernanke said in a speech at the Columbia School of Business in New York. "

A bill in legislation would allow the Federal Housing Administration to back as much as $300 billion in refinanced loans for homeowners facing foreclosure.

Third Clue:

Bank of America Corp may walk away from buying troubled lender Countrywide Financial Corp

Bank of America, the No. 2 U.S. bank, was likely to renegotiate its deal to buy Countrywide, the largest U.S. mortgage company, or might even scrap the deal altogether.

Countrywide shares tumbled more than 10 percent, while Bank of America shares slid 2.1 percent.

Fourth Clue:

Will Fannie and Freddie require a rescue?

As home prices continue their free fall and banks shy away from lending, Washington officials have increasingly relied on two giant mortgage companies — Fannie Mae and Freddie Mac — to keep the housing market afloat.

But with mortgage defaults and foreclosures rising, Bush administration officials, regulators and lawmakers are nervously asking whether these two companies, would-be saviors of the housing market, will soon need saving themselves.

Some financial experts worry that the companies are dangerously close to the edge, especially if home prices go through another steep decline. Their combined cushion of $83 billion — the capital that their regulator requires them to hold — underpins a colossal $5 trillion in debt and other financial commitments.

The companies are sitting on as much as $19 billion in additional losses that they have not yet fully acknowledged, analysts say. If either company stumbled, the mortgage business could lose its only lubricant, potentially causing the housing market to plummet and the credit markets to freeze up completely.

And if Fannie or Freddie fail, taxpayers would probably have to bail them out at a staggering cost.

Fifth Clue:

Fed Survey Shows More U.S. Banks Tighten Loan Terms

May 5 (Bloomberg) -- The Federal Reserve said the share of banks making it tougher for companies and consumers to borrow approached a record after the subprime-mortgage collapse made them more reluctant to lend.

The quarterly Senior Loan Officers' Survey, published in Washington today, underscores the Fed's concern that $318 billion of credit losses and writedowns among financial firms is causing a credit crunch. The survey, conducted last month, also indicates that the Fed's interest-rate cuts and loans to banks have failed so far to defuse the threat to the six-year economic expansion.

I could go on with endless clues, but I'm sure you get the point -- The Credit Crisis ain't done just yet (maybe phase 1 is).

Bottom Line:

As Credit Crunch Phase-2 kicks in (soon), we will see people flock to Gold once again (as the ultimate monetary safety) and will likely see $1,200 gold by the end of 2008.

All the Best!

Randy

Death of a Dream

I just read a great article that needs to be shared. Though quite unconventional and slightly radical in his rant, Roger Mason makes many very good points and I rather enjoyed his writing style/perspective... However, if his timeline and conclusions are correct (which I have some reservations about), we are in far worse trouble than even I envisioned. Enjoy!

Death of a Dream

After 232 years the American Dream is over folks. In the 1780's Alexander Tyler wrote, "A democracy is always temporary in nature lasting on average 225 years and cannot exist as a permanent form of government." The U.S. Constitution and Bill of Rights have been gutted. We almost elected an openly Marxist lesbian as our President and Commander in Chief. Obama Osama is to the left of Hillary, if you can comprehend that. McCain is dying of jaw cancer as if that isn't obvious. 1 in 10 American adults, children, and infants are on food stamps. One in six are government employees. The housing crash is just warming up! 59% of homes for sale in Los Angeles are fore-closures. They are selling for 50 cents on the dollar at auction. Adjusted for inflation since 2005 it is a quarter on the dollar. The dollar is useless. Our trade and budget deficits are egregious. The DJI is ready to collapse down to 5,000 ultimately. The DJT and DJU are hopeless. Dow Theory is telling us the house of cards is about to fall. Illegal immigration is completely out of control, and McCain will open the border gates even wider. Real unemployment is 14%, and real inflation is 18%. Four major airlines just went bankrupt- ATA, Skybus, Frontier, and Aloha (ATA was once the 10th largest). Alan Greenspan just publically admitted we're in a recession. We've been in one for months, and 70% of Americans know that. Gordon Brown (England's Prime Minister) just said we face the greatest economic crisis of the century. George Soros said the economic situation is hopeless. Warren Buffet basically said the same thing. Only 10% of our jobs are in manufacturing. We're now a mere service economy. We are closer to the Much Greater Depression every day.

Real inflation is now up to 18% as proven by configured M3 figures (which the government refuses to print anymore). See www.shadowstats.com if you want to verify that. Has your salary gone up 18%? Your home? Your private or government pension? Your Social Insecurity? Of course not. Your wealth has to go up 18% a year now just to break even! Let's take a prime example: General Electric (GE) was $28 five years ago.

