Gold bulls and inquiring minds are perplexed by last week’s mayhem in the precious metals markets. In addition to gold and silver, copper prices also went into free fall last week which is an ominous sign for the broader economy in general. We live in interesting times as geopolitical uncertainty, social acrimony, and financial collapse shape the world around us.

The situation in Europe continues to worsen and central banks and wealthy individuals are trying to find safe havens to protect their wealth. Most gold bugs believed that gold and silver would be the answer, but in this environment that hypothesis did not play out. In addition, the Federal Reserve came out with operation twist which market participants despised. Since the 3rd round of Quantitative Easing was not announced, risk assets such as the S&P 500, gold, and silver sold off sharply.

Read rest of article here… /> http://bit.ly/mPG8Ln

Gold bulls and inquiring minds are perplexed by last week’s mayhem in the precious metals markets. In addition to gold and silver, copper prices also went into free fall last week which is an ominous sign for the broader economy in general. We live in interesting times as geopolitical uncertainty, social acrimony, and financial collapse shape the world around us.

The situation in Europe continues to worsen and central banks and wealthy individuals are trying to find safe havens to protect their wealth. Most gold bugs believed that gold and silver would be the answer, but in this environment that hypothesis did not play out. In addition, the Federal Reserve came out with operation twist which market participants despised. Since the 3rd round of Quantitative Easing was not announced, risk assets such as the S&P 500, gold, and silver sold off sharply.

Read rest of article here… /> http://bit.ly/mPG8Ln

Gold will continue rising in value over the coming years for one reason: The primary buyers are purchasing physical gold for wealth preservation, and there simply isn’t enough physical gold to satisfy their appetites. The recent pullback was by no means the bursting of the gold bubble. Bubbles are characterized by months of extended exuberance and consistently higher highs—not the two- and three- hundred-dollar corrections we’ve seen twice in the past few weeks. Such pullbacks are healthy as they indicate gold has much, much farther to go.

You can read the rest of artice here…

http://bit.ly/qTVEfH

Gold will continue rising in value over the coming years for one reason: The primary buyers are purchasing physical gold for wealth preservation, and there simply isn’t enough physical gold to satisfy their appetites. The recent pullback was by no means the bursting of the gold bubble. Bubbles are characterized by months of extended exuberance and consistently higher highs—not the two- and three- hundred-dollar corrections we’ve seen twice in the past few weeks. Such pullbacks are healthy as they indicate gold has much, much farther to go.

You can read the rest of artice here…

http://bit.ly/qTVEfH

Only 5 short months ago the S&P 500 was trading at the 2011 highs around the 1,370 price level on the S&P 500 Index. Since then, the price action has devastated investors and traders alike. As of the close on Monday, the S&P 500 had worked over 270 handles lower in 5 months. The price action since September 27^th has been a bloodbath.

It is true that the S&P 500 could be carving out a double bottom on the daily chart, but I am of the opinion that there may be more work to do to the downside. We are oversold on the daily and weekly price charts, but I have yet to see the kind of panic level selling that typically precedes a price reversal. The chart below illustrates the number of stocks that are currently trading above the key 50 period moving average:

 

While most market participants are concerned about a trap door that causes prices to cascade lower, I am concerned that at some point news will come out that could rip the bears’ faces off. The majority of retail investors are running for cover. The sentiment levels are decidedly bearish and the last thing most traders are looking for is a rally. The contrarian trader in me cannot deny that a rally would do a lot of damage in the near future, but Mr. Market needs to suck in a few more bears in order to do the most harm.

One sound bite out of Europe could alter the price action almost instantly in favor of the bulls. The ECB could suddenly cut interest rates or announce that Eurobonds are going to be made available. Either two headlines or a combination of both headlines would most likely drive prices significantly higher.

After the nasty downside probe today, there are layers of buy stops above current price levels. If price worked high enough, the stops would be triggered and an all out rally could play out. Anything coming out of the Eurozone that appears to be either stimulative or that appears to push an ultimatum out on the time spectrum will be viewed as positive.

Often news and price action play out together at key support/resistance levels and it would make sense that some form of announcement will be made when the S&P 500 price is sitting right at a long term support level. As can be seen from the weekly chart of the S&P 500 Index ($SPX) below, the 1,008 – 1,050 price level is of critical importance.

 

The primary support levels I am watching on the S&P 500 if it continues lower are the 1,080 price level which should act as short term support. If that level breaks the 1,050 area will become a major support level that bulls will likely defend fervently. Additional long term support will come in around 1,008. I would be shocked to see the S&P 500 push through both the 1,050 and the 1,008 price level on the first attempt, but stranger things have happened.

