There are many reasons why pension fund managers, private investors and even governments are beginning to add bullion to their portfolios. Perhaps the most important reason for this shift is that bullion provides superior insurance in times of financial uncertainty such as we are facing today.

Until governments solve their debt problems and no longer need to debase their currencies through unbridled money creation, a fully diversified portfolio should include gold, silver and platinum both for wealth protection and growth.

Read the rest of article here…

http://www.silver-investor.com/pdf/7-18-11GoldSilverandPlatinum.pdf

Many people have asked if there is any way to place precious metals away for retirement. The answer is obvious—Yes!

However, what has been determined is that many people in the USA have most of their funds in some type of retirement account and do not have the ability to invest outside of their already existing account.

Therefore this is directed primarily at those that wish to know how to establish a precious metals IRA.  Individual Retirement Accounts (IRAs) can be funded with physical gold and silver, yet very few investors are aware of this fact. They are exempt from all capital gains taxes while in the IRA exactly like any other investment that is placed into an IRA account. Thus, if your investments perform well over a long period of time, it can result in huge savings. Of course upon distribution the appropriate tax consequences would be applied.

Diversifying your retirement portfolio with precious metals is fundamentally required if you properly understand asset allocation (see the Ibbotson study). Additionally precious metals normally rise during periods of unsettling events such as wars, terrorism, inflation, deflation, downturns in the stock market and the US dollar. Precious metals usually yield large profits in these circumstances.

What is unique about this plan is that you can take physical possession of the actual gold or silver when you make your withdrawals. That’s correct! You can cash out in real honest-to-goodness gold and silver instead of fiat dollars. This is the most important feature of all. Down the road, in this generational bull market in gold and silver, the odds are in your favor that you will want and need the physicals when it’s time to access your investment.

Once you decide that you want to include precious metals in your retirement planning, you need to determine how much you want to invest. How much depends on your annual contribution, your personal goals and your individual investment philosophy. Factors to consider are your age, total assets and risk tolerance.

Very few institutions are set up to handle the precious metals component of retirement plans. There are basically only three, Sterling Trust, Goldstar Trust, and Entrust.

Establishing a Precious Metals IRA

From the Midas Resources website…

“If you currently have an IRA or a qualified plan such as a 401(k), 403(b), etc most likely your plan does not allow you to own physical gold or silver in your account. If that is the case, there is a way to do it that is relatively easy and inexpensive. What follows is a step by step explanation of how to do it. The first step is to find a custodian that will allow such a transaction. There are several including Sterling Trust Company, Goldstar Trust Company and Entrust. There are many others. These three are the most experienced with holding metals. Once you select a custodian, you will need to open a self directed IRA. This involves a minimum amount of paperwork and a fee to set up the account.

Taking possession of your IRA is qualified as a distribution. Under that circumstance, the IRS requires that a possible penalty and the appropriate taxes be paid. To avoid the penalty and taxes you want to have your IRA gold stored with a custodian that handles precious metals self directed IRAs. Midas Resources’ brokers will work with you to select a custodian, and help you through the process of filing the required paperwork to start your self directed IRA.

Once your new account is funded, you can then direct your broker to purchase gold, silver, platinum and palladium for your account. Your broker will withdraw payment for the purchase and send the appropriate amount of metals to the custodian’s storage facility. The storage facility will report the receipt to your custodian and show the metals in your account.”

As you can tell setting up a precious metals IRA is not that difficult. I have discussed in some of my public appearances particularly at the Money Show throughout the U.S and Canada.

What Type of Gold and Silver Can Be Held In an IRA?

The United States government currently allows Gold American Eagles and Gold proof American Eagles in IRA’s. Gold American Eagles are mass produced bullion coins. The value of these gold bullion coins is tied to the gold price. The price of gold fluctuates moving up and down like a heart monitor. This fluctuation in the price is directly tied to investors that buy and sell in an attempt to take advantage of the price volatility.

 Three Easy Steps…

1. Submit the paperwork. /> 2. Fund the account. /> 3. Direct your broker which precious metals to buy.

The metals are stored at approved metals depository, which at times can be the same used by COMEX and other major commodities exchanges. Annual storage fee vary but I would not base my entire decision on the storage costs alone.

