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See earlier related Blogs here:
August 27, 2007 Technical Resistance Has
Many Meanings: Recognize Them And Profit.
August 9, 2007 China Now Controls
America's Financial Destiny
July12, 2007 US Dollar's Decline Is
Getting Serious
July 3, 2007 British Pound Makes A 25
Year New High And Poses Dangers for The US Stock Market
July 2, 2007
Where
Are The US High Tech Jobs Going?
June 28, 2007 Housing Correction
Continues. No Bottom In Sight, Yet
June 24, 2007
The 1929 Crash: Could
It Happen Again? Yes- Absolutely.
June 14, 2007 Ending The War in Iraq
Would Be Bullish.
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9/13/2007
The Coming Dollar
Collapse, Gold and Interest Rates
Yes, this is a scary headline. But if you google "Dollar Colapse" you get
dozens and
dozens of links to
investigate. Since writing a dissertation on the British Chancellors of the
Exchequer at Columbia, I have
thought about this subect over and over. I do commend to
you one
link from an author, Samuel Brittan, whom I read while writing my dissertation.
And, one final thought, no
one in Germany in 1920 expected the Deutsche Mark to become
worthless in 4 years. But it did. And the
consequences were grave.
My Thoughts
Down rushes the US dollar. Bush's trillion dollar Iraq blunder continues. Congress
lacks the will to stop this
costly tragedy. And American jobs keep leaving the country. Meanwhile,
the Fed is under massive
pressure by banks, home builders and mortgage lenders for rescue. Only
the World bull market keeps
the US from slipping into recession. So, what can you do in this
environment to make money.
Buying gold stocks is certainly one time-tested approach. Another
is buying oil stocks, and
another is buying Biotechs, which are more resistanct to recessions
and the initial onset of a
bear market. Will there be a massive liquidity crisis that takes down the
value of all liquid assets,
gold and gold stocks included? That is what we started to see in August,
until the Fed came to the
rescue. These are subjects Our Hotline discusses each night. Here we
want to focus on Gold Stocks,
but first consider the Dollar's steepening decline.
The Dollar and The Euro
These charts do not show very big drop in Dollar in last two days.
There is mounting evidence that foreigners are increasingly unwilling to buy US
debt. And why
should they continue? They
are compensated with interest rates of 6% while the US dollar
declines at a 6.8% clip.
The chart below shows that Central Banks have recently dramatically
increased their selling of US Treasuries. This
means the Fed will have to "print money" in ways
we can't imagine, if they want to
shore up the economy and the stock market until after the
2008 Presidential Election, as
history shows they are want to do. Bernanke in 2003 reportedly
said he would have dropped tons of
freshly printed greenbacks in the 1930's to have prevented the
Great Depression. Much of
his, and his mentor, Milton Friedman's, academic research was
on the monetary mistakes made
between 1928 and 1933.
How To Trade Gold Stocks
Tiger's Automatic Buy and Sell Signals have done particularly well with XAU, the Gold
Stock
Index. $10,000
invested in their Buys and Sells would have brought a profit of
118.7% in the last 11
months.
This does require short selling. If short-selling were not done, the gain
would have been
57% when taking the signals
at the next day's opening. TigerSofts charts calculate this for any stock
you want. It allows $40 per
trade in commission and "slippage". Simply trading the long side would
have produced very good gain in
2005-2006, 40.6%. If you read further, you can see how a trader
might know when to shift from a
trending market to a trading market. In the current situation,
we will know to shift to a trending
approach when the XAU makes a decisive breakout above
160 and Gold Bullion makes an
all-time high above 725. In the meantime, we now have an
automatic Sell on the XAU, though I
would personally want to wait long to sell out gold stocks.
The dollar is profoundly weak.
With interest rates being lowered by the Fed, it will be harder
and harder for the Treasury to sell
its massive debt to pay for Bush's Trillion Dollar Iraq War.
The XAU has been trading essentially sidewise for since January 2005. Tiger's
Automatic
Buys and Sells sense this and
produce signals appropriate for this type of stock behavior.
2006-2007
2005-2006
From March 2006 to December 2006, Tiger's automatic signals would have
gained a trader
65.4%, or 40.6% only buying and selling. This sues the next day's
opening price.
2004-2005
In 2004 the XAU was in a strong uptrend. We can see this in any ways.
But look at the ITRS indicator at the bottom of the chart below. This shows how
well the XAU is doing versus the Dow Jones Ind. Avg. Until March 2006, it
has been steadily positive. A SIMPLE way to trade a market or stock like this,
is to buy the stock when it is above a 20 or 21 day mvg. avg. That would have
gained 57% between July 2004 and March 2005.
Gold is fast approaching its 1980 peak at
$725.
Trading the Fidelity Gold Fund with TigerSoft
TigerSoft signals here would
have produced an 88% gain since November 2006.
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Gold Seasonality
A peak in October, a shallow decline into November and then a
year-end rally are what seasonality
would lead us to expect.
30-year Study by seasonalcharts.com
Adam Hamilton on Gold Seasonality
"Seasonality also exists in gold. There are times of the calendar year when
gold tends to do well and other times when it does not. Although there are many
varying reasons for this phenomenon around the world, the most famous example
of gold seasonality has to be the Indian wedding season.
"Indians have a deep cultural
affinity for gold, so in the autumn India's farmers
tend to invest their profits from harvest in gold. But even more gold is bought
for the Indian weddings that happen late in the year during festivals, mainly
in October and November. Something like 40% of India's annual gold demand
occurs in this short period of time. Wedding gold is often in the form of intricate
22-karat jewelry that the bride's parents give her to secure her financial future
and financial independence within her husband's family.
"Just as wheat traders use
wheat's seasonality to help them make trading decisions,
gold and even gold-stock traders can use gold's seasonality. With gold having definite
seasonal tendencies at different times during the calendar year, investors and speculators
can study it to better understand when seasonality helps or hinders their probabilities
for
success in launching new trades."
(Source: http://www.321gold.com/editorials/hamilton/hamilton071307.html
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