As a “generational perfect storm” brews on the horizon for gold & gold stocks, the HUI Gold Bugs Index is basing within a rather defined trading range.
After doubling off the October and November lows, the HUI gold stock index has now found support at earlier resistance levels near HUI 248, and resistance from consistent profit taking (and suppression) at the HUI 320-330 level.
Gold stocks have found strong hands and buying support on every pullback into the HUI 248-260ish range. And given the “monetization bomb” dropped by Ben Bernanke last week, that support should only strengthen.
HUI Gold Bugs Index Trading Range
Fundamentally, the HUI Gold Stock Index remains significantly under-valued to the price of Gold. And while this is a chart focusing on the “fundamental” valuation gap between gold stocks and the price of gold… don’t make the mistake of ignoring it as a lead indicator for the next major move up in gold stocks.
Presently there is strong resistance at the .35 ratio of the HUI Index to the price of gold. Once the HUI pierces the .40 line, gold stocks should explode.
5 Year Chart Of Gold Stocks vs. Gold Valuation Ratios
As I mentioned in earlier posts, gold is presently trading primarily as money. As the last bastion of sound money in a world of unsound central banking.
You will notice on the chart below that gold peaked against global currencies in late February, and while still trending positively against the U.S. Dollar… of late, it has pulled back against the Euro, the Pound, Yen, and the Swissie.
To time the next major breakout move for gold, simply watch for gold to break upward against these currencies. It should be soon…
Gold The Last Currency Now Standing
Competing safe haven currencies for gold have traditionally been the Swiss Franc and the Japanese Yen.
But, not any longer…
With Japanese exporters being crushed by the strength of the Yen, and the NIKKEI Index collapsing to new lows, the Bank of Japan has now joined the rest of the world in a competitive devaluation of the currency to prop up exports.
And on March 18th, the Bank of Japan announced it will monetize 1.8-trillion yen of government bonds each month, which will monetize 2/3rds of Japan’s budget deficit.
Historically, Switzerland has been a refuge of both secrecy and sound banking. But, not any longer. The Swiss have lifted the veil of banking secrecy, bending to US and International pressure, and they have also joined the rest of the world in slashing interest rates, and engaging in quantitative easing.
On Thursday March 12th, the Swiss Central Bank made the following announcement.
“Under the present circumstances, this represents an inappropriate tightening of monetary conditions,” the SNB said in its statement. “In view of this development, the SNB has decided to purchase foreign currency on the foreign-exchange market, to prevent any further appreciation of the Swiss franc against the euro.”
Additionally, the Swiss announced they will engage in quantitative easing by purchasing corporate bonds on the open market.
And now Gold stands alone as sound money, just as the G-20 prepares to unleash the “Global New Deal.”
So why haven’t gold and gold stocks exploded to new highs?
The first reason, is one I have not seen discussed anywhere else…
It has to do with the real reason Lehman Brothers was allowed to fail.
Lehman Brothers London office was the favored lender of US hedge funds, as far greater leverage was offered to hedge fund clients via the London offices of US Investment banks, that stateside.
It’s not a coincidence that ground zero of AIG’s collapse was it’s London derivatives trading office.
Billions were made by “insiders” shorting the market collapse and the forced liquidation of hyper-leveraged hedge funds in September through December.
Those same “insiders” control the gold market via massive derivatives positions as shown below:
Those same “insiders” were the one’s Rick Santelli referenced in the video below, as hundreds of thousand of options were purchased in the 10 Year Terasury Bond, just hours prior to Ben Bernanke’s announcement that the Fed would be buying 2 to 10 year bonds.
Go to the 6:45 minute mark on this video and listen to what Rick Santelli says…(and watch his body language).
http://www.cnbc.com/id/15840232?video=1065724474&play=1
What the “insiders” accomplished via collapsing Lehman Brothers, (besides making hundreds of millions on the short-side) was to eliminate billions of dollars formerly invested in gold, silver, oil, and infrastructure & commodity stocks.
…areas the “insiders” are now manipulating and accumulating.
