Many ask … what makes gold a valuable investment; and note that it is falling lower in price. Historical research shows that monetization of debt by a central bank, such as the US Federal Reserve, creates an investment demand for gold.
As I look at the chart of Gold, $GOLD, it could easily fall back to the Friday October 1, 2010 price of $1,319.
Silver, (NYSE:SLV), could easily fall back to $24. Over the years I’ve read reports of price manipulation by various means at various brokerages. These include alleged spoof sell orders, that is orders that are placed then later cancelled. I’ve also read articles that say there are many paper shorts. Such things, which if true, and if prosecuted could lead to limit up jumps in silver for days on end. I’ve never invested in either physical or brokerage orders of silver.
I’m invested in gold bullion. I would buy more at the current level if I had money, as my investment maxim, is: in a bull market, buy on price dips, and in a bear market, sell into pops.
In my financial market report for November 16, 2010, I document that a global competitive deflationary currency war is underway at the hands of the bond traders and currency traders. The currency traders continued with their global currency war on the world’s central bankers, which they commenced November 5, 2010, when the bond vigilantes called the Interest Rate on the US 30 Year Government Bond, $TYX, higher above 4.0%, on concern that the US Federal Reserve’s Quantitative Easing constitutes monetization of debt.
The ongoing sell off in the worlds currencies, (NYSE:DBV), and the emerging market currencies, strengthened the world-wide stock sell off that commenced on November 5, 2010.
Debt deflation continued in sovereign debt. Bond vigilantes continued calling interest rates higher globally. And as currency traders sold the world’s currencies, International Government Bonds, (NYSE:BWX), and Emerging Market Bonds, (NYSE:EMB), fell sharply lower.
Risk appetite has turned to risk aversion causing carry trade investment disinvestment in Junk bonds, (NYSE:JNK).
An unwinding of carry trade investment globally is documented by the developed market currencies, (NYSE:DBV), and the emerging market currencies, (NYSE:CEW), falling more than the Yen, (NYSE:FXY).
With World Government Debt, (NYSE:BWX), and World Stocks, (NYSE:ACWI), falling lower, carry trade investment is starting to come out of the HUI Precious Metal Stocks, ^HUI, traded by the ETF, (NYSE:GDX), and the junior gold mining shares, (NYSE:GDXJ).
Gold mining stocks are not the same things as physical gold; gold stocks are bought and sold as a speculative investment; this is readily seen in the chart of the junior gold mining shares, (NYSE:GDXJ), relative to gold, (NYSE:GLD), GDXJ:GLD, turning lower.
Research documents that CONSISTENTLY the precious metal mining shares turn down, when the US sovereign debt turns lower. US Government debt and the precious metal mining shares ALWAYS turn lower together. This is seen in today’s fall in the HUI relative to US 30 Year bonds in the futures market, $HUI:$USB.
Stocks in the precious metal mining category include, Keegan Resources, (NYSE:KGN), Great Basin Gold, (NYSE:GBG), Nevsun Resources, (NYSE:NSU), Allied Nevada Goldfield, (NYSE:ANV), Golden Star Resources, (NYSE:GSS), Aurizon Mines, (NYSE:AZK) and ASA, (NYSE:ASA).
Inverse Volatility, (NYSE:XXV), has now fallen lower. S&P Volatility, (NYSE:VXZ), has turned up withe the US Dollar, $USD, suggesting that an unwinding of Dollar carry trades is underway.
The bond traders have seized control of both long-term interest rates, such as the Interest Rate on The US 30 Year Government Bond, $TYX, and short term rates that were formerly under the control of the central bankers. Joe Weisenthal reports Mortgage Rates Just Hit A Four-Month High; his chart shows an explosive jump in mortgage rates in just the last few days.
The currency traders have established themselves as the world’s sovereign governing power; their rule over the world governments began on November 5, 2010 when the Interest rate on the US Government Bond, $TYX, sustained above 4%, and as they sold the major currencies, (NYSE:DBV), and emerging market currencies, (NYSE:CEW), which called the US Dollar, $USD, for now higher.
