Why Is Gold Going Up?
Basically all the markets moved sideways, except Gold which rose significantly.
I am watching the stock market, as I believe it could be on the cusp of a breakdown. The DJ30 was “at” the 50 day moving average last Friday, but bounced up today. Tomorrow could be the day it goes below the 50 DMA. The S&P is below the 50 DMA, so it is already signaling a future fall in value. While this measure of future market movement is far from perfect, it is good enough for me right now.
In the news today……
CIT goes bankrupt – and they have a pre-planned bankruptcy so the bondholders are happy with the outcome. They will reemerge from bankruptcy as a stronger company. Who loses? YOU DO!!!! This marks the first time that a government bailout will be wiped out by a bankruptcy court. YOU will lose $2.3B that was given to CIT by our government on your behalf. Don’t get too excited; this won’t be the last time you lose money that was spent by the government on your behalf. Oh, I guess you’ll see this on your evening news station as this will be one of the largest bankruptcies in the US to happen.
Goldman Sachs – now wants to buy $1B of tax credits from Fannie Mae. Now this is an interesting thing, isn’t it. Goldman would pay less than $1B for $1B worth of tax credits, so it can reduce its overall tax bill by $1B. Does this sound like a scam to you??? It does to me. These tax credits were written to allow low income housing to be built, but are no longer needed – so the scavenger is out. How would you like to go to the government and “buy” tax credits to reduce your tax bill??? I would, for sure. But this isn’t available to you or me. Why should Goldman Sachs be allowed to do it? The Treasury is balking – and they better balk, and this is political dynamite when the ordinary person realizes he is getting ripped off. If the government doesn’t sell the tax credits, Goldman Sachs will have to pay its full tax bill, and the taxpayer (that’s you and me) get what we deserve from their profits – not some negotiated lesser amount.
Goldman Sachs secretly bet on the housing crash – In 2006 and 2007, Goldman Sachs (GS) sold more than $40B in mortgage-backed securities to pension funds, insurance companies, labor unions and foreign financial institutions, while failing to disclose it was betting heavily on a sharp drop in U.S. housing prices. While some say the omission may be a violation of securities laws, Goldman says it had no obligation to disclose its internal hedges. Is this where that income that is taxable – as per the previous article – is coming from. These scumbags knew that housing was going to crash – bet on it – and (AND) continued to sell those toxic mortgages to its customers. They should be shunned by everyone who does business out there. They are just immoral – plain and simple.
Manufacturing Sector – grew for the 3rd month in a row. Great news. But, they aren’t really hiring people yet, so there is caution in the industry. When the crisis hit last year, people stopped buying and industry stopped producing, and the inventories were depleted. Now the inventories are being rebuilt. Good news. It will continue to be good news if people continue to buy. If not, or more unemployment stop people from buying, then industrial strength will dwindle.
Tonight’s Dinner Conversation…..
Why is Gold going up?? Here is a great explanation by Richard Gray.
“I believe there are two real drivers behind the gold price: the fear trade vs. the U.S. dollar, and the potential for inflation. I tend to minimize the overall impact of supply and demand. Given what we’ve seen over the course of 2009, investors are looking for an alternative investment to the dollar. If you go back to when the overall economy ran into trouble last fall, ever since then it’s been more of a dollar vs. gold story and that’s still true today.
As the economy recovers and there’s a scenario where inflation is an issue, then there’s a case to be made that gold will do well then, as well. But for the time being, it’s just people worried about where their money is today and using gold as a safe haven vs. where it could go with their other investments. What we’ve seen in the last six weeks is that gold has broken through some historic levels because there’s increased worry that maybe the U.S. dollar isn’t the world currency anymore and the U.S. economy is really not as stable as we’ve been led to believe.
Investment demand, whether from funds or individuals, has been a major, major driver, taking gold from $700/oz through to where we are today. And this investment demand is simply investors just looking for a safe place to put their money.”
Do you agree that Supply and Demand are not pushing the gold market right now?
Here are the last numbers for today:
Dow Jones 30 Industrial – 9763 (up 50 points)
10 Year Treasury Bond – 3.41% (up 0.02%)
Euro – $1.4756
Gold – $1053 (up $14)
Oil – $78.01 (up $1.01)
Gasoline – $1.99 (up $0.03)