Steps #1 and #2 involves completing the proper forms to transfer the funds to custodian. Again there are three choices as outlined above. Normally, the funds are transferred directly from an existing IRA or Qualified Retirement Plan.

In Step #3, the IRA investor directs a dealer which precious metals to buy.

For those wishing to send me an email for more information you can go to www.MyRealIRA.com

Martin Murenbeeld, the Chief Economist at Dundee Wealth Economics and a noted gold analyst, fears that gold is vulnerable to a sizable correction (drop in prices) while resource industry icon Rob McEwen makes a case for $5000 gold and $200 silver — in four years!  What to do?

This may be a “trading opportunity” for speculators plying for quick profits, but physical gold (and silver) investors need to hold their positions.

Even if Murenbeeld is correct, multiple challenges arise for sellers at these levels.  First, taxes would be incurred on profits.  Second, sellers would be out of the metals at a time when near chaos reigns in the financial markets.  Third, determining a re-entry point is difficult. Fourth, and I’ve see this often, having the discipline to re-enter the market on a drawback requires nerves of steel.  Too often, traders will not re-enter the market at all because they are constantly looking for still lower prices and are left on the sidelines are prices roar to the upside, passing sellers’ original exit prices.

While reading the Murenbeeld article, keep in mind that he is a bull and is only advising clients that gold is vulnerable.  He is not necessarily recommending that investors try to trade this market.

JW Jones – http://www.optionstradingsignals.com/specials/index.php

Back on August 7^th the S&P 500 was in the midst of a panic induced selloff and the bulls were running scared. Prices were collapsing and the bulls were racing to the exits. In the following weeks, piles of money flew out of equity mutual funds as the retail investors rang the register and pulled their money out near the lows which seems to be a regularly recurring event.

While most market participants were clearly panicking, I was sitting back watching the market push lower with complete focus on being ready to initiate long positions near the lows. I sent out multiple warnings to members of my service to raise cash and reduce risk. I sat in cash and watched the madness unfold in real time.

Admittedly I did not expect the selloff to be as severe as it was and unfortunately I did not get involved with any short exposure. However, my focus is always forward looking and opportunities will present themselves again and protecting my trading capital is always my primary focus.

My article that went out August 8^th was focused on downside momentum in the marketplace as well as key areas where I expected price action to hold at support. I was expecting the S&P 500 to find support around the 1,130 price level. I will be the first one to admit I am not one for making bold predictions, but I’m not scared to identify key long term support levels which have the tendency to mark bottoms in price action.

While price ultimately undercut my 1,130 target price level on the S&P 500, the following day a giant reversal bar formed which captured my interest and on August 10^th I entered long positions with tight stops below the recent lows and members and I were quickly rewarded. I closed the remainder of the trade today and locked in a 32% return based on maximum risk in essentially 1 week using a basic option strategy which levered up my position.

Now I find myself with very little exposure and I’m pondering what to do. First of all, a quick glance at the short term momentum charts illustrates that price action is still extremely oversold. However, oversold conditions could worsen further potentially. The chart below illustrates the amount of stocks trading above their 20 period moving averages:

It is obvious that price action in the S&P 500 is clearly oversold and equities have considerable room to rally. However, I would point out that oversold conditions can be worked off as function of the passage of time and not just higher prices. I continue to believe that we will see the S&P 500 test the 1,220 price level and will likely move on to the 1,250 area. If price action can work above the 1,250 price level the neckline of the head and shoulders pattern will act as a key resistance area. The daily chart of the SPX is shown below:

The key levels outlined correspond with major support areas that are either carved out by previous pivot lows or through Fibonacci retracement levels. At the very least, I expect price action in the S&P 500 index to test near the 1,220 price level as it will mark a .500 Fibonacci retracement area.