Estimating 10% real inflation over that time GE stock would have to go up ($31, $34, $37, $41, $45) to $45 just to break even. It is $32 now, so it is DOWN 30% in the last five year. The real purchasing power is down almost a third in only five years.

What can you do? Put every penny you have into silver. If you can't convert your IRA/401k to American silver stocks then dump it. Take the 40% hit, and put the 60% into silver. There is a severe shortage of silver bullion, but you can still buy it at Gaithersburg Coin in Maryland. There has never been a silver shortage in the history of the world until now. Soon we will be completely out of silver, and mine supply (and recycling) will not begin to cover the shortage. Silver will go to $200 an ounce and probably keep going. Gold should merely go to $3,000.

Look for $30 silver by Christmas. In addition to Quaterra, Silverstone, Impact, U.S. Silver, ECU, Fury, Endeavor, and First Majestic, we're going to add Genco today (we don't own this). There are only about 50 real silver mines in the world, and only maybe a dozen are worth buying. You must hold any bullion in your own personal physical possession. You cannot own ETF's, silver certificates, or other paper silver. You cannot let anyone store it for you. If you don't possess it, you don't own it. The $4 correction from $21 to $17 makes this a strong market which is now blue skies all the way to $30. Silver has far, far more potential than gold, and cannot be confiscated.

With Admiral Fallon out of the way, our illegal, immoral, insane, unethical attack on Iran looms closer. McCain and Petraeus won't shut up about the "danger" Iran poses to us. We have already attacked the Iranian banks with FinCEN. The Saudis are preparing for it. The Russians have detected American military buildup on the Iran border. Our war- ships are in the Persian Gulf. We have a record number of troops in Afghanistan. Syria is preparing for an attack by the U.S. CNBC, CNN, and the media constantly beat the Iran-ian war drum. An attack on Iran is going to end in disaster in many, many ways. Go to www.vdare.com and read Paul Craig Roberts about this. No more oil will be just one of the results. Gasoline and diesel are now $10 in Europe, and soon will be $10 here. Can you say "$10 gasoline"? Truckers are already starting to strike to stop federal and state diesel taxes for trucks. They are going to have a nationwide strike as they can't feed their families. American moves by truck. A trucking strike will freeze this country. Suspend-ing all commercial diesel fuel taxes would be good for this country. Support the truckers, unless you want the economy to grind to a halt overnight.

CNBC is the official government disinformation center, and Jim Cramer the Emperor of Disinformation. Watch his show to see what NOT to do. Whatever he tells you to buy, you sell it. Notice that Cramer missed the move in gold from $300 to $1,000, and the move in silver from $5 to $20. He still ignores both gold and silver, while he tells you to invest in the house-of-cards stock market. Do the opposite of anything he says. The DJI to gold ratio used to be 1:1 in 1980, but went to 45:1 in 2000. It is now 13:1 (12,300: $930) and headed back to 1:1.

Have you noticed your local shopping mall is going under? Have you noticed how many empty stores there are in your local strip malls? The Big Three Auto Makers are all broke. The entire banking system is bankrupt. The fifth largest bank in the world, Bear Stearns, is bankrupt. Citibank, Wells Fargo, Lehman, Bank of America are all next. Wachovia, the fourth largest, is about to go under as well. Open your eyes! Nothing like this has happened in almost 80 years since the last depression. You don't need to be a psychic to see the future; just look closely at today. The bailout (at YOUR expense) will just make things worse. The entire world banking system is coming unglued with the DERIVATIVES unraveling. Now the Federal Reserve is going to take over our entire investment system, nationalize the banks, and make Russia look like a free country. After the Federal Reserve was formed in 1913 the dollar has lost 99% of it's value. That's right- the Fed has made the dollar worth a penny in 95 years. Countless major chains are going under every day. The Top 10 Home Builders are completely and totally done in. The budget deficit worsens every day. The national debt gets deeper. The trade deficit worsens. We can't even sell T-Bills and T-Bonds to the fools who were buying them. The U.S. dollar is Monopoly Money. Inflation is destroying the middle class here- the very bedrock of America. We used to have the cheapest most plentiful food supply on earth bar none. No longer. Seen $1.19 lemons lately? Watch beef become unaffordable by the end of the year like in socialistic Europe. Restaurants are going broke. Hotels are going broke. Most everyone is going broke.

