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The Summer of 2006 - Part II

By: D. Stewart Armstrong


-- Posted Friday, 4 August 2006 | Digg This ArticleDigg It!

A treatise on Imbalances

….and the Calm before the Storm

 

Part II of II

 

 

Continuing on from Part I

 

August 2, 2006

 

For Now, Gold is being manipulated by both sides

But that will soon change

 

I want to make one point now and that is that gold is being manipulated down by both sides; but I don’t believe this will last much longer. On the one side, the US wants the price of gold depressed (subdued?) in order to demonstrate that there is no inflation, that the dollar and the stock markets are strong, and the economy is humming along. Gold is sound money and the antithesis of fiat currencies so it is quite obvious why the power elite doesn’t like to see gold appreciating in price.

 

The “other side” consists of all of those entities that realize gold is sound money. They are endeavoring to protect their capital via the accumulation of the metal in one form or another.  The other side would include China, Russia, and the Asian Countries. Of course, the Arabian Countries have Petro dollars to protect.

 

In James Turk’s recent Freemarket Gold and Money Report (www.fgmr.com) he quotes Adrian Douglas who had an article posted on Bill Murphy’s site, www.lemetropolecafe.com . By the way, both guys are terrific, have extensive and studied information to offer, and are in my top ten lists which are soon to be posted on www.GoldSeek.com.

 

Here’s the conclusion by Mr. Douglas. Before $350 US gold, the DJIA and gold moved in opposite directions; in other words they were strongly “anti-correlated” to one another. After $350 US gold, or when the bull market in gold began to pick up steam, the DJIA and Gold have been moving in the same direction. “So despite these two asset classes being typically anti-correlated and having (been) so for the quarter of a century, the DJIA suddenly levitates in perfect correlation with gold.”

 

Allow me to paraphrase the conclusion by Mr. Douglas; the DJIA is being manipulated! (Say it ain’t so Joe!) “The Dow is being bought as part of a plan to keep attracting foreign investment which supports the dollar and keeps interest rates low, and allows the US to keep living beyond its means. By doing so, the government is endeavoring to provide some semblance of normality via the world’s most closely watched index. As long as the Dow isn’t falling, then all is well and the structural imbalances of today’s monetary system can continue without end—or at least that is what the government seems to think.” End

 

Now, I believe that on the other side of the equation, the Arab and Asian countries that have long honored gold are only too happy to purchase it at these relatively depressed levels. They understand full well the financial consequences that the US will have to face because of it’s proliferate spending and long history of credit expansion. The piper must be paid and it would appear the bill is coming due and rather quickly. All this occurring when the Mezzo Soprano is gearing up for her song; although she could be a Coloratura. They are so much more vocally acrobatic!

 

They see the handwriting on the wall. I want you, dear reader, to see that same writing, understand what it is saying, and more to the point to act upon it!  For now, these countries welcome these depressed prices because they want to buy more gold at cheap prices, er—I mean inexpensive prices.

 

They care not a whit if gold goes to $600 because it only means that they can purchase more of it at inexpensive prices. They can wait. They have the luxury of patience as their governments don’t have to be reelected every four years. They have the luxury of long term vision, our government doesn’t; but you do.

 

Countries and some investors have recently purchased gold at $725.00 US per ounce and I don’t believe they should be that upset about the drop in price. They realize that the trend is up and there are going to be some bumps along the way. And if it does drop to $600, they’ll be buying more because the cat is out of the bag. They know that he who owns the gold makes the rules. And folks, you should understand that axiom as well as do the larger gold traders, governments, and institutions around the world. And for the record, I don’t believe we’ll see gold back at $600 any time soon just as I don’t believe we’ll see oil back below $50.00 a barrel any time soon.

 

GATA or the Gold Anti Trust Action Committee headed up by Bill Murphy, Chris Powell, and aided by the brilliant minds of Rege Howe, and an army of patriotic people has been correct for over five years; the gold market has been manipulated. Think about that!

 

I encourage you to visit GATA.org or take advantage of the complimentary two week subscription to www.lemetropolecafe.com  because there are literally mountains of empirical evidence that substantiates their work. Time has proven that they’ve been correct and yet to this day, very few national newspapers have taken their work seriously. Why? Let me put it to you this way, who owns those newspapers, radio, and TV stations? Let me say this about Bill and the Café; if you want to get a feel of the day to day pulse of the gold market—look no further.

