Tuesday, December 13, 2011

Gold Update

At this time we see no reason to augment our practice of voicing opinions just hours before the spin statement is released by Benny and The Inkjets.

A quick note to readers who still believe that the Federal Reserve is acting in their best interest.  The Fed is a private institution owned by the member banks, who are also privately owned and tightly controlled.  If you own common JPM shares, you unfortunately do not have any say regarding corporate direction.  Your share vote is superseded by a voting class of shares that does not trade.

When selecting members of the Fed, loyal academic types are sought.  The decision to be released is handed down based on the needs of the member banks.  At times political considerations are made in order to prevent the lynching of public officials in exchange for legislative favors or other consideration.  Most Americans are unaware that congress controls the country's checkbook.  When it spends an extra $1,500,000,000,000 in one year, the Fed creates currency to purchase those extra bonds.  Then the primary dealers buy the bonds at auction and flip them to the Fed keeping a vig as compensation for their efforts.

Now to our update on gold.  Last week we published a bold call that gold was forming a near perfect pennant characterized by lower highs and higher lows.  Since that time the same pennant has shown up on many other sites.  Yesterday's gap down, followed by sustained selling, did not violate the lower range of the pennant.

We have no idea what the Chairman will spin to us today but in the event that his propaganda and complex academic speak send gold prices lower, the next level of support would be the 200dma shown in red.  Following that we would call $1,550 as a general support area.  A break below that would be highly unusual and at this time we can not even make arrangements for such an unlikely scenario.


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