The energy crisis is a lie; we have endless energy available now. Global warming is complete scam. Ethanol is a government funded scam- at your expense. Coal, natural gas, and uranium are plentiful, and will last for hundreds of years. The military has enough oil off the coast of Alaska for 100 years. We don't even have any oil refineries now. Oil is useless without refineries. Windmills for power is a joke out of the 18th century. Hydrogen fuel cells are a long, long way off in the future. Hydroelectric is limited. We have no SASOL plants in the U.S. to make endless $4 liquid fuel out of coal. 60% of all our energy is ELECTRIC, and we can generate all we want with coal, natural gas, and uranium.

If you think things are bad now, by Christmas you'll be ready to jump off a bridge. 2009 to 2010 will usher in the Much Greater Depression, and events will unfold so quickly you'll be shocked and blindsided. We'll get Patriot Act II for finances. Banks will be nationalized as all police states do. Food and gasoline will be rationed. You'll think you're in Cuba, only you won't have bananas. There are already worldwide food riots. People around the world cannot cannot even get rice to eat. The housing crash is just beginning, along with the stock market collapse. It's just getting warmed up folks.

Your salary, your house, your pension, your Social Insecurity, the stock market all have to go up 18% just to break even! That's just to break even and not lose. Are they all going up 18% or more? Of course they aren't, and your standard of living is going to hell every day- as is your future. Silver is $18, and will be $30 by the end of the year. Silver is your financial saviour. Silver has almost quadrupled in the last five years. Silver is going to $200 an ounce in the next five years. Silver is a much better investment than gold, and gold is a great investment.

So many major longtime companies and chains are closing stores and going out of business you can't name them all. Sharper Image, Wilson's Leather, Pep Boys, Comp USA, Ethan Allen, Macy's, Levitz, PacSun, Lane Bryant, Talbots, Krispy Kreme, Starbucks, Harley Davidson, 84 Lumber, Home Depot, RentACenter, Rite Aid, Sprint, Disney Store, and Linen'n'Things are just SOME of them. The list gets longer every month.

If you want to read more go to http://www.kitco.com/ and read the Contributed Commentaries.
Go to http://www.butlerresearch.com/ to see what Ted Butler has to say about silver.

Join GATA at http://www.lemetropolecafe.com./You can get a two week free trial and it's $199 a year.

Or you can just read the Econmic Rants twice a month for free. Soon the website http://www.economicrant.com/ will open. Free of course.

Now go out and buy all the silver you can!

Click here for Roger's Past Monthly Rants

Can Gold Hit $2,000?

"Inflation adjusted, going back to 1980 prices, gold today should be over $2,300 an ounce, so making the statement that gold could go to $2,000 is not irrational," Frank Holmes, CEO of U.S. Global Investors told CNBC.

Holmes notes that most commodities have gone through their "inflation-adjusted 1980price levels," with the notable exception of gold. Holmes later discusses the US dollar, financials, stock markets, energy, etc. (click start button twice)

Is the Credit Crunch Over?

The recent stock market & dollar rally, coupled with the massive commodity/metals sell-off, has led many to believe that the Fed & Plunge Protection Team (PPT) were able to sucessfully restore liquid credit markets and the turmoil is now over.


My Thoughts:

Aside from unprecedented/wide-scale PPT market manipulation, and a mere slowing of the credit implosion helped by new Fed lending apparatuses, nothing has been resolved. Homes are still foreclosing in record numbers, legislators are now calling for new regulations to prevent future “similar” banking/credit issues, lending standards are getting tighter, financial institutions still have no market (aside from the Fed monetization window) for their gargantuan off-balance sheet/tier-III toxic waste piles, and American consumers (trying to cope with huge inflation waves, combined with a collapsing wealth-effect brought about by falling home values and lack of available “new” credit) are starting to pull back on discretionary spending. Note: 70% of the US economy is consumer spending

Bottom line: Recent sentiment change created by Financial Wizard market manipulation is all smoke and mirrors – the PPT is trying to re-establish faith and trust in markets (and a currency) that are ready to implode.


What manipulation am I talking about?

Let’s look at the recent precious metals sell-off: Gold and Silver took their worst beating in years during the recent commodities smack-down. How in the world could these metals get crushed so badly when dealers are overwhelmed with orders and can’t get or keep enough products on their shelves?

Must see this link (and pictures below) to understand what I’m talking about: Silver Shortage: 19 dealers reported "Sold Out"

Bullion Direct

Kitco

Additionally, I received this message via email from APMX just yesterday:

Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers’ needs. We have had to disable the APMEX ordering system to allow us ample time to upgrade our site to accommodate the increased demand. We apologize for this temporary problem. In the mean time, we will be accepting telephone orders for the following items only as we have them available:1 ounce Gold American Eagles1 ounce Gold Canadian Maple Leafs1 Ounce Gold Krugerrands100 oz Silver BarsMisc Generic .999 Fine Silver90% Coin SilverDuring this time, we will have a minimum order of $5,000. We regret we have had to make this drastic change to our ordering process and rest assured, we are working expeditiously to correct the problem. As soon as we have our new site up and running, we will notify you via e-mail when you can again place orders online.

