"We now have a potential double bottom on the $US 2 x 3 point and figure chart. To get the double bottom, Gold is going to have to close at $US 618 or higher without falling further. To negate the double bottom, Gold is going to have to close at $US 606 or lower. If it does that, and does not stop at the $US 600 level, there is the potential for Gold to fall back to its mid June lows in the low $US 560s"
The Gold Bull Market This Week - September 8, 2006
AS you know, Gold fell a LOT further this week. It certainly didn't stop at $US 600. That was taken care of right at the start of the week when, on Monday, September 12, spot future Gold fell just under $US 20 to $US 591.60. We're not back to the mid June lows just above the $US 560 level yet, but neither do we yet have any sign of support on any of the Gold charts.
Gold is not alone, of course. All the precious metals took big price dives this week, as did base metals and other commodities, as did oil. At its spot future close of $63.33 on September 16, the oil price is back to its lowest level since late March and only $US 2.30 above the level at which it began the year. If this goes on much longer, the US Labor Department might be tempted to do away with their "core CPI" (excluding food and energy prices) readings. The falling oil price would be just the ticket to maintain the facade that (price) inflation is "low".
And what a facade it is. That same US Labor Department has just released their official US CPI figures for August. Both measures, CPI and "core" CPI rose 0.2 percent, half their rises in the previous month. This, as US economic analysts lost no time in claiming, points to: "...an easing in inflation pressures as forecast by Federal Reserve policy makers". And this, in turn, will "...encourage Fed policy makers to refrain for a second straight month from lifting interest rates." The next FOMC meeting is next Wednesday - September 20. A gargantuan bet has already been made in the paper markets that the Fed will not raise rates at this meeting. An almost equally large bet has been made that they are done with rate rises altogether.
The reason for this attitude to US interest rates is not hard to find. On September 14, Countrywide Financial Corp., the largest mortgage lender in the US, reported that it had funded $US 40 Billion in mortgage loans in August 2006. This was TWENTY-FOUR PERCENT down from their volume in August 2005!
There is nobody of any consequence on Wall Street who does not know that a collapsing housing market spells doom for the US economy. The reason for this is simple. What is called economic "growth" in the US is driven by credit creation which is a mechanism which demands an unending supply of willing and ABLE borrowers to work. There are never any shortage of people who are "willing" to borrow money, but there are times when those who are "able" to borrow it decline in number.
The thing that has made people in the US both willing and able to borrow money in the US for the past four years or so was the housing bubble. It has burst. There is nothing to replace it with, no prospect of inflated valuations in another sector of the economy which people could use to borrow against to the extent thay did against the steadily inflating valuations of their real estate.
All economic booms are caused by "easy money". All of them end when the "easy money" runs out. That brings on the bust. In a rational economic system in which there are savings to fall back on and in which those savings are in a form of money which are not someone elses' liability, the economic bust which follows the boom can only go down to the point where the excessive debt is wiped out. The money itself is not threatened.
But the US, and the rest of the world, does not possess such a system. THAT IS THE PROBLEM. There are no savings to fall back on. Even if there were, these savings are in the form of fiat paper "money" notes which are, by definition, debt.
That situation is bad enough, but the present situation is even worse than that. The most corrupt and tyrannical US Administration ever is facing mid-term elections in the US on November 7. The only way that the Bush Administration can avoid paying for the "high crimes and misdemeanors" they have already committed is to hang onto control of BOTH Houses of Congress. With their foreign "policy" in tatters and seen to be in tatters, they are desperate to postpone any building crisis in their domestic economy until after November 7. The Republicans face a very steep uphill battle to retain control of the House of Reps as the situation presently stands. Any concerted weakness in their financial markets would quickly turn this uphill battle into a hopeless cause.
Here are three facts that those in power in the US already know but those who will be entering the polling booths on November 7 are not yet fully (or even partially in many cases) aware of. The US wars in both Iraq and Afghanistan are already lost, for the same reason that the Vietnam war was lost and beyond any means of recovery. The US economy is utterly and totally bankrupt and a SEVERE recession is an absolute certainty beyond any hope of avoidance. These two are at least suspected by many Americans. The first is being held at bay by what the US mass media does NOT choose to report. The second is being held at bay by the fact that US stock markets are nearing all time highs, the US Dollar is retaining its exchange value, and the prices of real economic goods and in particular precious metals have been pushed down hard.
The third fact is one that few Americans are yet aware of and which US political parties and the US political establishment dare not face or discuss. This is the fact that the current global financial system based on a fiat US Dollar as the "reserve currency" is doomed. A cursory glance at economic history would confirm this to anyone. No monetary system or medium of exchange based on paper given "value" by law (legal tender) has EVER survived. Never. Not once. Not in all of history.
This one will not survive either. But its drawn-out death throes have been made even worse by the desperation of the men clinging to political power in the US. Paper markets and valuations are being supported by main force. The paper money "value" of real wealth (commodities) is being pushed down by main force. And above all, the paper money "value" of the precious metals, the one form of money which CANNOT be debauched by political power, is being "governed" with a vengeance.
There is no telling if all this manipulation will continue to "work" until November 7. There is no doubting the fact that the efforts will continue up until that date - and after if possible. Yes, the rest of the world could stop the charade tomorrow, simply by dumping US Dollars. But the rest of the world has learned in a hard school that it is not a good idea to cut off all exits for a political regime which is already forced into a corner. And besides, they would themselves be staring at stupendous losses if the US Dollar crashes.
As we have stated many times, political power rests on the ability to control and manipulate what a nation uses as its money. Gold and Silver cannot be manipulated. Paper can, and so can the paper "valuations" of Gold and Silver. Right now, the whole world is being held hostage to a failed drive for empire based on an unsustainable monetary and financial system based on nothing more or less than promises to pay. Promises to pay what? More promises to pay.