Jun 1, 2012

How to Get Ready for the Next Leg of the Gold Rally

The long-term bull market in gold is now 11 years old – and, in spite of recent market stagnation, the latest phase of the rally appears to have just started.

My advice is simple: Prepare yourself. It still has a long way to go.

In the wake of very disappointing news on the U.S. labor market, the gold price today soared above $1,600 an ounce.

The long term bull-run in this yellow precious metal has been slow and steady. After Gordon Brown finished selling 60% of the U.K.’s gold reserves in 2002 at an average price of $275 an ounce, the market has never looked back.

Yet, until this morning, the price of gold has been basically unchanged since last year. Gold closed out 2011 at $1,566.80 an ounce. But at last glace today, thanks to the fact that the U.S. economy added only 69,000 jobs in May, far fewer than expected, the yellow metal had surged almost $60 to $1,621.77.

The gold price may even make another dip – but it will not remain at these levels for long.

Debt woes in Europe have prompted a sell-off across a broad spectrum of financial assets and commodities. A weak U.S. economy has added fuel to the fire and a weak Chinese economy has further eroded market confidence.

These days, the market perceives the only safe haven investments to be the greenback and the U.S. bond market.

The market is wrong. The only safe haven is the ultimate reserve currency – gold. And today’s lackluster employment figures prove it.

The Fundamentals Tell the Real Gold Story

A $16 trillion U.S. deficit and artificially low interest rates here and in Europe have created the perfect environment for gold.

Fiat currencies are now worth less than ever before in history. The U.S. dollar is simply the best of the worst, and that’s why it’s catching a bid.

The fact of the matter is that the U.S and Europe cannot allow interest rates to go higher. Higher interest rates mean it will cost more for governments to finance their unprecedented levels of debt. If interest rates were to move higher, the deficits would swell. The compound impact of interest would cause both governmental and individual turmoil. And governments will not allow that to happen, particularly in an election year.

However, low interest rates are the gold market’s best friend, and they’re here to stay for the time being. The higher dollar has caused gold prices to slip to the bottom of its trading range, but it will not stay there for long.

Central banks are continuing to buy gold in 2012. They purchased more than 450 tons in 2011, and they will buy at least 400 tons this year. According to the International Monetary Fund, the Philippines raised its gold holdings by more than one million ounces in March alone. Mexico, a large buyer last year, bought more gold in April. Turkey, Kazakhstan, Ukraine and Sri Lanka have also been buyers this year

Technically, Gold is a Screaming Buy

So far over the past 12 months, gold has traded up to $1,920.70 and down to $1,523.90. Since September 2011, gold has hit its support level on three occasions.

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In technical-speak, this weekly gold chart shows a strong triple-bottom formation. When a triple bottom occurs, technicians generally expect a break above resistance. In the case of gold, this would mean a new high and a move to $2,000 an ounce.

The monthly chart is indicating that the current price correction in gold looks a lot like the correction that occurred in 2008. The chart pattern looks eerily similar.

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One of the most bullish signals for the gold market is that the non-believers have been coming out of the woodwork lately. For example, Warren Buffet and his sidekick Charlie Munger both spouted anti-gold sentiment during Berkshire Hathaway’s recent annual meeting.

Munger went as far as saying that an investment in gold is “uncivilized.”

But they aren’t the only bears out there. Whenever the gold market has dipped over the past decade, the bearish commentary spews forth. And the more bearish these pundits get, the higher the market climbs. Even the believers have been getting nervous lately. Open interest (the total number of long and short positions) in gold futures traded on the CME has dropped by more than 16% in the past year. This means that weaker longs have liquidated their positions.

The Perfect Time to Buy

Government deficits in the U.S. and Europe keep growing. Interest rates are making record lows in the U.S. A continued sluggish economy may even cause the Federal Reserve to introduce another round of quantitative easing, just to keep things chugging along.