Or how about this one:

High Demand for 2008 Silver Maple Leafs: The Royal Canadian Mint has found itself unable to fully meet the unprecedented demand for silver Maple Leaf coins with its current supply, and has temporarily suspended shipments. This situation is temporary until more of this fine bullion product can be struck and shipped. Because many of our customers want to purchase this product at today's prices, Northwest Territorial Mint will accept orders now for shipment when the product becomes available, which we expect will exceed 30 days. If the wait for product proves too lengthy, we reserve the right to substitute a similar silver product.

OK, if there is such a supply shortage, why did PM prices crash this last week?

It was a PPT manipulated paper smack-down (through engineered margin call selling of futures, options, etc – to fry the longs, destroy prices and signal an end to the commodity boom) that has changed none of the underlying precious metals supply/demand/inflation-hedge/flight-to safety fundamentals.

But it did provide a great buying opportunity – could be a very good time to back up the truck and load up w/physical…

Take a look at who is taking advantage of this smack-down:

Asia jewellers on buying spree as price sinks-- It probably won’t be too long before PM prices regain their footing..

Jewellers across Asia rushed to buy gold on Thursday after prices tumbled more than $100 an ounce since spiking to a record above $1,000 an ounce this week, pushing up premiums in key bullion trading centres. Gold fell more than 2 percent to hit a 1-month low of $920.30 an ounce as funds sold bullion after pushing up the price to a lifetime high of $1,030.80 on Monday.


Superb comment from a reader at a PM blog I routinely visit -- summarizes the situation perfectly: Somebody took advantage of a short trading week to slam PMs - on options expiration week (saving the shorts' shorts!) - and by the same token make a "double-top" appear out of the blue - to signal "an end to the commodities bull" and "an end to the bearish dollar" - based on NO REAL PHYSICAL TRADING - just "PAPER"...

With our manipulation discussion out of the way, what about the credit crisis being resolved?

Bloomberg Today:

Goldman, Lehman Rating Outlook Cut to Negative by S&P (Update3)

March 21 (Bloomberg) -- Goldman Sachs Group Inc., the biggest U.S. securities firm, and smaller rival Lehman Brothers Holdings Inc. had their credit-rating outlook cut to negative by Standard & Poor's, which said Wall Street banks' profits may fall as much as 30 percent in the coming year.

``Our current expectation is that net revenue could decline'' at least 20 percent for independent securities firms, S&P said in a statement today.

Or this one:

Big U.S. finance company faces credit crisis, and shares fall

The crisis in the credit markets is threatening to engulf one of the largest commercial finance companies in the United States.

The CIT Group, a century-old company that lends money to small businesses and midsize corporations, drew on $7.3 billion of emergency bank credit lines on Thursday, causing its shares and bonds to plummet.

CIT, whose businesses range from making student loans to financing purchases of airplanes and railroad cars, announced that it would try to sell some assets or businesses to raise cash and repay its debts. Analysts said the tightening credit squeeze could drive the entire company into the arms of a bidder.

The developments at CIT suggest that the credit troubles that felled Bear Stearns this week continue to spread, despite efforts by the Federal Reserve to encourage banks to lend to other financial companies.

Another:

Credit crisis puts vise grip on leveraged companies

There are 93 US companies at risk of defaulting on $53 billion in debts, a new report shows, marking a 50 percent jump since last June, when the credit crisis started. Many of these debt-laden companies were involved in giant leveraged buyouts.

Standard & Poor’s ‘‘weakest links’’ report is forecasting that 75 US companies will default on their debts in the next 12 months. Of the 93 companies at risk, more than half were involved in takeovers by big-name private equity firms, including Boston’s Thomas H. Lee Partners, Bain Capital, and J.W. Childs Associates.

The sectors worst hit are media and entertainment, and consumer and retail. Many of the names are familiar to consumers, like Uno Restaurant Holdings Corp., the Boston-based pizza restaurant group; Linens ‘n Things Inc., the home goods chain; and Univision Communications Inc., the Spanish-language television and radio company.

‘‘This is just the beginning,’’ said Diane Vazza, managing director and head of Global Fixed Income Research at Standard and Poor’s in New York. For companies struggling with debt payments, she said, ‘‘There’s no way in a slowing economy, potentially a recessionary economy, to grow out of that.’’

I could go on with additional links to illustrate the depths of this credit crisis, but I think you get the point—the recent smoke and mirrors caused by PPT market manipulation has solved nothing. Our banking system is still insolvent and the fed is pumping money into a bottomless pit.

