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November 30, 2008

Honest Money Gold and Silver Report: Market Wrap
by Douglas V. Gnazzo

Market Wrap

Week Ending 11/21/08

The following is an excerpt from the full market wrap report available at the Honest Money Gold & Silver Report website. Stop by and check it out. This week's report includes twenty charts & graphs.

Economy

The Commerce Department reported that gross domestic product contracted 0.5% from July through September.

Third-quarter corporate profits fell 0.9% from the second quarter. This is the fifth quarter in a row that profits were down. Consumer spending fell at a 3.7% annual rate.

Consumer spending accounts for two thirds of the economy, so this is a significant loss. U.S. orders for durable goods, which are meant to last several years, slid 6.2% last month after a 0.2% drop in September.

Purchases of new houses dropped 5.3% to an annual rate of 433,000. The median sales price fell to a four-year low. New-home sales were at the lowest level in 17 years. U.S. foreclosures are up 25% from last year.

The New Deal

The latest New Deal has the U.S. government pledging $7.76 TRILLION in bailout funds. This is more than half the GDP the U.S. produced last year. Where does the government get all this money from - ah yes, that would be you and me and all of us.

Unfortunately, what is being pawned off as monetary policy is no different from FDR's New Deal during the 1930's. In other words, national socialism or corporate collectivism is on the rise. For more details click here: Social Security: The Final Conclusion, Part 10.

The $700 billion Troubled Asset Relief Program (TARP) approved by Congress is a drop in the bucket compared to the above. Latest figures have Federal Reserve lending 1,900 times the weekly average for the three years before the crisis.

When Congress approved TARP Bernanke and Paulson stated that transparency and oversight was needed and would be provided. Recently, however, Bernanke said that to reveal the names of those receiving funds would not be "right"; and refused to do so. This has caused more than a few in Congress to say the Fed should be restrained.

Congressman Scott Garrett, a member of the House Financial Services Committee said:

"The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones."

What affect has all this had on the economy so far? Thirty-year mortgage rates averaged 5.95% in 2007. Presently, the average is 5.98%.

The Fed has lowered interest rates by 4.25 percentage points to 1%. Players are making a killing in the bond market, but rates on home loans have NOT fallen.

The financial sector is mugging the productive sector of the economy and getting bailed out for doing so.

As stated in earlier reports over the years, the real cause of all monetary and economic ills is paper fiat debt-money. The only way to stop deflation or hyperinflation is to stop the inflation that comes first.

Why did the moneychangers push for paper money? Does the Constitution allow for paper money to be accepted between states as legal tender? No it does not. The Constitution mandates gold and silver coin as money. Why?

Paper fiat debt-money allows non-interest bearing debt (FRN's) to circulate as the currency, with interest bearing debt (T-bonds) "securing" it. Yet, the self-same Federal Reserve Notes are used to buy the Treasury bonds with.

When debt and money are one and the same, the monetary system is nothing more than a wealth transference mechanism.

Debt cannot pay off debt. This is why the Constitution mandates gold and silver coin as money; and disallows bills of credit (paper money) from being accepted as legal tender between the states.

The Constitution is not being adhered to. Paper money has been sold to the American public as a "bill of goods" by the elite collectivists that profit thereby.

The solution is to return to a sound monetary system of gold and silver coin. Click here for further details: Honest Money.

The monetary base is expanding at 75% y/y rate, which makes a strong case for inflation down the road.

With the supply of debt that will be issued to fund the bailout programs monetary inflation will be hard pressed to stop.

The fate of the stock market rests with the yen, as commodities do with the dollar. If the yen falls the stock market will rally; and vice versa.

The chart below shows an ascending right-angle triangle formation on the monthly chart with a retest of the recent breakout presently occurring.

Resistance has turned to support. If support holds, look for stocks to head back down when the yen heads back up. This is the intermediate to longer term trend.

Silver

Silver has not been as strong as gold. While gold has broken above its Nov. high, silver has not. Silver has broken above its downward sloping trend line, but it needs to break above horizontal resistance at the Nov. high turning it into support for a sustainable rally to occur.

MACD has put in higher lows but RSI has flattened out as momentum has slowed. RSI is showing a slight negative divergence as well.

Gold Stocks

The gold stocks have started to act better, as the chart below of the GDX/GOLD ratio shows.

A new short term channel up has developed. This is positive for both physical and the stocks.

Gold has held its value better than any other commodity during the on-going asset deflation.

Gold is in the process of forming a bottom. A symmetrical triangle has taken shape with a gap to the upside. Gold and the gold stocks are starting to look better.

Come visit the Honest Money Gold & Silver Report website to see the most up to date charts on the precious metal markets in this week's new edition of the market wrap report.

In today's turbulent times of financial crisis gold and silver are more important than ever. Just made available on site is an audio version of the book Honest Money.

Good luck. Good trading. Good health, and that's a wrap.

Come visit our website: Honest Money Gold & Silver Report
New Book Now Available - Honest Money

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

Douglas V. Gnazzo © 2005-2009
All Rights Reserved Without Prejudice

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