I would not be at all shocked to eventually see the neckline of the head and shoulders pattern backtested to verify resistance. The head and shoulders pattern that helped propel prices lower is clear when looking at the weekly chart. I first wrote about the pattern back on July 8^th and presented the following chart:

It is entirely plausible that Mr. Market thrusts lower from here to shake out longs. If that scenario plays out it could potentially carve out a double bottom or another basing pattern which would give active traders another entry point to get long. I think we are weeks from having a possible test of the recent lows on the S&P 500 as it is going to take the broad marketplace quite a while to digest the selloff and work off oversold conditions as a function of time and/or price.

Price action would be healthier if we pulled back a bit here before attempting to attack the resistance at the key 1,200 price level on the S&P 500. If prices continue to race higher in a short period of time I would consider the price action to be more of a warning that lower prices are around the corner.

While anything could happen, I believe that the S&P 500 will test the recent lows which need to hold desperately. I want to be a bull very badly, but right now unfortunately I cannot be bullish because a variety of indicators and analysis suggests that lower prices may await us.  

By now most readers recognize the monster bull market that gold and silver have enjoyed for nearly a decade. I do not intend to provide a history lesson, but during the last equity selloff investors and traders alike fled to Treasuries and the yellow metal for safety while nearly every other asset class sold off. Gold put in a new all-time high on August 11^th and price quickly sold off.

Since then we have seen gold climb back up and at this point in time it appears to be poised to test the recent highs. Some market pundits say gold is in a bubble while others say prices will work higher. In my estimation as long as the Federal Reserve has loose monetary policy gold prices will continue higher over the long term. At this point in time it does not appear likely that the Federal Reserve will tighten monetary policy until after the election at the very earliest.

Instead of arguing the economics behind gold prices and the inflation/deflation debate, I am more interested in where price action may be headed. At first glance on the daily chart of gold futures it could be said that gold has accelerated significantly higher in a short period of time. There are plenty of traders that believe gold has gotten ahead of itself and desperately needs a strong correction to shake out weak ownership.

Interestingly enough these same traders and investors have been calling for a major selloff in gold for quite some time. While I have written about coming corrections, I have always maintained a long term bullish stance on gold and silver due to the Federal Reserve’s current monetary policy.

Yet again, I find myself expecting to see gold selloff in what could play out as a double top on the daily chart. I am going to be watching the price action closely looking for a possible entry to take advantage of lower prices. At the same time, I am not willing to go charging in until I see some confirming signs that gold prices will head lower.

If gold prices push above the recent highs with additional momentum gold will trade higher yet. The next few days should be very telling as a large move could be setting up in the yellow metal in the near term. The daily chart of gold is shown below:

While the daily chart clearly illustrates the potential for a double top to emerge, the weekly chart has a more parabolic look to it. If a significant correction in the price of gold sets up for traders to take a longer term short trade, then a major reversal or topping pattern should come into focus in the next few weeks.

While a short term trade to take advantage of lower prices in gold might produce some fast money, longer term traders need to be patient and let gold confirm lower prices before getting involved. The weekly chart of gold is shown below:

Ultimately I do believe we need to see a healthy pullback in gold that works off some of the overbought conditions that are present in the price action. If investors continue to view gold as a safety trade it is obvious that prices could continue higher based on uncertainty coming out of the sovereign debt crisis going on in Europe. As of right now, it appears gold could go either way but probability favors the downside.

Logically it would make sense that if the S&P 500 rallied gold would selloff. Unfortunately Mr. Market rarely embarks upon the logical until he has convinced enough market participants to behave irrationally. It should be interesting to see what Mr. Market has up his sleeve this time.

Join Us Today: http://www.optionstradingsignals.com/specials/index.php

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. 

David Banister- www.markettrendforecast.com

Let’s clarify the SP 500 situation here: (Sent to my paying subscribers on August 16th)

Back on the Sunday night, August 7^th I wrote an article forecasting a likely SP500 low at 1096-1100 ranges and explained where those numbers came from.  We ended up bottoming a few days later at 1101.

The lows at 1101 were a convergence of fibonacci weeks, months, sentiment bottoms and VIX extremes along with major insider buying all at the same time. Subscribers to TMTF were made aware of these convergences and were advised to watch 1089-1102 ranges for a major tradable low.