BOTTOM LINE: A one or two day turn around for stocks and commodities means little.

NOTHING, absolutely nothing regarding underlying fundamentals has changed from last week, except the titanic has taken on a bit more water, and the captain is desperately trying to reassure us by saying -- "it's only a small leak and lifeboats (PM's) won't be needed."

Go ahead and trust the captain -- but at your own peril...

OK, my doom and gloom is out of the way -- how about some closing funnies?

Regards and happy easter to all!

Randy

Tumultuous Week Ahead

I imagine the Plunge Protection Team (PPT member pictures below) put in quite a bit of overtime this weekend -- in an attempt to repair the damage caused by Bear Stearns, before the contagion spreads throughout the financial world and causes irreversible damage.

Treasury Secretary Paulson (Chairman of the PPT)

Ben Bernanke (Chairman of the Board, Federal Reserve System)

Christopher Cox (Chairman of the Securities and Exchange Commission)

Walter Lukken (Chairman of the Commodity Futures Trading Commission)

Well today, Secretary Paulson let it be known to the world that they are worried, and stated they will stop at nothing to calm the markets:

Treasury Secretary Paulson Says Administration Will Act to Calm Chaotic Economy

WASHINGTON (AP) -- The Bush administration will "do what its takes" to stabilize chaotic markets and minimize the economic damage, Treasury Secretary Henry Paulson said Sunday after a tumultuous week capped by the government rescue of a teetering investment bank.

All eyes now are on Wall Street as leading financial advisers prepared for a Monday meeting with President Bush and the Federal Reserve weighs another deep interest rate cut Tuesday to stem even more deterioration.

The treasury chief sidestepped questions about what would have happened if the Fed had not ridden to the rescue, whether other firms are on shaky ground and the possibility of additional bailouts similar to Bear Stearns'.

At the same time, however, Paulson sought to send a calming message that the administration is on top of the turbulent situation. "The government is prepared to do what it takes to maintain the stability of our financial system," he said. "That's our priority


As if the Bear Stearns problem wasn't enough to deal with this weekend, it now looks as if Goldman Sachs will report huge write-downs early next week.

As the former chairman and chief executive of Goldman Sachs, I imagine the PPT leader (Secretary Paulson) is monitoring the situation very closely…

Goldman Sachs to reveal $3bn hit

Goldman Sachs, Wall Street's most powerful investment bank, will this week announce asset writedowns worth about $3bn (£1.5bn), its biggest jolt to date from the crisis threatening to engulf the world's financial markets.

Goldman, which has largely thrived amid the turmoil elsewhere on Wall Street, is expected to report a fall in first-quarter earnings of about 50 per cent. The write-down will underline how the financial turbulence is now affecting even the most stellar performers.


With this said, I believe we will likely see Wall Street take an “E-Ticket” ride next week – potentially one of the wildest rides ever.

You see, the indexes are so incredibly close to extreme downside support levels that the PPT will fight tooth and nail to prevent a break below support.

If we do happen to fall below key support—automated sell signals will kick in from around the Globe—potentially creating a selling panic/free-fall. Example: Next downside support on the DOW is 11,630 (S&P and Nasdaq look very similar)

With that said, aside from the downside pressure caused by mounting credit problems and looming (additional) write-downs, we can also expect to see numerous Economic reports released next week (I expect very few to be positive) :

Monday
- NY Empire State Index
- Net Foreign Purchases
- Industrial Production
- Capacity Utilization

Tuesday
- Housing Starts
- Building Permits
- PPI
- Core PPI
- FOMC Policy Statement (likely to see a 100bp cut)

Wednesday
- Crude Inventories

Thursday
- Initial Jobless Claims
- Leading Indicators
- Philadelphia Fed


Additionally, it was only a mere 6 months ago that Congress approved a debt ceiling increase for our country (increased ceiling from $9T to $9.8T).

Well, with only $400B to go (see debt clock below) and plenty of bailouts/monetization schemes ahead, it now looks like our inept congressional leaders are once again looking to raise the allowable debt limit.

The Gross National Debt

If passed, this new $10.2 Trillion cap should hold us to ~ Jan 09, but what then?

Why don’t we just raise it to $100 Trillion and be done with it for a few years? Are they scared they might send the wrong signal in doing so?

Come-on, they aren’t fooling anyone… The hole is already far too deep and there are only 2 ways out of this mess: #1) Default or #2) Hyperinflation… I think we all know which route was selected...

House seeks debt limit increase to $10.2 trillion

WASHINGTON (Reuters) - The government's debt limit would be raised to $10.2 trillion under a budget plan for next year approved by the U.S. House of Representatives.