If price works down to the 1,008 – 1,050 support zone it would not be shocking to see a strong reversal higher. With the recent carnage we have seen in the S&P 500, I find it hard to believe that we could see another 10 – 15% more downside before a reversal plays out. The 1,008 – 1,050 price zone seems ripe for a test, but one other scenario would be a test of the 1,080 support zone that fails intraday and by the close is regained. The chart below illustrates the two most probable scenarios:

Financial markets do not offer a sure thing, however it is without question that bulls will aggressively defend the 1,008 – 1,050 price level on the S&P 500. If that level fails, the price action is going to get far worse and an all out crash could be underway. For now, I am of the opinion we are within 7% – 8% of an intermediate term bottom which could produce a strong multi-month rally into the holiday season 

As always anything could happen, but traders need to keep their eye on both sides of the price action. A rally would do a lot of damage to the bears as well as the under-invested retail traders and investors. Ultimately the price action is in the hands of Mr. Market, but it is a well known fact that Mr. Market likes to trap traders and inflict pain on as many market participants as possible. A forthcoming rally  would offer yet another opportunity for a lot of traders to eat another slice of humble pie 

Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at http://www.optionstradingsignals.com/specials/index.php and take advantage of our free occasional trade ideas or a 66% coupon to sign up for daily market analysis, videos and Option Trades each week.

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

  

It seems everyone is looking for a place to put their hard earned money as uncertainty around the globe continues to rise. Oil, Gold, and Silver which have been the hot investments for the past few years took it on the chin over the past month with oil falling 13%, gold dropping 15%, and silver with a whopping 30% decline. We did actually see sharply lower prices, but last week these oversold commodities had a bounce and recouped some of their losses.

It has been a month since I covered the dollar index in detail and back on August 31^st I pointed to a potentially large shift in the US dollar. The charts were pointing to a sizable rally which would likely send stocks and all commodities crashing lower. Since then we have seen just that and the so called safe havens (Gold, Silver, Oil) have dropped taking most investment and retirement accounts down with them. I did talk about these so called safe havens a couple weeks back stating my point of view on them. 

My Cole’s Note Summary: “I do not consider any investment vehicle a safe haven if it can drop 15% in value within 1-2 days. And I would never put a large position of my account especially a retirement account into these investments if I were over 50 yrs of age.”

So where are the big, smart, and conservative traders putting their money to work?

Let’s dig down and take a quick look at the charts…

The 20 Year Bond – Daily Chart:

US Dollar – Daily Chart:

Utility Sector (Dividend Paying Stocks) – Daily Chart:

Weekend Trading Conclusion:

In short, I feel both stocks and commodities are oversold but need more time to bottom and we may see a few more days of lower prices in the near future. I see the dollar starting to get toppy on the daily chart and once that rolls over then stocks should bottom along with gold, silver, and oil.

Once equity prices start to bounce I anticipate money to flow out of the safe haven (Bonds) and into stocks where there are much larger potential gains to be had. All this could play out in a couple days so I am keeping a very close eye on everything.

Last week we bought the inverse SP500 etf (SDS) anticipating another surge higher in the dollar which would send stocks down in value. So far we are sitting with a gain of 8.2% and the potential for another 4 – 10% if things play out as I expect. If you would like to receive my daily pre-market trading videos so you know exactly what to expect each session along with my ETF trades be sure to join my free newsletter and get my free book here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Asahi recently posted a story about Japanese pensioners who are selling their gold.  Remarkably the perception of gold has been quite a bit different in Japan than around the rest of the world.  The country as a whole has been a net exporter of gold since 2006 and according to the World Gold Council, Japan is the only major economy where the demand for gold is decreasing.

Many Japanese, who have become accustomed to their deflationary environment, view the recent high prices in gold as an opportunity to take profits.  What they fail to understand is that for a country like Japan, whose debt exceeds 200% of its GDP, deflation is only a temporary condition.  Whereas inflation (and hyperinflation) can reduce the real cost of a debt burden – and actually bring unsustainable debts back into the realm of manageability – deflation cannot.

At some point Japan will be forced to face the harsh reality that awaits every bankrupt country.  They will either have to openly default on their debt or radically revalue their currency lower.  Neither scenario will leave recent sellers of their gold very happy with their decision.

Interestingly enough, the article notes that the only group showing interest in owning gold are the retired  bureaucrats from the finance ministries and agencies.  They seem to grasp the unsustainable nature of the status quo.

The situation is the same in the United States where we have the added wrinkle of possessing (for now) the world’s reserve currency.  The highly complex machinations of the global finance systems can, in the short term, produce counterintuitive moves in which wealth seeks the dollar and treasuries over gold.  But this too is a temporary aberration.

The United States government is bankrupt and even a return to historically normal interest rates could render our debt obligations unserviceable.  No paper, be it currencies or debt, will be safe under those circumstances.  Only gold and silver will be left standing as the true stores of value.

