Something big is brewing: Swiss news timing, Dow and tresury bills falling together... Fantastic Gold chart action...Pre-emptive strike on Gold.
(From The-privateer: the-privateer.com
If you are regular visitor to this page, and you haven't read the preamble at the top of the page recently, please read it. If you are new to this page - please read it too. When you are finished, take a good close look at the charts above and reflect on the present situation.
Over the past two trading days (Oct. 16-17), the Dow has lost 210 points. During intra-day trading on October 17., the Dow fell as much as 182 points. On top of that, the S&P 500 chart has broken below the steepest of its uptrend lines.
That was written last week. This week, things have become a lot worse. The catalyst was the extraordinary crash dive on the Hong Kong market on October 23. That has affected U.S. markets. Over the last two days of this week (Oct 23-24), the Dow has lost 319 points, and now sits 132 points below its level of last Friday (Oct. 17).
And finally, U.S. long-term bond yields are rising once again. That was also written last week, on October 17. But there has been a sea change in U.S. bond yields since the Hong Kong market meltdown on October 23. While the Dow was falling 319 points on Oct. 23-24, long-term (30 year) Treasury yields were also falling - down 11 basis points. This is highly unusual. Stocks and bonds usually rise together (the price of a bond being the reciprocal of its yield). When they go in opposite directions, you can be sure that something big is brewing.
But if you were merely suspicious of something strange going on, (if you're only "suspicious", you haven't been following the markets very closely), you should have had all doubts removed by the
extraordinary swan dive in the Gold price on Oct. 24.
Last time this happened was just before the July 4 holiday. The catalyst then was an announcement by the Reserve Bank of Australia that they had sold 167 Tonnes of Gold. We repeat, the Gold had already been sold. This time, the catalyst has been an announcement by the
Swiss Central Bank that they may be selling 1400 Tonnes of Gold over the next few years, if they can get the Swiss people to agree to it via a referendum. It should be pointed out that the Swiss people hardly ever agree to anything via a referendum.
The Swiss want to join the European Single Currency, the Euro. If they do sell this Gold, they are most likely to sell it to the new European Central Bank, where it will undoubtedly become part of the backing (official or otherwise) for this new currency. As always, the timing of the announcement was impeccable. With Asia in meltdown and the carnage having spread to Europe and the U.S., something had to be done. All Central Bankers were telling anyone who would listen that everything was OK because the fundamentals were sound. For "fundamentals", read U.S. Dollar and Treasury debt paper.
So far, the money being scared out of stock markets and Asian currencies is flowing into U.S. Dollars via the Treasury's inexhaustible supply of debt paper. It's a "flight to quality", don't you know. It is absolutely imperative that "quality" is seen to reside in U.S. Dollars and debt and only in U.S. Dollars and debt. Any lingering historical memories of Gold having any role to play in
financial crisis situations had to be squelched. And they have been, haven't they?
The action on the Gold charts is quite fantastic. It signals as no other market signal could equal the true seriousness of the present global financial situation. We will go into this in much more detail in the next issue of The Privateer, but there is absolutely no doubt that this was a pre-emptive strike on Gold. |
