article: Taylor on Gold (good summary of last week, PPT action)
gold-eagle.com
an excerpt:
Following the revelation that massive fraud had been uncovered at WorldCom, the markets looked like they were getting ready for a total melt down and gold had begun to rise very significantly. But one thing the plunge protection team learned following the 1987 market crash. They CAN intervene to keep the market from plunging over the cliff. But non the less, they have a problem. By keeping the market from falling over the cliff and thus purging itself of excesses, intervention leads to a false sense of security and thus sucks unsuspecting investors into the continuing purchase of overvalued assets. Eventually, as we are seeing now in the stock market, intervention cannot keep stocks from plunging in value as the weight of the secular bear market is slowly but surely leading to huge losses.
And so, with little if any doubt, the plunge protection team came back into the market this past week. They averted an immediate disaster no doubt by buying equity futures and by dumping gold on the markets when the markets were very thin. They have prevailed once again nominally in the short run. But longer term the tide is turning against these leader who wish to use market intervention to defy the truthfulness of markets. Of course, the frequency of these kinds of interventions are becoming ever greater and the amount of new money the Fed has to keep pumping into the economy to keep the dollar and U.S. economic fib alive, is growing rapidly. Can there be any doubt that the U.S. government is nearing the end of this con game?
At the very end of this week, the gold cartel trashed the gold price when the Asian markets were closed and when few people were around in New York. The result was that the price of gold closed in New York closed at $313.90, just a smidgen below its 50-day moving average of $314.74, but still above its 200-day moving average of $293.18.
My good wife Teresa told me Friday she hoped and indeed expected the gold cartel would trash the price of gold on Friday because it was the end of the quarter. Working for a mutual fund herself, she is aware how the people in this industry think at window dressing dates such as quarter and year ends. So she told me before she went to work that she expected the plunge protection team might enter the futures markets to cause the price of equities to rise and that they would also slam the gold price. Teresa was glad about this because she wanted to be able to buy some more gold shares for her mother's account. Teresa got her wish and actually I was kind of pleased too because it meant the Calls I wrote on GoldCorp might not be called away from me after all. Since I am bullish on gold and especially on GoldCorp, I want to continue owning it. Of course I wrote the Call simply to pocket some income.
Given our longer term bullish view on gold, I think we have to view these manipulatory actions as providing us with a gift to buy gold at an even cheaper price than its already bargain basement price. In other words, we will allow the Cartel to work FOR us rather than AGAINST us, since we are confident gold will eventually prevail over the dollar.
As for gold, the bottom line is this. The U.S. economy is in very poor shape. Equities are extremely overvalued as is the dollar still. In fact, George Soros suggested last week that the dollar may soon plunge dramatically in value. No matter how much the government intervenes (which Soros urges it to do) the U.S. dollar is inevitably headed over the edge of the Grand Canyon. When that happens you will be glad you have purchased your "golden parachute" at prices made possible thanks to the Gold Cartel.
/ jim |