Going back to the March 2009 lows, The SP 500 rallied up in 5 waves from 666 to the 1370 Bin Laden highs.  At that level we had re-traced 78.6% of the entire 2007 highs to 2009 lows, a common turning point.  Since then, we have had a 3 wave decline, also common for correcting a 5 wave move to the upside.  The decline halted at 1101, an exact 38% fibonacci retracement of the 666 lows to 1370 highs.  This is what I call a “fibonacci intersection”. The same thing happened in July 2010 at 1010 on the SP 500, where a huge bottom formed amidst two Fibonacci intersections.  These are crowd behavioral patterns, and we identify them at TMTF for our subscribers.

The rally since 1101 last week to 1204 pivot highs was a 5 wave rally, this is an early bullish sign that most people don’t see. A correction of this 103 point 5 wave rally to 1204 would be normal, but the lighter the correction the more Bullish.  So far the correction is only 23% of the 104 point rally with a gap fill at 1180.

Let’s review the bull signals:

13 Fibonacci month’s from the July 2010 bottom to August 2011 bottoms

7 Times in history we had the SP 500 double in a short period of time, and in every case it retraced 27-40% of the price movement from lows to highs. We just retraced 40% of our SP 500 double, historically very high retracement.

At 1101 we had 38% Fibonacci ABC correction of the Bull leg from 666 to 1370

At 1101 the SP 500 was yielding more than 10 year treasuries

In 1974-77 we had the SAME pattern, which I outlined for everyone last week.

Insiders with massive buying, the most since March 2009 lows, corporate buybacks announced.

VIX at extreme levels

Fear gauges were at extreme levels. Sentiment was over 50% bears with normal readings at 39%.

5 wave impulsive rally from 1101 to 1204 ensued… now a pullback is due. Same thing happened last summer 1010 to 1130, pullback to1040 in 3 waves, then another 5 waves up.

What am I telling everyone?

Stop yelling fire in an empty theater….

This is options expiration week, trading this week is notoriously difficult…

The Bear case is crowded, the Bull case is not.

I’m leaning bullish as long as I keep seeing this type of confirming price action.

I’m watching 1165 on SP 500 as a pivot low worst case, but as long as we see price action above that I like the set up for a while yet on the long side.

(But Dave, the textbook for Elliott Waves doesn’t agree with you… good, that’s why I use other indicators)

Consider subscribing so that you will be consistently informed, have 24/7 Email access to me with questions, and also get Gold and Silver forecasts on a regular basis. Subscribe now with a 33% discount coupon ahead of our rate increase. www.markettrendforecast.com for details.

A Frightening Worldwide Currency Crisis: An Unstable Monetary System

I was asked several years ago to reenact a dramatic scene from the movie Rollover (1981), which is a rather frightening worldwide currency crisis, depicted when oil money is withdrawn from the banking system. Although a total hypothetical scenario, it brings into crystal clear focus what systemic risk is all about. This was just re-posted to our website (see www.TheMorganReport.com)

To put this into the proper context, we might visit something seldom talked about today and something I have not used in the past several years at any of the conferences that I present at — namely, the Golden Pyramid, which is attributed to Mr. John Exter.

You can get some very good background on Mr. Exter from “A Moneychanger Interview: Mr. John Exter Simplex Munditiis,” provided by Mr. Franklin Sanders.

Greg Pickup also did two excellent articles and mentions Mr. Exter’s work in both of them. One is called “The Value of Money,” and the other is “They Rang a Bell.”

John Hathaway, the senior portfolio manager at Tocqueville Asset Management L.P., wrote an article in 1999 called “The Golden Pyramid,” in which he mentions the Exter Pyramid.

Finally, for the purposes of this article, my friend and fellow newsletter writer Jay Taylor did an article titled “Systemic Fiat Currency Risk & John Exter’s Golden Triangle.”

John Exter’s depiction of the Golden Triangle can be viewed below. This is a representation of the financial system in John’s era. First it must be pointed out that an upside-down pyramid is a very unstable structure, whereas a normal, right-side-up pyramid is an extremely stable one. Does this imply the whole financial structure is unbalanced?