I was interviewed on the Fox Business Channel regarding the Utah Legal Coin Act in early June 2011. Here is a little background and some interview questions. />   /> For the first time since 1971, gold and silver are once again considered legal tender in at least one part of the United States. The State of Utah passed the “Utah Legal Tender Act,” which “recognizes gold and silver coins that are issued by the federal government as legal tender in the state and exempts the exchange of the coins from certain types of state tax liability.” />   /> The law, signed by Governor Gary Herbert on March 25, is a voluntary system that provides an alternative to the fiat-based Federal Reserve notes that are created out of thin air in unprecedented proportions. />   /> The most significant change from a practical perspective is that the Utah’s state tax code now considers gold and silver coins issued by the U.S. Mint as currency rather than an asset, which means since it is considered money it cannot be taxed. However, federal taxes still apply on these transactions. />   /> The Utah Legal Tender Act (HB 317) is designed to reinstate gold and silver coin as an optional medium of exchange in Utah intrastate commerce. The bill recognizes the inherent and inalienable right of citizens to voluntarily employ these time-tested, inflation-proof, complementary currencies to foster economic development throughout the state. The bill draws its authority from Article 1, Section 10 of the United States Constitution which provides that no /> state shall make anything but gold and silver coin a tender for payment of debts. Grounded in long-standing principles enshrined in the supreme law of the land, this statute addresses current, pressing monetary issues in modern American society—issues to which gold and silver coin solutions are uniquely suited. />   /> Because the founders of our nation had experienced firsthand the ills attendant with unbacked fiat currency, they provided in Article 1, Section 10 of the United States Constitution that no state is to make anything but gold and silver coin tender for payment of debts. Unfortunately, we’ve departed from the wisdom they imparted, and embraced a medium of exchange that has no intrinsic value whatsoever. The value of today’s dollar is upheld by governmental edict, backed only by the indebtedness of our nation and its citizens. Because of sharp increases in our money supply, our national debt is on an upward trajectory, set shortly to eclipse our gross domestic product. Since there is no historical precedent for a totally fiat money system such as ours ever lasting more than a few decades, prudence dictates that alternative, sound means of exchange be put in place well in advance of any potential crises, such as those endured by the fiat-financed nations and empires of the recent and distant past. />   /> Even absent the specter of catastrophic consequences, an alternative sound money system confers many benefits on citizens and state governments alike. Such a system serves as a refuge from the ills that fiat money produces, including the insidious “inflation tax” that our current monetary system imposes. Consider that the U.S. dollar has lost more than 95% of its purchasing power since decoupling from gold and silver backing. By contrast, sound money systems of the past continued virtually inflation-proof for centuries on end. />   /> States that have tried in the past but failed to enact their measures />   /> Virginia House Joint Resolution 557 /> Georgia Constitutional Tender Act /> Ohio Honest Money Project /> Idaho Silver Gem Act, Bill No. 633 /> South Carolina House Bill No. 4501 /> Missouri House Bill No. 561 /> Washington House Joint Memorial 4010 /> Colorado Honest Money Act (HB09-1206) /> Indiana Senate Bill No. 453 /> Montana House Bill No. 639 /> New Hampshire Gold Money Bill 1.1. />   /> Because of the co-dependent relationship between Congress and the Federal Reserve, the likelihood of any sound money reform coming out of Washington DC is remote indeed. Individual states, exercising their sovereign authority, are best equipped to restore sound money to its prior status as a trading currency. So look for a sound money comeback on a state-by-state basis. It makes sense to first support states that are well positioned to make sound money a reality today. Then as the movement gains momentum, reluctant jurisdictions will see the advantages of embracing sound monetary systems. />   /> More information can be found at: www.utahsoundmoney.org. />   /> We have received feedback on this from many people so far and many are of the belief that Gresham’s Law (http://en.wikipedia.org/wiki/Gresham’s_law) will mean that no one will spend real money (gold or silver) into circulation. We will not argue with the concept but will make the case that the market will decide and perhaps there will be some who want to “spend” their profits into the community. For example, when silver was approaching the $50 level there could have been (in theory) people who wanted to take advantage of that price and spend some profits for some good or service. />   /> Also, we think that some merchants favorable to sound money principals might offer a discount for real money being used in a transaction. We can envision two prices — a silver price and a fiat price. Again, the market will decide and it is our hope that real money circulates enough to encourage other states to adopt such measures. We find it interesting that some of the opponents of the law come from the CPM Group: />   /> We, of course, side on the principle of sound money and think the U.S. has not instilled confidence for a very long time. I am scheduled to fly to Utah and be with Governor Gary R. Herbert for a ceremonial signing of this law. We again are hopeful that other states will follow and the principle of fair weights and measures will once again be restored to the people. />   /> Mexico at the National level />   /> Another aspect of putting silver into circulation is one that graced these pages many times, the proposal led by Hugo Salinas Price to reinstitute silver as money along side the peso. This of course implies silver being used again as an alternate means of payment at a national level. />   /> Mr. Price has written numerous articles about the possible return of silver money circulating along side the Mexican peso. Let me state that when we first put this into our report so many years ago we lost some very angry subscribers because “we” did not understand Gresham’s Law! Quite the contrary, but these quick-to- judge people would not take the time to read and understand the proposal in full. />   /> Again we are NOT suggesting that this will catch on right away but will more likely develop momentum over time. />   /> David Morgan