We are currently in the midst of a U.S. Presidential election, which promises to center on future economic and fiscal policy. Regardless of which candidate wins in November, the $16 trillion debt will be a noose around the president’s neck.

The current administration has conducted policies that have addicted many Americans to entitlements. Without entitlement reform and reducing the size of government, it will be impossible to lower the debt without raising taxes dramatically. Raising taxes will slow the economy down even further.

While the greenback rallies, remember that is not rallying on U.S. strength – but rather on weakness elsewhere. Even the world’s central banks doubt the viability of paper currency and continue to buy gold on dips. And so should you.

Now is the perfect time to buy, whether you’re new to gold or are already a holder of the ultimate reserve currency.

I have no doubt that 2012 will be another up year for the gold market. I maintain that gold will trade above $2,000 an ounce by the end of this year.

Your eyes and ears in the commodities market…

Andy Hecht

P.S. No matter what people may try to tell you, gold and other precious metals will always have value as real, hard currency. A little over twenty years ago, everyone was saying that silver was done for. I knew they were wrong, and I could see that silver was in prime position to rise higher than ever before. When silver’s wild ride came to a stop, it was up over 800%. Today, I see another commodity in the same place that silver was all those years ago. To find out where I see this commodity heading – and how you can profit from it – click here for my latest video.
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Webster Tarpley: NATO’s death squads responsible for Houla massacre

From PressTV, May 30, 2012:

A prominent political analyst says that NATO-backed armed gangs have been behind the recent killing of civilians in the Syrian town of Houla.

Press TV has conducted an interview with Dr. Webster Tarpley to further discuss the issue.

What follows is a rough transcript of the interview.

Press TV: Dr. Tarpley, the statements coming from the Western sources of the Houla massacre seem to be a mix of realities and speculations. I mean, we have the UN human rights office saying that during the massacre the government was shelling the neighborhood.

I mean, how could the military have been shelling the place if it had its own forces on the ground there?

Tarpley: I think you will find that the Western accounts are coherent with a major NATO war provocation. All honest observers know that the fundamental problem in Syria is the presence of NATO death squads that have been brought in, in large numbers, armed, fomented by the NATO states and this is now taking on a certain momentum of its own.

This is not the first time that the NATO people have tried to get a large scale massacre that they could try to inflame public opinion with.

However, I would say three on the ground eyewitness reports that I verified myself. First one comes from Fides; Fides is an Italian-Roman Catholic missionary News Service and they point to the fact that what the reality of the Houla massacre is that these fighters, right extremists, al-Qaeda or Salafi, whatever they were; came in and started targeting the Armenian Christians and the roman Catholics, the Franciscans and some others. This is one package.

Then we have a Belgian website with an author called Vox Clamantis which describes, in detail, how it was done that the hospital in Houla was burned down and the people that had been taking refuge in it were systematically massacred from up-close by the death squads not by the government.

Then, we have the Russian journalist operating in Syria, Anhar Kochneva. You can look at some of the work that she has put on the Internet where you have actual eyewitnesses speaking in Arabic and it is translated into Russian but there is also a text which you can translate into English if you want to or some other languages, which simulates the same thing.

They say that they are being oppressed by these death squads in effect and that they are angry with Kofi Annan and with Qatar for enabling this.

So if you put it all together.., there is yet a further element which is that there has been an attempt, it is gruesome and it is macabre, but to procure cadavers.

The NATO side, the death squads they sponsor have been attempting to build up a stock of cadavers that they could then use in this way.

The model for this of course is what Himmler, Heydrich and Gerbils did at the Gleiwitz video station in Germany on the Polish border to provoke war with Poland in August-September 1939.

This is exactly the same method that is now being used by NATO in Syria.

Press TV: With that said, who would benefit from killing women and innocent children in Syria?

Tarpley: Well, the goal of this is to build up war hysteria in world public opinion and this has succeeded to some extent because of the controlled, brainwashing Western media, the kinds of stories that have been put out are all one-sided, all quite fantastic.