If we examine the pyramid from the tip (bottom) up, we are looking at the most liquid assets; and as we move up the pyramid, the financial aggregates not only expand (they must continue to expand in a fiat system), but they also become less and less trustworthy. Since the entire financial system is faith based, this could also be viewed as a confidence meter.

People have had faith in gold through all of recorded history, whereas many currencies have come and gone in the monetary history of mankind. The financial markets seem capable of inventing all sorts of paper asset investments; bad or marginal loans are packaged together and turned into high-yield “investments.” All kinds of financial “insurance” packages are written to hedge risk; multitudes of Exchange Traded Funds have emerged that bet on price movement of the underlying asset. Of course, let’s not forget about the hedge fund — once a rather obscure investment vehicle that few knew of or even had the ability to locate, it now has become mainstream. And this hot money moves into and out of various markets with noticeable effect.

The Exter Pyramid does not include derivatives, which would be at least in my view at the very top of this unstable structure. There are many problems with derivatives, but the primary one could be the ability of the parties to pay.

Derivatives have exploded over the past two decades and it is well outside the purpose of this briefing to delve into the topic. However, Mr. Puplava of Financial Sense Online was ahead of the curve as usual and wrote about this topic in his article “Pedal to the Metal.” Additionally, the reader should study the topic of derivatives carefully, and this can be accomplished with some effort by reading about the threat posed by these financial instruments. See the first three or four articles (or more, of course, if you wish) on the Financial Sense Web site.

Looking at the third-world debt loan at the time a mere $1.3 trillion was a concern to Mr. Exter, today we know how the problem was resolved, due to Mr. Perkins, a former respected member of the international banking community. In his book Confessions of an Economic Hit Man, he describes how he helped the U.S. cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay, and then taking over their economies. See “How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions.”

The Golden Pyramid />

So in the movie Rollover, When the Notes Come Due, all heck breaks loose because long-term financial instruments have to be sold all at once and moved into cash to settle with the oil investors. This causes massive selling pressure and moves market valuations tremendously. You might call it a significant shift in investor psychology in an instant!

Thus the financial instruments that the market has the least confidence in fall in value the fastest (greatest amount), and those that the market has tremendous faith in (such as gold) move up in value. In this hypothetical scenario, it all takes place in just a few trading days. I have no idea whether the writer of the movie Rollover was familiar with Mr. Exter’s work or not. But with gold’s reaction since the recent downgrade of U.S. debt this fictional movie is starting to look more like real life by the minute.

Finally, it is rather ironic that this movie was released after gold had peaked on January 21, 1980, and was actually beginning a long bear market.

To take a look at this reenactment on YouTube, please click here. Don’t laugh I am not a professional actor by a long shot but nonetheless if you view with an open mind you should get the gist of this movie sequence.

Maybe with this depiction on the YouTube Web site, perhaps more and more people will become interested in the precious metals markets!

On Thursday, June 2nd Governor Gary Herbert signed into law a bill that allows gold and silver coins, minted by the U.S. government, to be considered legal tender in the State of Utah. This monumental event means that Utah has officially become the first state in the US to legalize gold and silver as currency – an exciting milestone, not just for Utahns, but for anyone concerned about fiscal stability!

Governor Herbert signed the bill and held a one-hour ceremony featuring several of the foremost silver and gold experts from around the country.

 

Those gathered heard from Larry Hilton, the Utah attorney who helped draft the law. He /> who spoke about how a gold standard might restore faith in American money at a time when the country’s debt is spiraling out of control. He referred to the bill as a “dollar-friendly measure,” one that will strengthen the dollar by refocusing policy matters in Washington on what once led to the phrase ‘the dollar is as good as gold.’ ”

David Morgan, owner of silver-investor.com and a nationally recognized silver expert /> also spoke to those gathered at the State Capitol.

Old Glory Mint played a key role throughout the grassroots process that led to the drafting of this legislation and its signing into law. As a private minting company, Old Glory supported the bill for sound money in Utah, from the beginning. Reed Larsen offered his expertise in the field by addressing many issues and helping to set parameters for the project. Several of the discussion meetings were held at the Old Glory offices in West Jordan. The trail to restoration of silver and gold as legal tender in the state of Utah has been a long and bumpy road.