One of the main reasons that gold & gold stocks have not risen to new highs, is quite simply… there is not as much money left on the bullish side to offset blatant “insider” suppression, and manipulation.
While suppression and manipulation to control gold prices is certainly not news to any card carrying gold bug, the transition from price suppression, to accumulation is.
…and that is what we are now witnessing.
The game has changed.
Manipulation and suppression are now being used to facilitate accumulation, as the world is about to enter an unprecedented and historic, globally coordinated reflation, via quantitative easing and the flooding of the international banking system with fiat.
Given the massive reduction in capital available to hedge funds, gold and gold stocks will be much easier to manipulate than ever before.
Traders need to anticipate naked shorting of the paper gold markets, and should trade paper, to accumulate physical.
The game has changed, and the “insiders” are playing rougher than ever before. Use gap up’s to take profits, and use those blatant smackdown days, like we saw the morning of Bernanke’s announcement that the Fed would monetize the debt, to buy into those gap down - shakeout openings.
This is an environment where you must think like a Bankster Gangster, and trade like a thief in the night… anticipating instead of reacting to their constant manipulation and intervention.
Gold stocks will not stay locked within this present trading range for long, and they’re going to have a very difficult time keep gold from breaking out to new highs once the “Global New Deal” beings to be unleashed.
In the interim, I hope you find the charts above helpful.
And remember, to beat ‘em at their own game, you must…
“Think Like A Gangster & Trade Like A Thief In The Night.”
Good Luck,
SliderOnTheBlack
5 responses so far ↓
1 Mark Collier // Mar 24, 2009 at 3:13 pm
What do you think of the AUD as a potentially strong currecy relative to the USD?
2 William Nowotney // Mar 24, 2009 at 8:15 pm
Wow SOTB… You’ve finally woken up and come over to our Ludwig von Mises Monetary inflation camp. I’m happy you realize now what the Fed and the FCBs response to the bursting of the credit / housing bubbles would entail. It was no secret and many of us were discussing it when Bernanke was first appointed to chairman. Deflation was a fools game spoon fed by the Fed to the dim-wits that couldn’t figure it out. Ever since 1913, the Fed has ALWAYS used the deflation scare so that they could expand money supply above and beyond GDP growth.
Where I completely disagree with you is the conspiracy part of your thinking. Yes, various groups do conspire, THEY ALWAYS have BUT they’re usually more likely to fail than succeed, especially governments. WAT TOO MUCH credit is given the success of conspiracies. By and large, the Fed are a bunch of bunglers.
911 conspiracy theories are just that, theories. Theories believed by gullible people with a few screws loose (it’s a genetic thing.)
Again, welcome to the club Slider. Better way late than never.
William Nowotney
3 mikemo // Mar 24, 2009 at 10:31 pm
Slider, Keep up the good work on the NWO front.
It’s all unfolding, whether others want to see it or not. You’re a beacon in the fog.
4 SliderOnTheBlack // Mar 25, 2009 at 2:15 pm
William Nowotney says…
["You’ve finally woken up and come over to our Ludwig von Mises Monetary inflation camp."]
.
re:["I’m happy you realize now what the Fed and the FCBs response to the bursting of the credit / housing bubbles would entail. It was no secret and many of us were discussing it when Bernanke was first appointed to chairman."]
re: ["911 conspiracy theories are just that, theories. Theories believed by gullible people with a few screws loose."]
5 SliderOnTheBlack // Mar 30, 2009 at 4:00 pm
Mark Collier
re: ["What do you think of the AUD as a potentially strong currency relative to the USD?"]
I worry about Chinese & Japanese imports still being weak.
While the Brazilian Real, Canadian Dollar, and Australian Dollar have upside to a commodity recovery, I like the Norwegian Krone as the only fundamentally sound, liquid fiat currency.
The Swiss Franc has lost is safe haven status given that the Swiss Central Bank is now engaging in quantitative easing.
Norway has both a current account and budget surplus - the largest of the top ten currencies, as well as the lowest cost of insuring against a credit default.
They’ve got a $350 billion dollar sovereign wealth fund and huge oil revenues.
You can invest in the Krone through Everbank:
https://www.everbank.com/
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