MAJOR MARKET ALERT - Friday May 8th

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Precious Metals Blog

Monday, May 11, 2009

MAJOR MARKET ALERT - Friday May 8th

GOLD, SILVER, S&P500, CRB Index, U.S. Dollar and Real Estate alerts

May 8, 2009

Major market technical objectives have been achieved. Coupled with its fundamentals the Gold market has triggered buy signals on the daily, weekly and monthly indicators that we use. This is the first buying trigger of all three since 2001. The results of that buy trigger was that gold rose for 8 consecutive years.

This is an all out buy signal for both gold and silver. To have all three technical indicators on your side is very rare in any market. We also have a confirming technical breaks down on the short to mid term U.S. dollar and a buy on the short to mid term CRB (Commodity) Index. The S&P 500 (Stock "Financials" Market) has come close enough to meet upside technical objectives, research indicates it is time to step out of stocks and be thankful we finally had bounce. I will watch them from the sidelines now and await the next confirmation either up or down. I suspect down and a retest of the 2009 lows.

The strongest moves in Precious Metals have historically begun late summer and last through late winter with spring and summer softness. This early triple confirmation buy signal suggests the possibility of a very strong Gold market for the remainder of 2009.

The final piece to the puzzle for a rapid growth scenario is for the U.S. Dollar to close the month below .80 it closed today in the .82 range, almost 10% below the March high of .90. That means we have already lost over 9% of our buying power in just 2 months, this trend will accelerate as the Feds loose money policy of the past 8 months obliterates our buying power. Remember there is a lag between cause and effect!

A huge recent news item was completely brushed under the rug this week was that our U.S. Bond auction went horribly, as interest rates exploded upward. This is the exact opposite of what the Fed is trying to accomplish. U.S. Bond (Debt) buyers demanded much higher yields in order to buy our debt. This will immediately force the Fed to accelerate the buy-back of more of our own debt in an effort to force rates down. This is money we don't have. In other words more monetary inflation is occurring, price inflation through currency dilution will be playing a huge role in our upcoming lives.

Real Estate is looking better? Maybe on the surface, but will it continue? We have seen rapidly increasing unemployment (8.9%) this is already above the Feds desired target outlined in the Bank Stress Test which was approved this week, after the fact. Unemployment is rising, the stock market and media actually celebrated the loss of over a half a million jobs in one month, amazing! In the previous paragraph I described the fact interest rates are now going UP rapidly in a bad economy. We also are in a very temporary lull in Real Estate loan resets, there was a few month lag when lenders transitioned from sub prime loans to ALT-A loans, those loans begin resetting at an a rapidly increasing volume for many months. Less jobs, higher rates, increasing supply = Lower prices. If you are looking for a home look for homes prices at or near 1999 levels.

The government and Fed "solution" is to increase bank balance sheets, create stimulus programs, buy our own debt, buy our banks, buy our auto giants, buy the largest insurance companies, buy the mortgage giants, take over the largest real estate lenders etc. Outside of the obvious socialist implications, what are we buying this with? More credit. It's actually your credit! At an interest. Needless to say, our U.S. credit rating could soon be slashed. We are adding zero's to the balance sheets. The United States government is now in the business of corporate, real estate, financial market and banking take overs, government health care creation. Make no mistake this will result in a massive increase in the size of government. We are already the largest debtor Nation, this money is being created/printed. I can't emphasize enough, we are a DEBTOR Nation, SPENDING and growing government.

Countries who were buying our debt to keep us going now see the writing on the wall. China is increasing its gold reserves on a massive scale. Why? Because they see our plan will lead to U.S. currency dilution. Gold is the benefiting asset in mass currency creation which causes their devaluation. China has recently condemned our monetary policy and is the largest holder of our debt. As we dilute the value of our dollar it is in fact stealing from the Chinese and all U.S. currency holders, including you. Venezuela in this past month also took over every operating gold mine in its country to protect themselves from inflation. Remember this as well, we aren't the only country inflating! This is a world event.

Mark this day on your calendars, fundamentals have been joined by the technical indicators. Gold appears set to move and move rapidly, where it goes is anyones guess, we could be in a for quite a few explosive years.

Do you have yourself protected? If your financial wealth is all on pieces of paper you aren't.

James M. Carrillo
Sr. Portfolio Adviser

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DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of GoldIRAS.com. Past performance of any investment is no guarantee of future performance. All investments have risk.

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