Gold Update

My favorite yellow metal gold has been performing nicely over the past week. It has pushed passed the ever important resistance of 692.50 and is trading at 694.50. These next couple of days will be pivitol in seeing if the move past 692.50 will be a break out or a fake out. I will definitely be watching this going forward.

So why the recent move in price?

Well the easy answer is that the market is pricing in a downward rate cut in the fed funds rate. This may very well be true, but I have a gut feeling that there is someone behind the scenes pulling the trigger on some large gold sales. It very well might be the likes of a foreign central bank...possibly china, or it might just be attributed to the buying of the hated satanic hedge funds.

The Telegraph had some interesting things to say about the market for U.S. Treasuries. The reason I talk about the treasuries market in the context of a gold post is that as treasuries go so go the U.S. dollar. As the U.S. dollar goes, gold goes inversly.

The other reason is that if foreign banks aren't accumulating treasuries they have to accumulate other investment vehicles. In China, how about a $300 sovereign wealth fund. Then you have euros, yen, and of course gold. The notion of a rate cut is beginning to scare foreign investors away from bonds.

Then you have the trade protectionism against bills that are currently flying around congress with the senators and representatives licking their lips at how they will be preaching "I voted for a strong American economy and resentment towards those Chinese cheaters."

Well, I would like to assume that they know that China has about 20 aces up their sleeves. Regarding their foreign excange reserves, they hold the ultimate playing card in these protectionist discussions.

So back to what the UK Telegraph had to report regarding the bond markets. They said that foreign central banks had cut their holdings of U.S. treasuries by $48 billion with $32 billion of that drop coming in the past 2 weeks.

We can't say who is behind the sales until the treasury releases its TIC numbers in November. Any who, this is reason enough to worry. The swoon of the dollar has been fantastic over the past 2 months, and it's inability to break and hold above its 50 day MA is very bearish, not to mention the fact that it can't even come near its 200 day MA. A rate cut, just might seal the fate of the green back.

Going forward, we can't miss a day in the markets. We are one or two events away from seeing fireworks in the currency, PM, and foreign debt markets. These are definitely interesting times, but we haven't seen a scrath $40+ trillion credit derivatives market gets pulled into the mess.

I am an owner of physical gold/silver as well as PM mining stocks. I recomend that you do that same before its too late...