



Friday, September 9, 2011

Swissie Gold and Euro Gold setting all time highs

US based analysts continue to approach the gold market with blinders on as they focus exclusively on the US Dollar price of Gold and draw all their views of the market from that perspective. An apt comparison would be looking at the Dollar price of RICE and extrapolating future price action for the global price of this international food without even considering its price in Japan or Malaysia for example. This is shortsighted at least and foolish at worst as it betrays a flawed understanding of the role of gold in the international arena and its function as the currency of last resort.

With the vast majority of Central Banks around the world embarking on policies and practices designed to deliberately debase their respective currencies, those investors around the globe seeking to protect their wealth from such depradations are buying gold. That is why it continues to make one new high after another across a variety of global currencies.

Consider the price of Gold in Swiss Francs or "Swissie Gold". Ever since the SNB decided to debauch their currency and kill its historic safe haven status, gold has been soaring in terms of the Franc. Do you think that those Swiss who are financially savvy were going to sit idly by while their Central Bank plundered  and looted their wealth?

Or consider the chart of Euro Gold, Gold priced in terms of the Euro. It too is making one new all time high after another. It is responding to the circus in Europe as the monetary authorities and political leaders there provide living testimony why one should not "put their trust in princes". The resignation of the ECB's Stark is yet another straw on that camel's back.

Think citizens in Britain have any more confidence in their leaders than the rest of the Euro Zone? Guess again!

Judging from the price action of the US equity markets this morning, the investing community has as much confidence in the Obama Administration's efforts to create jobs and turn the economy around as the passengers and crew of the Titanic had in their captain to save them from their collision with that  enormous iceburg. This is the reason that while the Central Bank attack on gold continues, they have not been successful in derailing it. No one trusts the hapless clods to fix anything.

Do you get the distinct impression that there seems to be a rising lack of confidence across most of the globe in their respective governments?  Personally I shudder to think where the S&P 500 would be without the surreptitious buying of the Exchange Stabilization Fund.

Considering the debacle unfolding in the equity markets today, the HUI or mining shares index, is once again holding remarkably firm as this sector contines to outperform the rest of the broad market.

Not surprisingly, the US Dollar has become the safe haven currency for the time being not based on any merits of its own, but only because the alternatives are even worse. It is attempting an upside breakout above a key chart level in today's session would which confirm a bottom is in for the intermediate term as it flirts with the 25% Fibonacci retracement level from the decline that began last May. It still looks like a rally in an ongoing bear market however. It could push as high as 79 - 80 on this leg if it sees some follow through gains next week but I frankly would dismiss any long term sustained strength unless it could convincingly clear the 81 level.

In the meantime this Dollar strength is engendering selling in the commodity complex by the hedgie algorithms once again. This is where some of the pressure in SILVER is coming from today. For the time being, the slowing global economic growth theme is currently outweighing the fears of currency debauchment when it comes to commodity pricing.