Then, it goes together with the idea of course that now at least 12 NATO countries and others have kicked out the Syrian diplomatic representatives. So there is an attempt to build up a certain momentum.

The Russian delegation going into the UN meeting on Sunday afternoon was already skeptical that you could not, somehow the NATO’s story does not add up. In other words, it cannot be artillery and tanks, on the one hand and everybody killed from up close, on the other.

That contradiction was obvious from the very beginning and obviously we need Russia to hang tough to remain strong on this and not to cave in under this immense pressure.

But the idea is either regime change immediately or war and then regime change. And as that Gleiwitz-Polish example suggests, this is the kind of thing that gets you on your way to a war.

The way the war could come is quite obvious. We now have operation Eager Lion 2012. We have got 12,000 troops from 17 countries in Jordan, mainly US, Jordanian and some other NATO.

This drill could immediately go live. It could immediately cross the Syrian borders, so to speak, and start a war since the elements, the spearhead of such a war has already been assembled on the territory of Jordan.

So we are literally on the brink of a very large regional war.

Press TV: Turkey has hosted a group of opposition groups ahead of an expected resignation of Burhan Ghalioun, the head of the so-called Syrian National Council.

I mean, what do you think was the aim and achievement of this meeting?

Tarpley: Well, Turkey, up to now, has not taken the plunge. The pressure coming from NATO on Turkey of course is that they have got to launch an attack.

That would be national suicide for Turkey because it would guarantee an uprising of the Kurds and this would tear apart the post-Ataturk Turkish state.

So that would be a very, very bad choice but we are constantly getting reports that Erdogan is looking at invoking NATO article four. There is no basis for this and of course the so-called Syrian National Council is a gaggle of adventurers; it is a gaggle of profiteers and rent seekers and adventurers who are trying to get money from various Western countries so that they can continue to live the high life in these hotels.

And the fact that just after 51 percent of the Syrian people voted for an actual election, which was open, it was not a one-party election at all, a couple of weeks after that election being successful, the Syrian National Council fell apart just about completely with this guy, Ghalioun, resigning. I think that says a lot.

NATO is politically defeated but their only answer to that is that they tried to escalate it militarily and for that they have got to use these provocations which again are just a kind of thing that we saw coming from the Nazis on the verge of World War II.

MY/VG/MSK/JR
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Mike Shedlock on the Spexit, the Grexit and Running for the Eurozone Exit

From CapitalAccount, May 31, 2012:

Welcome to Capital Account. A slew of bad news out of Europe, as Irish voters today attempt to exercise their sovereignty and cast their ballots in a referendum on Europe's fiscal consolidation treaty. Meanwhile, European central banker Mario Draghi made it clear he's fed up with national sovereignty. The ECB says europe needs new tools to fight bank runs and Draghi says the lesson from Spain's Bankia was that the supervision of eurozone banks should rest with a central authority, not national regulators. Isn't that what we have in the US now with the Federal Reserve? How's that working out?

And speaking of Spain, will we see a SPEXIT before a GREXIT? Mike Mish Shedlock is here to talk about why that could be the case. Mish says that the sooner Spain sees the light and gets out of the Euro that is strangling it, the better off Spain will be. The same goes for Greece, and possibly a slew of other nations in the Eurozone.

And last but not least, back in the US, GDP was revised downwards from 2.2 to 1.9 percent. At the same time, borrowing costs for the United States are at 60-year lows for the 10-year government bond. So what gives? Are the Hyperinflationists right, or is the market proving the Deflationists' argument? Meanwhile, the Obama administration's attempt to build an industry of battery-makers for electric cars is sputtering. Subsidized firms are struggling; they don't have many customers. They are operating way below capacity. This is according to the Wall Street Journal. So what was the problem? Government grants were linked to production calendars and not to market demand. So is this a great example of what happens when government picks winners and losers? Or is there a role for Uncle Sam in alternative energy?