To mark this singular moment in history, Old Glory designed and minted a commemorative coin, entitled the “Anticipation Round.” One of only eight gold rounds minted by Old Glory was framed and presented to Governor Gary Herbert during the signing ceremony. Symbolically, only 888 silver rounds were produced to mark this occasion. The number eight was chosen specifically because it is the symbol of infinity, suggesting the way gold and silver have historically held their value over time and will likely continue to represent the value of real money going forward. This symbolism also speaks to the far-reaching influence the passage of this law could have on the value of currencies around the world for generations to come.

Old Glory owners and managers express appreciation for the invitation they received to be part of the process and commend the efforts of everyone who contributed to the passage of this ground-breaking legislation.

The Anticipation Round features a seagull and the state capitol on the obverse side of the coin with the sego lily, Utah’s state flower, and the majestic mountains on the back side. The purpose behind the representation of the seagull is to show the seagull’s involvement in helping early settlers in Utah. In the spring of 1848, settlers in Utah had crops that were being completely ruined by an overwhelming swarm of crickets. Thousands of seagulls came from the Great Salt Lake and eradicated the crickets quite quickly – thus saving the settler’s crops from further damage. The seagull and sego lily represent indigenous resources and remind us that unconventional means can be sought to preserve prosperity and that through preparedness we can thwart many of the repercussions of the impending financial challenge through precious metals.

So why was Old Glory Mint so involved in the process of passing this bill? Old Glory Mint purchases bullion straight from mines and the largest refineries, depositories and distributors, and uses it to mint .999 fine silver and .9999 pure gold rounds of various designs and sizes. We are one of the Top 10 private mints in the country, producing bullion products and customized designs in our 3,500-square-foot facility.

HB 317, The Utah Legal Tender Bill, addresses the need for individual states to return to a standard that connects true value with a monetary system. This constitutionally provided protection allows silver and gold coinage to be minted in each state. This bill fits into our overall mission to encourage the use and ownership of gold and silver products. We are thrilled to see the State of Utah take this first, and very important, step to protect Utah citizens and we anticipate, in the not too distant future, when other states will choose to do the same.

Wayne L. Palmer

Congressman and presidential candidate Ron Paul recently introduced legislation calling for the federal government to cancel the $1.6 trillion debt held by the Federal Reserve.  Such a move creates legal challenges, one of which would be that the Fed would openly acknowledge that it is a private entity and that fedgov has no authority confiscate its assets.  (Fedgov had no “authority” to call in gold in 1933, but legal tests to that stood up.)

Yet the $1.6 trillion in Treasury debt was obtained via the Fed creating money “out of thin air,” to use an old and established description of what the Fed does when it buys debt (or other securities that it now owns).  Banks do the same when they make loans to consumers via fractional-reserve banking.

Another argument that can be expected: if the Fed has no debt to sell, it cannot shrink the money supply if it deems it appropriate.  This would be a smoke screen; it is highly unlikely we will ever again see the Fed decrease the money supply.  QE3 is right around the corner.

The following article is an update on the current technical position of the marketplace as I see it. Obviously the price action this week has been ugly as the situation in Europe has become front and center in the minds of traders and market prognosticators. The information below is an adaptation of what members of my service at OptionsTradingSignals.com received early today.

The S&P 500 sold off sharply earlier this morning and has since bounced higher. Price is drifting lower as I write this but on the shorter term time frame we may see a short / intermediate term bottom traced out during intraday trade today. It would make sense that prices would rebound after being so extremely oversold.

The 10 minute chart of the S&P 500 E-Mini futures chart below illustrates the intraday price action:

 

If the S&P 500 does carve out an intraday bottom, the daily chart of the S&P 500 below illustrates the key price levels that will come into play on a potential reflex rally:

The VIX is trading lower after popping higher this morning. The data coming out tomorrow and Friday may give traders an opportunity to get involved with a short side try on the VIX. However, I am going to wait patiently for the setup to present itself. Clearly any trade would be a shorter term type of trade as the VIX can behave wildly.

The usual suspects (IYT, XLF, EEM, IWM) are all trading to the downside again today. The financials (XLF) are showing relative weakness at this point in time. The rest of the usual suspects are all rolling over quite similarly to the S&P 500.

