Monday, February 23, 2009

Gold’s Assault On the Clueless

We’ve been monitoring gold’s vital signs closely, since any foray above $1000 is cause for nervousness. The yellow stuff has always been free to roam, and even to misbehave, below that price; but once above it, the bankers regard each rally with a glower of malice.  While it is indisputable that debt deflation’s irresistible power has rendered the central banks incapable of exerting any meaningful control over the sovereign economies they represent, the bankers and the IMF still have the ability to crush any hint of rebellion by those gold bulls who would deign to challenge the monetary status quo. With their relatively large stocks of physical gold, and the complicity of institutional agents such as JP Morgan to help suppress “paper gold” in futures markets, the bankers still have enough influence over bullion’s price to temporarily suspend the laws of supply and demand.



The politicians are on board, of course, although not as conspirators. They are all knee-jerk Keynesians at the moment, either too stupid and/or lacking in imagination to understand why fiscal spending, no matter how much of it, cannot possibly pry the economy from a deflationary black hole. They have put their trust in eggheads and MBAs to fix things, even if most of us have begun to suspect that throwing yet more trillions of dollars into the maw of deflation will not solve anything. Although our elected leaders might not feel so strongly about gold as Keynes, who was appalled by the popular appeal of “that barbarous relic,” they are nonetheless dumbfounded as to why anyone would prefer gold-backed currency to the Monopoly money that The Government has empowered as legal tender.


Concerning our immediate outlook for gold, we have identified 1025.20 as the next significant point of resistance for the Comex April futures contract. The number is yet another in a series of Hidden Pivots that have told us unequivocally and at each step along the way whether buyers were ready to forge effortlessly higher. If 1025.20 gives way easily, as other points of resistance have, we’re ready to infer that the benighted acolytes of Keynes are about to get fragged by investors who are growing increasingly restless, if not to say panicky, about The Government’s apparent powerlessness to ameliorate economic distress.

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