If you peruse what the "mainstream financial analysts" are saying, you may have run across this over the past week. Yes, that's right, there have been several warnings out that the $US Gold market is in a BUBBLE" situation. We have seen some very amusing analysis in our time, but this is REALLY funny.
(Gold This Week - June 7)
Last week, we talked about the emergence of talk of a "Gold bubble" in many analyses of Gold, the metal having reached a five-year high on a closing price basis at the beginning of June. Sure enough, the correction has come, with $US Gold back to its short-term (25 day) moving average on the chart above for the first time since early May.
The first $US 6.60 "sell off" on June 5 came in after hours trading in New York as a large trading house dumped 5000 contracts. The most recent $US 5.90 "sell off" on June 10 came on the back of some vague rumours about Russian Gold selling. Then, on June 14, Gold spiked up to $US 323 on the news of the car bomb outside the U.S. Embassy in Karachi (Pakistan). At the same time, the Dow dived nearly 250 points, but both situation were brough back under "control" by the end of the day's trading.
We are not surprised by Gold's sudden "weakness", we are well aware of the stakes that are being played for here. No we don't mean the huge Gold "short overhang" held by U.S. trading houses. In the scheme of things, that is a minor detail. We are talking about the continued control of the global financial system by the U.S. (and other) establishments here.
For an excellent overview of how big the stakes really are, we refer you to an essay on Lew Rockwell's website called When Didn’t They Know It, and What About You?. We commend this article and the gentleman who wrote it to your attention. He puts the whole tragic situation in perspective.
The economic and financial situation in the U.S. is dire. It is getting very hard to ignore how dire it is. Consumer confidence, according to figures just released, has taken a nosedive. This is a terrible impediment for all those still trying to "talk up" the U.S. economy since they are all unanimous in their claims that an upsurge of consumer spending will power the U.S. economic "recovery" they still insist is just around the corner.
The U.S. Treasury wants their "debt limit" increased by $US 750 Billion. The Congress is countering with an "offer" of $US 450 Billion. The Treasury is wailing that this will only keep them "going" until December. Meanwhile, the whole sorry bunch is trying to pass a debt limit increase in secret. Their problem is obvious. Since the last debt ceiling increase in August 1997, Treasury debt has increased by nearly $US 500 Billion. Congress and the Treasury have the problem of trying to "explain" how debt can increase by this amount over the same period as they were reporting five years of Treasury SURPLUSES! It won't wash - they know it - so they are trying to sweep the entire sordid mess under the rug.
An aside here. I am an Australian. I want to say that when Prime Minister Howard - speaking before Congress - claimed to speak for "all Australians" in praising Mr Bush for his leadership "in the defense of freedom(!??)", he didn't speak for me. The comments in Australia about this abject bootlicking have been scathing, to say the least.
The point should be made. The stakes being played for here are HUGE. The chasm between what is being said and what is being done has seldom been greater. The cheerleading from the mass media (especially, it must be said, in the U.S.) has seldom been more nauseating.
This is the last line from A Case For Gold at this website: "And because the money you use is totally controlled by your government, dear reader, so are you. That is the case for Gold as money.".
The reason that the money we use is totally controlled by Government is simply that it is NOT Gold. Back when it WAS Gold, government control was almost infinitely less draconian than it is today. Now, because of the gigantic financial mess that governments have made in the thirty years since Gold and money were finally officially divorced in 1971, government control is aspiring to almost completely draconian dimensions. How draconian? Please go to the link at Lew Rockwell's website (see above) if you haven't already done so.
Given the seriousness of the problems now facing the U.S. political and financial establishment, and given the naked grab for ever more political power by the Bush Administration, it is testament to the increasing understanding of the situation by "ordinary people" that Gold has fallen so modestly over the past two weeks. In market terms, we have a simple and shallow correction.
But as the "game" gets tighter, the potential for a loss of control increases. We shall see how much longer it can be maintained. The evidence will start from what comes out of the G-7 Finance Ministers meeting going on this weekend. This meeting is a preliminary to the G-8 Heads of State meeting next weekend in the foothills of the Rockies in Alberta, Canada.
The U.S. is going to have a VERY tough time keeping the rest of the world in line. We started this analysis with "THE BUBBLE BURSTS?" The question is: WHICH BUBBLE?. Will it be the recent mild correction in the $US Gold price? Or will it be the increasingly threadbare illusion of U.S. financial invulnerability?