The daily chart of the XLF is shown below:

 

The U.S. Dollar Index futures are trading lower today and continue to base right at a key support level. If price breaks down we could see risk assets like the S&P 500 and oil push higher. For right now, the Dollar is trading well above key support.

Gold futures sold off sharply this morning but have since regained most of the intraday losses and are trading strongly to the upside from Tuesday’s close. Gold is starting to get a bit stretched to the upside and I am stalking a potential short trade on gold for the service. It would only be a short term trade, but I think a pullback is likely.

Silver futures have broken out and intraday price action has pushed silver above recent resistance levels. I’m not going to chase silver here as it could be the beginning of a failed breakout. However, if prices continue higher in coming days or price consolidates at this breakout level I will become interested in taking silver long.

For now, the precious metals are intriguing, but I like the price action in silver better than gold as we have more crisply defined risk levels as gold has runaway to all time highs.

The silver futures daily chart illustrates the key levels in silver:

 

Oil futures are trading sharply lower today and are coming into a key support level going back to late June. If those prices do not hold up, we could see oil trade down below the key $90/barrel price level. At this point in time, I am not interested in trading oil, but if price works down into the $85/barrel price level I will be interested in oil as a longer term trade for the service.

Lastly, Treasuries are really pushing higher recently. I am patiently stalking a long term entry on TBT for the service similar to the oil trade discussed above. For right now, I’m going to remain in cash and see how price action plays out. Members of my service have been sitting in cash for the past few weeks and we have sidestepped this entire selloff. While I’m sitting in cash for now, I have a growing list of names I am stalking for trades in the future.

Take a look at www.OptionsTradingSignals.com/specials/index.php today for a 24 hour 66% off coupon.

JW Jones

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.

If you’ve paid any attention to the inflation vs. deflation debate you’ve noticed that it is fairly convoluted. I’ve read the arguments in great detail and have come to the conclusion that it’s mostly a problem of semantics. Strictly speaking, deflation is a decrease in the supply of money and credit. As bad loans are written off, the supply of credit, which represents the lion’s share of the money supply, decreases.

Colloquially, most people define inflation as rising prices. This introduces a lot of confusion as rising prices are a symptom of inflation rather than its cause. Most of the debates arise as a failure to define inflation (money supply vs. prices) and money (dollars vs. gold). Once those details are pinned down most everyone seems to arrive at similar conclusions. The key to understanding the underlying economic effects is to be able to separate them from the effects introduced by the unit of accounting. Paper money is particularly problematic in this regard, as its value is constantly being debased.

I love repricing things in gold because it brings the long term economic trends into sharp relief.  PricedInGold.com has published some excellent graphs using gold as the numeraire. Look at the Dow Jones Industrial Average (DIA) priced in gold and you will see a clear bear market since 2001. Look at the DIA priced in dollars and the trend is not so clear.

One of the problems with inflation (increasing the money supply) is that it distorts the basic unit of accounting. How can resources be allocated properly when the purchasing power of a dollar is constantly changing? What may nominally appear as profit, or a bull market, may just be a loss of value in the unit of measurement.

Imagine the disaster that would occur in the building of a bridge if the physical length represented by an inch changed every day during its construction. Nothing would ever match up. Nothing would ever work. This is one of the great problems our economy has suffered from for the last decade. A profit in terms of dollars does not necessarily represent a gain in purchasing power. When this essential signal becomes distorted, resources will be constantly misallocated. This leads to a continual state of recession as capital is never invested in line with the needs of the market. A foundation for strong economic growth is never formed.

Bill Haynes recently asked whether another Great Depression was already here. Take a look at the United States’ GDP, when priced in gold rather than dollars, for the answer. A much clearer picture is formed when the effects of unsustainable credit are removed. While the economy may have felt good during the middle part of the last decade, it was largely an effect of living on credit. Much like an individual who lives beyond his means via credit cards, things feel good while future earnings are being pulled in and spent in the present. But when the lines of credit finally run out, the financial reality sets in. It becomes clear that there was no underlying economic growth to support the additional spending.