Friday, January 7, 2011

The Next Move

It appears gold has bottomed at $1355, silver bottomed at $28.40, and platinum bottomed yesterday at $1705.  The fact that platinum stayed above yesterday's low is the technical reason I think precious metals have bottomed.  The fundamental reason is because I think Bernanke has no idea what he is doing.

Bernanke is going to hold Treasurie debt until it expires and this is what solves the economic crisis?  The crisis started because cheap energy is no longer abundant and the monie which we use to trade the energy is on the downside of its production.  Gold production bottomed over a decade ago, and it will not be long until oil does as well.  We are now in the grey zone of finance; it is easy to mine the gold while the oil is at the top of production.  Once again, it is because of cheap energy, as cheap fuel, that mining gold is so profitable.  This is essentially 1849 all over again.

ABX tested 49 and it appears it will move up from there.  The whole mining sector took a hit this week on gold's manipulation.  How was gold manipulated?  Well if Bernanke was leasing gold and not allowing any bids, and at the same time Blythe and the House of John Pierpont Morgan were short selling gold, that would cause a significant drop in its price.  I imagine Bernanke finally leased some gold today, which explained the price action.  Considering Hu and China are in the US building, I would not be surprised to find out several months down the line that China did lease gold this month.

Now that Bernanke made it past his Senate Test, I imagine it will be more POMO, more monie printing, and more manipulation.  The only thing is if bank equity is  to increase, gold prices need to increase.  That really is the only certain thing the market has going right now.

So if bank equity is to increase, gold will increase, but the banks want to make even more monie so they will spend their cash.  They will buy corporate debt and equity, so corporations will stay strong.  This is the last phase of the market consolidation started bt the Fall of '08.

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