I appreciate those who have given their time to document Quantitative Easing. Their reports are both awakening and sobering.
Gary Dorsch, Editor, Global Money Trends Crossing The Rubicon Into The World Of QE-2
Chris Martenson, QE II Has Lit the Fuse
Doug Noland, Prudent Bear, The Official Start Of QE 2
Greg Hunter, USA Watchdog, Insanity Or Ingenious?
Paul J. Lim, New York Times, A Calmer Market? Not For Long Bonds
Mary Williams Walsh, New York Times, Municipal Bond Market Shudders
Ambrose Evans Pritchard in a recent Telegraph article, used the word “Götterdämmerung“, and that sure got my attention as that is an apt word to describe the apparent fatal wound to the world’s financial, economic and political systems which is coming soon, as bond traders continue calling interest rates higher, such as the US mortgage rates, and the Interest Rate on the US Government 30 Year US Treasury bond; and as currency traders continue a global sell off of the world’s currencies, as both conduct a war for sovereignty against the world central bankers and world leaders.
God was gracious to provide Revelation 13:3, which reveals that the soon coming apparent fatal wound to the world’s economic and political systems will be healed.
But that it will come at the cost of the rise to power of a world Sovereign and also a world Seignior, the latter comes from Old English and means top dog banker who takes a cut.
Yes out of the coming investment “flame out”, a global Leader and a global Banker will rise to establish order.
Perhaps Herman Van Rompuy will rise to be The Sovereign as the After America website relates that he has called for global governance: nation states are dead … The EU chief relates the belief that countries can stand alone, is a ‘lie and an illusion!’
And perhaps Tony Blair, because of his business connections, will rise to be The Seignior … Or perhaps the Seignior will be Olli Rehn, one known for calling for calm as related by Ambrose Evans Pritchard in article Telegraph article Greek Rescue Frays as Irish Crisis Drags On: The eurozone bail-out for Greece has begun to unravel after Austria suspended aid contributions over failure to comply with the rescue terms, and Germany warned Athens that its patience was running out. The clash caught markets off-guard and heightened fears that Europe’s debt crisis may be escalating, with deep confusion over the Irish crisis as Dublin continues to resist EU pressure to request its own rescue. Olli Rehn, the EU economics commissioner, said escalating rhetoric in Europe was turning dangerous. “I want to call on every responsible European to resist the centrifugal tendencies and existential alarmism.” …. And yet again, it might be the co-chair of the Council on Foreign Relations, the CFR, Robert Rubin, who was Treasury Secretary. He is shown in a 1995 photo by Stephen Crowley of The New York Times, with Alan Greenspan, who was Federal Reserve Chairman, at a House Hearing, in The New York Times article The Reckoning Taking Hard New Look At A Greenspan Legacy by Peter S. Goodman, who said of Alan Greenspan: “And his views held the greatest sway in debates about the regulation and use of derivatives, exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. He related: “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.
All seigniorage will come and go through The Seignior: all sovereign wealth funds, and banks will report to him, as there will be unified regulation of banking globally.
Soon there will be no national seigniorage anywhere as sovereign debt interest rates will explode to the point where there will be no buyers. This is already the case for Portugal, Italy, Ireland, Greece and Spain — they have lost their seigniorage authority. Their fiscal needs are provided for by the ECB which buys their bond issues, as well as debt from their banks. The ECB is the sole lender to these nations. Currently the ECB is The European Seignior.
Sovereign nations and their constitutions will be history, as principles of global governance working through regional economic and security pacts and leaders’ agreements will serve as the basis for regional currencies or a global currency.
The Seignior’s financial and economic power will complement the military and political power of the Sovereign; and between the two they own the world “lock, stock and barrel”.
ABOUT: I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes debt deflation has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation. The chart of gold, $GOLD, reveals that with the onset of the European sovereign debt crisis in April 2010, gold has morphed from a base metal commodity to a currency, in fact the world’s sovereign currency.