 

Bill Buckler becomes Strident and Direct

 

I am also going to quote from Bill Buckler of the Privateer. I’ve been reading the Privateer (www.the-privateer.com) for over five years and in that period of time, I don’t believe I’ve ever heard Bill Buckler as angry (testy?) or as undeviating as he was in his gold commentary on Saturday July 22, 2006. He is usually much more diplomatic and tempered in his comments.  

 

The Privateer is also on one of my top ten lists, and I consider it to be in the top three of the best geopolitical letters that I’ve ever read. Do yourself a favor and subscribe to both the Privateer (bi-monthly) and his Gold Commentary (published weekly).

 

“Yes, the manipulation of the Gold "price" this week has been BLATANT in the extreme, as blatant as has been seen at any time in the last decade plus. This is abhorrent, it is true. But is it more abhorrent than what has gone on in Lebanon, at the G-8 meeting, or in the US Congress since the Israeli attack of July 12?

In actual fact, of course, all of these things are part and parcel of the same desperate quest. This is the quest to perpetuate the current global financial system as an absolutely necessary pre-requisite for the power exercised by those who control it. The actual state of the system is best measured by the means chosen to perpetuate it. The situation in Lebanon is a new low in this regard. The depravity is numbing, much more numbing than the mere manipulation of Gold.”

 

“Meanwhile, over at the US futures exchanges, the "funds" have been hard at work battering the Gold price. Almost ALL of the almost $US 50 fall in the spot future Gold price this week has taken place in the US futures markets. And almost all of it has taken place after all other paper Gold markets have closed for the day. Gold is honest money, and honest money and empire building don't mix.”

 

The calm before the Storm is not so calm

 

Today is July 31, 2006 so I’m right at the deadline. Lemmesee. Gold is currently at $636 and it has been in a tight trading range for several weeks.. So, we still might get back down to $625 or even $600. Again, do I care? No I don’t because I firmly believe that this is the calm before the storm and if you’ve looked at the news lately, it’s been pretty stormy out there. It is going to become a good deal more volatile before this is all over.

 

The autumnal season looks to be quite promising and if you are considering investing in gold companies, especially the junior mining companies, might I suggest that you consider “getting in” before the pack.  If you are “in”, stay the course. You will be handsomely rewarded. I’d like to offer one other piece of advice and that would be to take 10% of your entire precious metals portfolio and convert it into physical gold or silver. Don’t be caught with 100% of your metals portfolio in paper; even though it has much more leverage to the price of the metals. 10% should be set aside and I already gave you the names and addresses of the people who you should check in with first for pricing and service: Ron Paul Coins otherwise known as Camino Coins.

 

I want you also to consider this one fact. The power elite controls, manipulates the paper markets every day but when you purchase physical gold and or silver, you’re taking that one ounce or 1000 thousand ounces off the market making it ultimately more difficult to manipulate the price. When you purchase physical, you’re doing your own part to keep the market honest. Just a little something to think about.

 

Sinclair weighs in with his own top ten list

 

One guy that has some pretty good insights is Jim Sinclair at www.jsmineset.com . I peek in on him at least once or twice a week to see what he’s thinking because he and his friends have some excellent insights. I’d describe Jim’s site as he sees it–an educational tool. However, he is also a student of the geopolitical landscape knowing full well that nothing occurs in a vacuum.

 

Today, Jim listed these ten guidelines for the average gold investor. I don’t believe he’d mind me listing them. Because there is brilliance in their simplicity, and the timing is so propitious, I would encourage us all to take them to heart.  For those of you unfamiliar with his work, the four angels are the four critical steps upwards towards $1650 gold. Review his commentary for July 19, 2006 and you’ll see your Angels with their magnets pulling gold inexorably towards $1650. However, I believe in my heart of hearts that it won’t stop at $1650 but may well move upwards towards $2500 or better.

 

Below, number four is if you have a large amount of US dollars in whatever form, CD’s, Cash, Savings, consider counterbalancing some of those positions by buying the Canadian Dollar. It can be simple as asking for Canadian Dollars at your local bank or having instruments vested in the “Cando”. I’m going to put in a quick mention of two people that Jim refers to quite frequently, Monty Guild and Dan Norini. At some later point, I’ll have more to say about these fine gentlemen.

 

I believe that a newer pronouncement from Jim is to hold 1/3 of your liquid net worth in physical gold; i.e., coins, bars, and so forth. I would interject that if one is looking for the real “spending” kind of liquidity due to a systemic financial failure; consider bags or partial bags of pre-1964 90% silver coins. The face value of a “bag” is $1000 US but they are sold at a premium to the face value. Buy US Silver Dollars if you wish to go that route as they are the most recognizable. But even silver rounds, as they are called, are a good bet if there was a systemic failure in the global “paper” system. Remember that the older Morgan or Liberty Silver dollars do not contain a full ounce of silver although the more recent Silver dollars do.

