Gold's two recent tops where it was hammered were $1030 on the day of the Bear Sterns rescue, and $840ish at the time of the Fannie and Freddie rescue.
In both cases, the Wall St and media spin was everything is ok now, the worst is over, the Fed has provided liquidity and its all good now.
This weekend, we've got Lehman Bros, the 4th biggest US investment bank about to or already failed. Merryl Lynch is being bought out by BoA (where will they get the $40b????), AIG the world's biggest insurance co is asking for a $40b loan or saying they will be dead in 48hrs. http://dealbook.blogs.nytimes.com/2008/09/14/aig-seeks-fed-aid-to-survive/index.html?hp
The US Fed are saying we'll now take basically anything as collateral. http://news.goldseek.com/GoldSeek/1221454799.php
Were the premises under which gold was hammered right or wrong? Looks like they were so wrong it wasn't funny, and the spin was pure lies and BS.
If Lehman fails it triggers CDSs wherever it is a counterparty. If AIG goes, or is downgraded they are the major underwriter of CDSs and other OTC derivatives. Ready for a $60 trillion unwind? Got gold or silver?
WHAT THE FED DID on August 17, 2007
For immediate release
To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points.
----------------------Fast Forward
So what was the immediate result of the Fed cut on August 17, 2007? Here it is in a nut shell (which is a preview of what will occur subsequent to the Fed's 75 basis points cut on January 22, 2008):
- QQQQ soared 22% in the next 10 weeks
http://stockcharts.com/h-sc/ui?s=QQQQ&p=D&yr=1&mn=0&dy=0&id=p48287022494
- DOW rose 13% in the next 8 weeks
http://stockcharts.com/h-sc/ui?s=$indu&p=D&yr=1&mn=0&dy=0&id=p48287022494
- Gold sky-rocketed 31% in 11 weeks
http://stockcharts.com/h-sc/ui?s=$gold&p=D&yr=1&mn=0&dy=0&id=p48287022494
- Silver went ballistic 48% in next 11 weeks
http://stockcharts.com/h-sc/ui?s=$silver&p=D&yr=1&mn=0&dy=0&id=p48287022494
- HUI went parabolic 63% in next 10 weeks
http://stockcharts.com/h-sc/ui?s=$hui&p=D&yr=1&mn=0&dy=0&id=p48287022494
- GDX went V-E-R-T-I-C-A-L 66% in next 11 weeks
http://stockcharts.com/h-sc/ui?s=gdx&p=D&yr=1&mn=0&dy=0&id=p48287022494
Indeed Dr Bernanke met the challenge head on...stopping the bears in their tracks.
P.S.
Results of the Canadian PM index subsequent to the August2007 rate cut was similar. The XGD soared 38% in the next 10 weeks'
http://stockcharts.com/h-sc/ui?s=xgd.to&p=D&yr=1&mn=0&dy=0&id=p48287022494
I believe current LOW prices of select gold and silver stocks are godsends for those with liquidity and the well reasoned conviction the secular gold and silver bull markets are alive and well.
_______________________
The FOMC cut again 50 basis points (Fed Funds and the Discount Window) on January 30, 2008. How did this dramatic cut affect the markets short-term?
- DOW stabilized for the next 12 weeks
http://stockcharts.com/h-sc/ui?s=$indu&p=D&yr=1&mn=0&dy=0&id=p48287022494
Gold roared up 21% to an all-time record high ($1025) in 8 weeks
http://stockcharts.com/h-sc/ui?s=$gold&p=D&yr=1&mn=0&dy=0&id=p48287022494
Silver went ballistic 43% in next 8 weeks
http://stockcharts.com/h-sc/ui?s=$silver&p=D&yr=1&mn=0&dy=0&id=p48287022494
HUI rose 24% in next 10 weeks
http://stockcharts.com/h-sc/ui?s=$hui&p=D&yr=1&mn=0&dy=0&id=p48287022494
AND BERNANKE IS AGAIN UP TO BAT -- As there is another FOMC meeting Tuesday (Sept 16, 2008). Based upon the extreme precarious situation of the US Financial (Lehman and others teetering on the brink of disaster), I can foresee the Fed slashing rates by another 50 bps. Consequently, the impact on gold and silver and PM equities should be electric. It is reasonable to expect HUI to rise 30% to 40% and gold and silver to soar.
HOWEVER: there is also an outside chance of a draconian slash by the Fed:
Consider:
For some time the Fed has been periodically cutting rates with a view to resolve the real estate crisis, provide the financial lifeblood liquidity to floundering banks, and to stave off a looming DEPRESSION. But as we all know the “Fed cut medicine” was ALWAYS too little too late (a day late and a dollar short...if you will). Hopefully Dr Bernanke has learned a lesson (after so many failures), and will administer a much stronger doses this time …ie slash interest rates by 100 bps on Tuesday. In this event, the US dollar will plunge to retest multi-year low to 71 (basis US Dollar Index). This will fuel gold, silver and PM equities to launch toward recent all-time record highs of March 2008.
US$
http://stockcharts.com/h-sc/ui?s=$usd&p=D&yr=1&mn=0&dy=0&id=p48287022494
Tuesday, 16 September 2008 is Dr Bernanke’s moment of truth. He will either rise to the challenge, or be clawed to death by the Wall Street bears…as the US financial system disintegrates before his eyes.
Zoom out on your chart and start the TL from 2002.
Throw away the charts
You were?!?!?!?!?!Oh no... I was just starting to get the hang of those EW things.
I see a perfect bounce on that TL from 2002.
You were?!?!?!?!?!
LOL Wayne - 10/10 for Whiskers having a go eh
The 6yr line could still hold, I bloody hope so!
I don't
Ok happy, what do you know that we dont?
We were talking about EURUSD cross. A break below 6yr trendline would almost certainly bring gold down another level. But would seem kind of weird from a fundamental/USDCOT perspective..I can't see it holding. Part of the reason I think gold is a bit volatile but should generally hold around the low 800's in the medium term.
Throw away the charts, entering uncharted territory dictated by fear, greed and dare I say it, official intervention (in all markets) where necessary?
A period of $50 daily swings in POG, lot's of money to be made (or lost) on the swings ie nice $20 spike down to $764 just then then bounce up again. DXY up/down 2 pts!
This is going to be a wild ride! Decoupling time?
We were talking about EURUSD cross.
A break below 6yr trendline would almost certainly bring gold down another level.
:
I can't see it holding. Part of the reason I think gold is a bit volatile but should generally hold around the low 800's in the medium term.
Merryl Lynch is being bought out by BoA (where will they get the $40b????),............. The US Fed are saying we'll now take basically anything as collateral. http://news.goldseek.com/GoldSeek/1221454799.php
Looks like a big part of the reason Merryl was valued at $29/share for the takeover when they were trading at $17 before the weekends carnage is the second bit of news, that the Fed will now take equity as collateral!
Hence BoA put a silly valuation on Merryl, then get to exchange that amt for US Treasuries at the Fed!
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