The House's fiscal 2009 budget, which passed on Thursday, would increase U.S. borrowing authority by $385 billion from the current limit of $9.815 trillion, according to the House Budget Committee

Congress last approved an increase in Washington's borrowing authority last September, increasing the credit limit by $850 billion.

Some lawmakers recently have estimated that the Treasury Department could bump up against the current $9.815 trillion limit either shortly after November presidential and congressional elections or early next year, depending on revenues and economic performance.

Lastly, allow me to share with you some snippets from a fantastic Christopher Laird article (from http://www.prudentsquirrel.com/), as Mr. Laird understands the current situation far better than most.

Gold Says That Central Banks Fail To Stop World Deleveraging

Right now, we are looking at the precipice of a total world financial collapse. When the stock markets finally let go, people will wake up to the reality of world financial bankruptcy. Millions of people will lose much of their retirement savings, in a super world stock crash, and you will again see stories about people refusing to open their 401k statements because they don’t want to see how far down they are. That’s what happened right after the Tech crash. Well, think of that episode as merely a taste of what is to come.

I am not exaggerating. To date, the US and EU central banks have put up an astounding $2.5 trillion worth of money to their respective banks and bond markets. They are doing this to prevent a total banking collapse. So far, they are barely staving off a massive wave of bank failures world wide, but particularly in the US and the EU region.

Unfortunately, the ones really on the hook for all this coming market collapse will be the big retirement funds, as they are the ones invested in all these bubbly world asset and financial markets. That shoe will drop.

Bond and securitized debt chaos

We are not going to detail the many stories about how the bond and credit markets are collapsing. But, suffice it to say that many huge credit markets are literally frozen. Whether it’s the mortgage derivative securities, a $3 trillion plus market, or the US GSE markets, something like $ 7 trillion in size (this is Fannie and Freddie and such), or municipal bond markets, $10 or more trillion, and if you can believe this, or even the US treasury secondary market (already existing US T bonds that are sold between investors), these credit markets are freezing up in a big way.

Securitized debt markets new

Just to make a comment on this, the securitized debt market is fairly new. This is where large investors bought big packages of mortgages, or whatever kind of debt you can imagine like credit cards or student loans, that were securitized and sold off. There are many types of these, like CDOs, MBS, SIVs, etc. (CDO – Collateralized Debt Obligations, MBS – Mortgage Backed Securities, SIVs – Structured Investment Vehicles).

This type of lending became a standard in the last ten years, and has effectively absorbed the entire world lending market for everything from corporate bonds to municipal bonds to credit cards to mortgages.

Being a new and very complicated market, and utterly gigantic, the treasuries and central banks have stated that they don’t understand them well enough to try and solve all the problems. The Fed, the ECB, and the BIS have all commented that they don’t understand this new securitized world debt market that has taken over all credit worldwide. This is not a good thing – to put it mildly.

What I am trying to say is that this entire new, huge, world credit apparatus is now imploding.

Gold says central banks are failing this time

Gold has risen in tandem with the credit crisis because the central banks are falling behind the world credit deleveraging since August. If the gold markets felt that the central banks had a handle on the credit crisis and world financial meltdown, ie that cutting rates would work to stop financial deleveraging and economic contraction, then gold would not rise as much.

This time, gold is clearly giving a verdict that Central Banks are failing to reflate a massive world deleveraging, that markets are going to unwind no matter what the CBs attempt to do.
If central banks fail to reflate credit and financial markets, then the only alternative for world governments is big deficits. More programs to bail out banks, more central bank $ trillions to try to stem the losses...Effectively, more debasement of world currencies.

If central banks could succeed in stopping the world deleveraging, and stop the massive financial hemorrhaging on every consumer’s balance sheet, every financial institution’s balance sheets, then gold would not rise as much as it has. If gold expected things to normalize, and gold expected that central banks could escape outright monetization of problem markets this time, gold would not be rising as much as it is now. Gold is up 50% since August, when the credit crisis and world deleveraging began.

Clearly, gold has decided that central banks have lost control of the situation, and the only alternative is more interest rate cuts, which makes borrowing cheaper and is economically stimulative, but lowers the value of currencies. On top of interest rate cuts, central banks are now doing outright bailouts, which also devalue currencies. Outright bailouts are monetization.

World economy credit driven

The trouble is, none of these central bank efforts seem to be working. New big credit markets are freezing up each week. The already frozen ones are not recovering either. Given the fact that our world economy is primarily credit driven, what do you think that means for the next several years for the world economy? I’ll let you answer that yourself.

