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Gold/Mining/Energy : A to Z Junior Mining Research Site -- Ignore unavailable to you. Want to Upgrade?

To: 4figureau who wrote (4473)	5/20/2003 9:09:32 AM
From: 4figureau	Respond to of 5423

The beneficiary of this gathering economic nightmare is real money Richard Russell Dow Theory Letters May 20, 2003 >>The fact is that China alone could easily supply the entire world with all the manufactured goods that it needs -- but even that would not solve chronic Chinese unemployment. All this puts a frightened US Federal Reserve in a difficult spot. The US is confronting a half-trillion dollar (or more) budget deficit, a half-trillion dollar (or more) current account deficit, a dragging economy, and in the face of this the Bush Administration is pushing for major tax cuts and stepped up spending. No currency can hold up in this kind of climate. Something had to "give," and that something is the dollar.<< The Dollar -- Our uncomfortable Treasury Secretary Snow is providing the world with a new definition of a "strong dollar." Snow said that his understanding of a strong dollar is the people should have confidence in it. "You want them to see the currency as a good medium of exchange, you want the currency to be a good store of value, something that people are willing to hold, you want it hard to counterfeit." Hey, what about the dollar compared with gold or other currencies? Mmmm, well, the Treasury secretary didn't get into that. Along those line, it should be noted that the Treasury has dreamed up an exciting addition to our currency. Yes subscribers, the Treasury will be adding color to the twenty-dollar bill. On Snow's encouraging words, the dollar slumped another 20 points today, while the euro rose to within a penny of its all-time high of just over 1.17. It should be noted that not all is well on the part of President Bush's economic team. Receiving their walking papers, so far, have been the Secretary and the Deputy-Secretary of the Treasury, the head of the National Economic Council, the Chairman of the Council of Economic Advisers, the Director of the Budget, and the head of the Securities and Exchange Commission. In the meantime, the IMF warns that Germany is at high risk of deflation and that Japan might suffer further price declines. The IMF added that Hong Kong and Taiwan are also experiencing deflationary pressures. The IMF appointed a special task force to study deflationary risks in the world's 35 largest economies in December amid rising concern about global price declines. So what's really happening? The world is suffering from too much in the way of goods -- and consumers are exhausted from too much debt and too much spending. A major problem aside from over-supply and under-consumption is the vast differential in wages between the developed nations and China, India and the Asian nations. The fact is that China alone could easily supply the entire world with all the manufactured goods that it needs -- but even that would not solve chronic Chinese unemployment. All this puts a frightened US Federal Reserve in a difficult spot. The US is confronting a half-trillion dollar (or more) budget deficit, a half-trillion dollar (or more) current account deficit, a dragging economy, and in the face of this the Bush Administration is pushing for major tax cuts and stepped up spending. No currency can hold up in this kind of climate. Something had to "give," and that something is the dollar. The Fed has little choice but to open the spigots of the money supply and warn of even lower rates to come. At the same time, the Fed, almost daily, predicts that some of the surging liquidity will somehow be spent by consumers who are already "spent up," and by manufacturers who don't need to build new sources of supply. The more the forces of deflation press on the US economy, the more panicky the Fed, and the more the Fed will work the liquidity spigots while warning of lower interest rates to come. The beneficiary of this gathering economic nightmare is real money -- better known to you and I as gold. June gold has now rallied up to its resistance level at 360. The formation that I see in gold is a huge potential "head-and-shoulders" bottom. The "left shoulder" is now formed, the "bottom" is now formed, and I'm wondering whether gold is now going to back off a bit, thus forming a "right shoulder." In certain cases, where the item is very insistent and powerful, the item (in this case gold) can push right up above resistance (in this case resistance is at 360) and keep on going (which it now seems to be doing!). As for gold shares, looking at HUI, its current technical task is to rally to 140. Then either to back off slightly or to keep on rallying into the top area that was formed during December to February. The high for HUI came in at 155 intra-day on January 6. The 200-day MA for HUI is at 127 today, while the 50-day MA is still below the 200-day MA at 125. Both MAs are in rising. 321gold.com