Market Wrap
Week Ending 10/31/08
The following is a short excerpt from the full market wrap that can be viewed only at: Honest Money Gold & Silver Report (click link to access). Two dozen charts are available for your viewing.
Currency
One of the driving forces behind the various asset bubbles around the world has been the yen carry trade. Traders borrowed the yen at 0.5% and invested in higher-yielding assets around the world. There has also been a carry trade prevalent in the U.S. dollar and Swiss Franc.
Presently, the Yen has been the strongest currency worldwide; with the dollar close behind. Traders that borrowed yen and dollars to "invest" in higher yielding instruments are now scrambling to settle their trades. The demand for dollars and yen has been huge. Hence the quick and violent moves the currency markets have been experiencing.
The yen/euro cross has been in a parabolic blow-off. When the yen is strong stock markets are weak, as traders are resistant to take on risk. When the yen falls traders are more willing to take on risk and markets go up.
Look for the gaps to be filled and stocks to rally. A MA crossover appears to slowly be developing, which would result in the yen up and stocks down.
Gold
Gold was down -12.10 to close at $718.20 (continuous contract) for a weekly loss of -1.66%. Year to date gold is down approximately 16%.
Since making its all-time high back in March gold has lost about 30%. Gold's five year rate of return is just shy of 90%.
As long as gold holds the bottom trend line the long term trend remains intact.
Gold priced in Euros is doing much better than gold priced in U.S. dollars.
Summary
The global financial system remains in shambles. It can be no other way, as all world currencies are paper fiat debt-money. Until a sound monetary system of gold and silver money is restored, the system will remain unstable and prone to mishap.
The monetary base in the U.S. is exploding upwards, guaranteeing monetary inflation. Currency debasement (loss of purchasing power) is assured. Rising debt levels are a given. All this is gold positive.
Volatility reigns supreme within the markets. Cash and gold are best in times of uncertainty such as these. The stock market is in a bear market and strength is to be sold into.
Gold and silver should be held as insurance - insurance against further currency debasement (loss of purchasing power). For thousands of years gold has been accepted as money anytime, anyplace. All central banks hold gold in their reserve deposits.
In a paper fiat money system such as ours, Treasury bonds secure the circulating currency known as dollar bills or Federal Reserve Notes. This means that interest paying debt (Treasury bonds) secure non-interest paying debt (Federal Reserve Notes or dollar bills), which in turn are used to purchase the self-same Treasury bonds with. A most interesting scheme is it not?
All the bailout plans call for more and more debt to be issued, which in turn secures more and more money supply, which in turn can buy more and more debt: and around she goes - where she stops - nobody knows.
Paper fiat debt-money is on self-destruct, it carries within a deadly seed. The 21st century will go down in history as the age when paper fiat money died and gold and other tangible assets became dear once again - when value was no longer measured by promises to pay, but by payment itself - using honest weights and measures.
The latest full-length version of this week's market wrap is available only on our web site: Honest Money Gold & Silver Report. Most major markets are included with the emphasis on the precious metals market. Two dozen charts with commentary are available, including our stocks watch list. See why we believe gold is in a secular bull market. Stop by and check it out: Honest Money Gold & Silver Report.
Good luck. Good trading. Good health, and that's a wrap.
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