What is happening in general is that financial and asset markets are deleveraging. The general world economic situation can be regarded this way, as deleveraging, and it won’t be a bad oversimplification. All this borrowing that went into bidding up world financial and asset markets is now going to be unwound. I read a banker’s comment around September that ‘The credit unwinding will not be denied.’

That appears to be exactly what is happening.

USD, Yen, Euro, gold

If you agree with this, then what is the prognosis going forward for the Yen, Euro, and USD? And thusly for gold?

In a nutshell, the central banks will attempt to stop the deleveraging. They have failed so far, and will continue to fail. As the economic contraction worldwide gets more and more painful, they will make more big efforts to stop the deleveraging that ‘will not be denied.’

At some point, I expect one of the central banks among the ECB or BOJ to give up on the reflation efforts (to counteract the deleveraging.) At some point, they will realize that the efforts to stop the deleveraging is futile, and only adding to public debt, and just making things worse.
At that point, everything just finishes unwinding rapidly. It will be very very scary for everyone and every country. The implications are really rather staggering.

Which is why the central banks are fighting this deleveraging as hard as they are now. In fact, the Fed would have cut interest rates faster, but they risk cutting the ground from the USD. Their hands are tied to a significant degree.

The ECB will be forced to cut this year, otherwise the Euro continues its painful strengthening. The Fed has basically no choice but to continue cutting. The alternative would be collapsing stock markets. That will likely happen anyway.

Maxed out this time

Basically, the only solution to massive unwinding of credit, theoretically, is to get borrowing and economic activity to start growing again. That way, world consumers would then start buying everything and, if the economies recover, then the present leverage out now can be carried forward.

But that is not happening, is it?

Why is it not happening? Why are lower interest rates failing to restart things? Because, this time, unlike 2001, people cannot borrow any more. They have already borrowed all they can. This time, cutting interest rates will not work to revive economies. The only other option is government spending, and or using currencies to stimulate things. Using currencies to keep things going will fail because the deleveraging worldwide is way too vast.

If cutting interest rates will not work to revive economies this time, then the deleveraging will continue relentlessly. It is that simple.

And, why are the bond markets freezing, and such? Because lenders of all types, who bought all the securitized debt, now realize that the present levels of debt in every sector, public and private, cannot be kept up. So, then, why do new lending? Everybody is maxed out. The reason for the collapse of the credit markets is also that simple.

The only thing standing in the way of a total world financial collapse right now is all this massive emergency lending by central banks to financial institutions. That means that, when enough big investors realize there will be no economic recovery from cutting interest rates this time, the stock markets will finally collapse big. I expect this to happen sometime this year, election or no election. The problems are just too big.

For the full article, please click link: Gold Says That Central Banks Fail To Stop World Deleveraging


Bottom Line: Things are going to get much worse before they get better and this upcoming week could be the beginning of “the much worse to come”…

As I pen this message, World markets are starting to open with downward pressure (due to ongoing credit turmoil), while the dollar continues its slide into the abyss. Meanwhile, Gold/Silver are up almost ~ 1%.

Hold on to your hats!

Randy

Two out of Three (thus far this week) aint bad

Last Sunday (in previous post) I made three predictions for the week ahead.

1) I stated we would probably see Silver break the $20 mark

2) I predicted Gold would likely break the $1,000 mark

3) I felt strongly that Equities would fall below Key Support levels

Well, thus far (I still have 1 day to go) I'm two for three:

Silver Broke $20 the very next day after my post:

Gold is still flirting w/the $1K mark. Lets see what tomorrow brings

DOW has fallen through key downside support (support was 12,060); next downside support at 11,630 -- then the bottom falls out

S&P broke below key downside support (was 1,316);

next downside support at 1,270 -- then the bottom falls out

Two bonus charts follow -- for shits and grins, as they both follow nicely with my long-term dollar sacrificing/hyper-inflationary scenario:

US Dollar Index has fallen off a cliff --Lowest EVER

Oil is reaching for the sky! -- Highest EVER!!

Regards

Randy

Monetizing Debts & Buying Assets to Prevent a Depression

I was pretty shocked to see this article get released from Reuters. It suggests that the Fed may end up having to resort to buying up assets, stocks etc to prevent a Depression. I would have to concur, as the banking/financial crisis seems to be getting worse. I expect however, we will probably see a FFR below 1% before this actually kicks into high gear.

Depression risk might force U.S. to buy assets:

NEW YORK (Reuters) - Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.

That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.

In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.

"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.

"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.

Legal changes would be needed to give the Federal Reserve and the U.S. government the authority to buy stocks. Currently the Federal Reserve can buy only debt issued by the Treasury, as well as U.S. agency debentures and mortgage-backed securities.