 

Numbers 8-9-10 are very important. Number 10 may be the most important lesson because I would like every American to have an awareness of physical gold and silver and how valuable they may become. The only problem is, as Jim suggests, you can lead a horse to water but you can’t make them drink. And sometimes horses will act more like mules. So look to saving yourself and your family.

 

Be Convinced or be gone is prepare for the long haul, look for value (not a stock play) and don’t endeavor to be a short term trader as you’ll only lose your resources, i.e. shirt, unless you are a truly astute and sophisticated investor. So here is Jim’s list.

  1. Believe in the four Angels as they will succeed.
  2. Do not use margin.
  3. Stay the course as this course is the right route.
  4. Hedge your dollar position by Cando.
  5. Mute the media.
  6. Look long term now, putting a stop to the desire for instant gratification.
  7. Commit 1/3 of your liquid net worth to gold itself.
  8. Put your house in order by significantly reducing or eliminating debt.
  9. Be convinced or be gone.
  10. Do not try to save the world but save yourself. Speaking about gold to those who are gold phobic will only tire you out and make them mad.

When pigs fly

 

One certainty that we can all count upon is that the masses will be getting into gold and the precious metals complex when it is hundreds of dollars higher than where it is now; or when pigs fly. Why is that? I can only make conjectures such as the media might just have to begin covering the sector because the price increases will be too spectacular not to; in other words it will be one heck of a story.

 

That troubles me because I know that many Americans are up to their eyeballs in debt and are desperately looking for a way out of that box they’ve become trapped within. We can’t make excuses for them or for us. We all have to own up to some degree of accountability. However, that being said there are lessons to be learned on a personal level and I hope we can all learn them. Meanwhile, get to safety!

 

Conclusion

 

Information and Education are the keys to one’s personal enlightenment. Education in particular is the key to a better world for you and your children. I’ve tried to once again present a case as to why a brighter future for you should involve gold and other precious metals.

 

I am putting together a list of what I consider to be the top ten gold newsletter writers along with the top ten companies that I believe will double, triple quadruple and some that may even offer a 1000 per cent return on your investment. To understand these companies and these writers, one first has to be aware of them and the financial dynamic to which they refer. In an upcoming piece I will begin the series. Of course, these are my opinions only, and there may be scads of people out there of whom I am unaware. By all means, write in and nominate your own favorites and I’ll try and put together a top ten “reader list”.

 

I would urge you to take advantage of the information that these web sites and newsletter writers offer. You will need patience, discipline and a bit of luck. Remember that any company that is advertising on GoldSeek.com has been put through a certain filtering process. None have paid for the privilege of being placed on these top ten lists that I am putting together. It is our way of trying to help the average American, perhaps the average international investor make some intelligent choices. Those choices are always made easier by listening to the people that have studied the issues for years and are willing to offer their insights to you.

 

Intelligent decisions usually emanate from an informed educated people. We want you to be part of that elite group. All it really takes is a willingness to transcend standard mindsets that have been created by a lack of educated choices.

 

Yes, of course it takes hard work—no one is going to do it for you. But you can take their lead, study, and perhaps end up in a much better place than where you are now. And of course, we all can end up in a worse place if we don’t do your homework or due diligence as the case may be.

 

The summer of 2006 could be the beginning of something very positive in our lives. I certainly don’t have all the answers, but we know a few people that always seem to come up with some excellent insights. As the summer of 2006 winds down, look towards the fall with some fresh information, defined goals, clearer insights and a renewed commitment to the precious metals complex. Your financial future just might depend upon your success or failure in these endeavors.

 

Until Next Time,

 

D. Stewart Armstrong

Consultant to the Junior Mining Companies

 

PS After the conclusion of Part II of this article we get busy. There will be updates on most of our past recommendations: OLE, NPG, BYBUF, MMRSF, GPXM, JNY, TGK, and KDX but to name a few. We will also begin coverage on GOCM and LGD. In addition, we will begin our Top Ten Lists and if you have a chance go back and revisit A 2005 Gift to the Gold Community which can be found in my GoldSeek Archives. None of those referrals have changed—they were excellent back then and they are even better today.


-- Posted Friday, 4 August 2006 | Digg This Article





 



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