Nationalist Weekly Market Commentary
For the week of 01/06/2003
"I get a kick out of these guys who say that gold is overbought and due for a correction, but yet can't give us any reason why it went up in the first place.
In fact, the CRB is at new highs. With deflation raging (at least in people's heads) you would think that someone would have an explanation, but there is none.
And that is the way it is at the beginning of major new trends.
We all hear the conspiracy theories about how there is no gold left in Fort Knox (because it blew out of the vaults in the two years before Nixon closed the gold window) and, like everyone else, I dismiss these types of stories. But I got to thinking the other day. The trend of central bank gold sales got under way in the mid eighties almost certainly as a part of effort to combat inflation. There was much fanfare, with legislative debates, new laws passed, and news releases by the central banks in the selling countries. In Switzerland's case, I believe they had to amend the Constitution.
With all the hoopla and all the fashion and flare of the gold sales, how is it that the United States was deathly silent on the subject? No debates, no policy pronouncements, no nothing. A few academic studies advocating gold sales, but not a single word about the subject by anyone in authority.
Here we have a major financial fad blossoming around us - governments grabbing for free dollars - and not one peep from any of the officials in our money grabbing U.S. government.
Don't you find that somewhat strange?
Hmm! I give the conspiracy theorists about 25% odds, but if they are right, then gold goes absolutely ballistic. We are talking $5000 per oz at the ultimate peak 10 years from now. A ten bagger at least.
Hope you folks aren't offended that I did not post the weekly update over the past two weeks, but the data release schedules get all messed up this time of year, and volume falls off decreasing the predictive value of my methods - good time to move to the sidelines and enjoy the holidays.
Well the release date for the COT is tomorrow, which fouls up tonight's charts, but I thought I should post the base and M-3 charts because they are significant. As you can see below, base growth is slowing and M-3 has been flat for the past 5 weeks. Although the Fed has expressed its total committment to reflation, it ain't showing up yet in the aggregates folks, and that is the only thing that counts. Action, not talk. Thus, we are poised on the cusp of a major down move if M3 remains sluggish.
I am looking to accumulate some sizeable shorts here, but would not be surprised to see Mr. Market rally for another 3 days or so. Short term predictability is still low because of the holidays. Stocks have been trading in inverse lock step to the bond, and I am waiting to see if this decouples.
Gently rising mortgage rates will crush the housing market and the economy, and I am looking for the trading pattern of the last few months to break, with the bonds and the stocks going down together. Got a whiff of that Friday. All in the fullness of time.
Charts have been updated, but I am rather tired tonight, so I will delay the individual chart commentary below til tommorrow. Most of you already know what the charts mean and how I interpret them."
To the charts!
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