While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.

The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said.

Then, investors were very optimistic about new technologies, and stocks rose against a backdrop of low inflation, and a trend toward globalization. There was even an equivalent of the modern day subprime mortgage debt meltdown in the form of U.S. loans to Latin American countries which had to be written off.

"The big difference is the attitude of central banks and specifically the attitude of the Fed," Connolly said.

Some economists have blamed the U.S. economy's travails in the 1930s on the Federal Reserve's hesitation to inject reserves into the banking system.

However, today's Fed has tried to preempt the danger of a protracted economic slump and has responded swiftly to a credit crunch in the past year and gathering signs of deterioration in the economy, Connolly said.

The Fed has stepped up its temporary additions of reserves to the banking system, and swiftly slashed its benchmark fed funds target rate to 3.0 percent from 5.25 percent in September. Analysts expect at least another 0.5 percentage point cut in next month.

At the same time, "the fed funds rate can't stay significantly above the 2-year note yield," Connolly said.

On Tuesday, the 2-year Treasury note yield was at 2.00 percent, not far above the lowest level since 2004.

The Fed "almost certainly" has to cut the funds rate to 2.0 percent by the end of this monetary easing cycle, he said. If conditions in the banking sector worsen, the Fed could cut the funds rate to 1.0 percent, a low last seen in June 2004.

Global banks have already written down more than $100 billion of bad debts associated with the U.S. subprime mortgage debt meltdown and housing.

However, Fed rate cuts alone are unlikely to avert a prolonged period of economic weakness because the danger still exists that a burdened banking sector will choke off credit to consumers and households.

"The Fed probably can't fix it all on its own now," Connolly said. "There is a chance the Fed gets forced into unconventional cooperation with government," which could involve buying a range of assets to reflate their value.

That would be reminiscent of some steps the U.S. government took in the 1930s when the economy was mired in deflation and high unemployment.

One turning point came when agricultural prices were restored to their pre-slump levels, Connolly said. Such measures were among the New Deal programs that President Franklin D. Roosevelt launched to bolster the economy.

Either way, investors face bleak prospects now without some kind of further government intervention, he said.

Those steps might offer clues to investors in stocks and commodities, which Connolly expects the government might be ultimately force to step in and buy to stabilize markets. He expects that a depression may be averted, but only by the state and the Fed reinflating the price of such assets.

Beleaguered housing, non-government fixed-income securities and even the now overvalued Treasury market have little hope of generating substantial returns for investors over the next few years, he said.

"If we don't avoid depression, the only thing worth holding is cash," he added.

Additionally, Christopher Laird (from the Prudent Squirrel) is saying much of the same in his new article: The Other Option, Crossing The Rubicon .

With US target rates cut from 5.25% vs 3% now, both consumer and corporate credit have not eased. It is said the US Fed needs to cut to the 2 year bond rate to have any chance of loosening US credit markets - which would be around 2%. The Fed is still behind the curve.

In fact, looking at credit markets now, it looks as if the Fed is not only behind the curve, but has let the train get completely away from them. If they have any hope of catching it, they need a target rate of 2% now. But inflation is still a concern, and that is not going to happen in time.

The other option, Crossing the Rubicon

A while ago I wrote a piece that, if markets got bad enough, central banks could be faced with having to monetize all the bad assets accumulating on financial institutions books. That would be the only way to get banks lending again, and to put a floor on markets.

If CBs saw that interest cuts failed to restart US consumer spending, they would then be faced with the option of actually buying everything in sight to support financial markets. This is monetization of markets. (Monetization is where central banks merely buy everything in sight where the losses are and hold it on their own balance sheets. Presently, central banks are doing what are called REPOs, repurchase agreements, which are short term CB purchases of assets that are supposed to be bought back and the money repaid by the seller. This is short term central bank purchasing of assets, but is not actual monetization, as the assets are only held for a month or so. Monetization would be just wholesale purchases and holding of troubled assets, and no Repo agreement.)

Gold here

With Central banks lowering interest rates, and more to come, gold is rising in all major currencies. This will continue in 08, sans some major world stock crash. But, if central banks actually do the other option, monetization of troubled assets and markets, and cross the Rubicon, then gold will go right out of sight. Even a hint of any serious monetization would drive gold rapidly to $2000.

If we merely have interest rate cuts, gold will get easily over $1000 in 08, probably in a month or two. If there is any significant monetization by Central Banks (perhaps just buying outright all the troubled assets on banks books, right now about $2trilllion worth and counting) gold goes to over $2000 in a few months time.

Monetization is the central bank's Rubicon. They are thinking of crossing it. We are at a decisive point in gold's price action in 08.