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-- Posted Thursday, 28 September 2006 | Digg This Article
Honest Money Gold & Silver Report Gold & Silver
Gold Gold put in a solid performance last week, gaining the most since July. There was good physical buying from India, as the wedding season is underway. India is enamored with all things golden, and so are we. Gold was up $11.93 for the week ending 9/22/06, closing at $588.60 (continuous contract), a gain just over 2%. Silver was up an even stronger 0.37 cents to $11.16 for a gain of 3.42%. Both made higher weekly closes. In the first three days of this week gold has gained $12.80 and is now above the $600 price level, closing today Wednesday the 27, 2006 at $601.40 – up 2.17% (continuous contract). Silver is up 0.46 cents to $11.62 or 4.12%. It’s a start. But remember the saying: two steps forward and one back, as that is what we will most likely see – regardless of how big the steps are. Below is a chart of gold, and then one of silver that puts them into perspective regarding what matters most: the intermediate and long term trends. The short-term trends are just that – short-term. Gold Continuous Weekly
Silver Continuous Weekly
Why They Are Precious We are going to attempt to explain a subtle point about gold and silver that few talk about. It goes against what most say about the precious metals. Nonetheless it is true. We begin by offering two quotes. The first states the problem – the second the solution. It is not, however, as simple as it seems – only because it has been made complicated by those that wish to protect themselves from the sovereign of sovereigns – the ever watchful sentinel. This is why gold to them is the immortal enemy. "Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." [Alan Greenspan] "Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state." [William F. Rickenbacker] That is all one needs to know if fully understood. We will try to elaborate. The following is from a paper we penned called: Gold's Hidden Secret: The Moral Hazard of Fiat Money (click link to read full paper). Illusion and Deceit Remember what the Constitution states is money: gold and silver coin, not paper. Recall the devolution of our monetary system from coin, to certificates, to paper fiat. When our money is allowed to be dishonest, to be mere promises to pay – our monetary system is on self-destruct. Federal Reserve Notes are doomed to lose their purchasing power, just as the Fed’s Inflation calculator (click to see) shows. So beguiling is paper fiat that even those who favor gold as Honest Money are deceived into accepting the “pricing” of gold in dollar bills, or Federal Reserve Notes. To Do So Is To Accept The Unacceptable. The Dollar Bill Or Federal Reserve Note Is Not The Constitutional Silver Dollar. The dollar of the Constitution is a weight of silver: one ounce of silver – the Silver Dollar. One is an honest weight of silver – the other is a piece of paper that represents a debt obligation. One is the means of payment (silver), the other is a promise to pay – but pay with what? Delusions of Price Prices go up only because THE VALUE OF THE MONEY GOES DOWN, causing a larger quantity (price) of dollar bills needed to buy the same amount of goods – even gold. Gold And Silver Should Not Be Priced In Dollar Bills Or Federal Reserve Notes. The Constitution and the Coinage Act of 1792 clearly state the same. Gold And Silver Should Be Denominated in Honest Weights and Measures: Of Gold And Silver – and NOTHING ELSE. Our money is gold and silver coin, not paper Federal Reserve Notes or debt-obligations. Gold and silver are the standard by which the dollar is defined – the unit of account: so says the Constitution. Prices of all goods should be according to the constitutional definition of a weight of silver or gold, not of a number of Federal Reserve Notes. What good will it do for gold to rise to $3000 an ounce if the money of account is still paper fiat Federal Reserve Notes? There will be suffering across the land. The cost of all goods will skyrocket. It will take more and more dollar bills to exchange for them. When you sell your ounce of gold for $3000-dollar bills – you will be accepting money that has lost as much purchasing power as your gold just “went up in price”. You will not be any better off. You will be back to square one. This is the shabby secret they do not want you to know or understand. Only Honest Money can cure the ills of such a cancerous monetary system. Only gold and silver exchanged by weight and fineness alone can overcome the debasement and loss of purchasing power that paper fiat debt-money has caused and continues to cause. Further to the above we offer the following chart. Note the notations. DJIA/GOLD
HUI The HUI closed the week out at 294.59 (continuous contract) down -$3.83 or –1.28%. Physical gold out performed the stocks, however, that is not all there is to the story, as the second chart below of the gld/hui ratio, clearly illustrates. First is a long-term chart of the HUI Index that puts the gold stocks in a different perspective then the recent short-term machinations – all standard operating procedure for a bull market. HUI Gold Bugs Index Weekly
Gld/Hui Ratio Gold Trust Shares/Gold Bugs Index
The last two days the pm sector action has been constructive. Yesterday gold was down hard and reversed to close positive. Today gold stocks were up and then turned down negative. They proceeded to reverse and rallied strongly up to close positive. All very good action, as it is eating away at overhead resistance or supply. The above chart of the gld/hui ratio shows the highs above 2 that have marked tops in the ratio from where gold stocks then proceeded to out perform physical gold. This is positive action as the overall gold sector does best when the stocks are leading. An apparent high right above 2 has just occurred. The other indictors on the chart show very over bought levels, which in turn favors the gold stocks to out perform. South African Gold Stocks The South African Rand fell to its lowest level in more than three years last week, continuing its recent drop. The fall followed the news release by South Africa’s Central Bank that the country’s current account deficit was at a 24 year high. Apparently the U.S. isn’t the only country having a problem with its current account deficit – or currency. For our own personal account we have been buyers of two SA Gold Stocks: Gold Fields (GFI) and Harmony (HMY). We are not recommending others to buy – simply stating what we have done, and plan on continuing, unless something drastically changes from the present state of affairs (which is always possible). If changes do occur, we will adjust accordingly. There is nothing wrong with being wrong – only in staying wrong. Below are the charts of Gold Fields and Harmony. Both have individual nuances as the charts depict.
Gold Fields Ltd. Weekly
Harmony Gold Mining Weekly
Summary We direct attention to the recent fall of commodities and the fall in long-term interest rates. These are not unrelated events. Both contribute strongly to the PERCEPTION of disinflation or even deflation. Perceptions, however, can be misleading: both those intended and not intended. In this particular instance we favor the first. There are those that say the Fed’s job is to control inflation. Such is impossible in paper fiat land. The dollar was created by inflation. The dollar was born to perpetuate inflation. It has self-destruction by inflation imbedded within its genes. Since 1913 the dollar has lost 95% of its purchasing power. Case closed. The Fed’s job in their eyes is to attempt to control the PERCEPTION OF FUTURE INFLATION by the consumer AND those who purchase GOVERNMENT DEBT – KNOWN AS TREASURY BONDS. The recent fall of commodities and long-term interest rates is just what the maestro ordered. His minions have, at least for now – delivered the goods. It remains to be seen if such is sustainable. We will go with the primary trend of the market, which is a law unto itself and will not, and cannot be denied. Postponed – yes; denied – no. We note that besides the market sector risk that presently exists for all commodities, including gold and silver and the pm stocks, the pm stocks are also subject to overall market risk if the stock market were to take a good hit. We do not see this happening before elections, but anything is possible. Forewarned is forearmed. The above is but a short portion of our 25 page weekly market update of all the major markets, which can be found at our website. There is a considerable amount of information on the precious metals, as well as the return to a hard money currency of gold and silver coin, as mandated by the Constitution. A daily market update is provided, and there is an interactive bulletin board area where financial and other issues are discussed. Drop by and check it out. 
Come visit our new website: Honest Money Gold & Silver Report
And read the Open Letter to Congress
COMING SOON: A REQUEST FOR AN AUDIT OF US GOLD RESERVES
-- Posted Thursday, 28 September 2006 | Digg This Article
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