Daily Commentary

Crisis Fears Soar

by Joe Battaglia
Posted: October 2, 2008

The Chairman of the ECB said today the bank is considering lowering interest rates.  This caused the dollar to soar 120 basis points to 80.67, as the euro fell aggressively.  The result of that was oil falling $1.86 to $96.67 and gold falling $35, with silver down $1.  The impact on all commodities of the dollar strengthening so much has been nothing short of remarkable.  This is particularly true given the fact that our country is about to spend itself into a debt hole from which it will never get out.  This is a period of competitive currency devaluation.  We are in uncharted territory with regard to all of these markets.  For example, the Dow industrials are down 180 points, with the transportation index down 235 points.

 

The real question is whether the entire globe is sinking into a depression.  It's almost hard to believe the dollar, just a few months ago was threatening to collapse below 70 on the index.  Given the fact that there are tens of trillions of dollars that change hands every single day, the movement in the U.S. currency has been mind-boggling.  In addition the volatility in virtually every market has been something that we have never seen before.

 

At the moment gold is again challenging support at $850 an ounce.  In my view, the net result of the economic mess is going to be a serious recession.  This is evidenced by the fact that August factory orders, excluding transportation fell 3.3%, durable goods orders fell 4.8%, and overall factory orders fell 4%.  At the same time unemployment is rising aggressively.  Losses in the equity market have been in the trillions of dollars.  Losses to the banks and financial system may be as large as $40 trillion.  Thus far, our government seems to be on the hook for about $1.2 trillion with no relief in sight.

 

For the moment, analysts are looking toward the House of Representatives to see whether they will join the Senate in passing this bailout bill.  However, once again the bailout bill is so ladened with lard and extraneous provisions that one wonders what could possibly be in the minds of these senators to do such a poor job in discharging their duties. 

 

When we examine the reports of the analysts on the Dow Jones Wire Service, we see they still are encouraged to own and acquire gold at these levels.  As the global economy unwinds, there is little doubt the demand for gold will continue to increase on a flight to quality.  Already the world is seeing tremendous shortages of physical gold and silver as the flight to quality demand has exhausted available supplies.  George Gero, Vice-President of RBC Capital Markets said: "The declines do not mean gold is in a bear market." 

 

The problem we see with the precious metals futures markets, which are controlling price direction at the margin, is that commodities across the board are being liquidated to meet losses in the financial sector.  The commodities provide a liquid market where many financial sector assets, especially in the credit markets are totally illiquid.  It is this dynamic that is creating an aberrant situation for metals and commodities in general.  George Gero further told the Dow Jones Wire Service that: "Recent declines in open interest imply that liquidity is being raised by clearing-house members and hedge funds."  The desperate need for cash is causing the best assets to be liquidated. 

 

However, the paper markets are certainly suffering considerably more stress.  The gold equities have been hammered and are trading at levels we haven't seen since gold was several hundred dollars lower.  This is further evidence of massive liquidation to raise liquidity in a cash starved market.  At the same time, those who are most knowledgeable about the precious metals market, the gold miners themselves, continue to close out hedge positions because they are firmly of the belief that gold prices are headed higher.  That latest company to do that today was ARC Exploration.  It covered 185,391ounces of gold that it had previously sold short.

 

I said on my radio programs the other day that people should own gold regardless of the price.  It doesn't make much difference if gold is higher or lower when you are in a currency and financial crisis.  The important thing to remember is almost everything will collapse, including currencies.  The currencies will buy less and less and less.  The gold will continue to maintain purchasing power regardless of the nominal price.  That is the essential insurance attribute of gold and silver.  Just yesterday I was listening to Jim Cramer on CNBC.  He again said it makes sense to own gold at these levels for safety and insurance.

 

Investors who would like to consider owning some gold or silver, as insurance against loss of buying power of the dollar and further financial crisis ahead, should acquire precious metal assets at these bargain basement prices.  I have consistently recommended that investors consider using Goldline's Price Guarantee Program, which provides a two-week window of opportunity to re-price your order in the event of a correction to obtain more gold or silver for your money.  Also ask Goldline about how you may be able to receive free coins in conjunction with a purchase transaction, which amounts to a discount.  Call Goldline now at 1-800-827-4653.

 

We have put two brand new articles in the free information package to help investors understand the crisis that is underway.  One is an article from the Associated Press discussing the fact that money market funds are not risk free and the other article is from Reuters discussing the time bomb going off on Wall Street.  Both articles would be very helpful pieces of information and they are augmented by the information provided in the other articles and in the company brochure.  Please read all of this information carefully, including the Risk Disclosure Booklet.  Call Goldline at 1-800-827-4653 to receive the free information package.

 

Investors should contact Goldline and ask them to explain the features, benefits and cost structure of the various gold and silver investments that are available to you.  Select those that best meet your own personal and individual investing needs and objectives.  Investors looking for low transaction costs may wish to consider bullion assets such as American Eagles, Krugerrands, Canadian Maple Leafs, Silver Bags or Silver Bars.  However, the Price Guarantee Program is not available with these assets.

 

If you would like to take advantage of the Price Guarantee Program, which provides you with a two-week window of opportunity in which to re-price your order in the event of a correction, you must select assets with some collectible value such as Swiss 20 Francs, Double Eagles and Silver Dollars.  When you acquire $6,000 of private gold, you will receive a free gold coin.  Investors may wish to consider a tube of these coins to obtain two free coins.  Call Goldline at 1-800-827-4653 for further information.

 

To receive the free information package including the four articles on the dollar, the economy and gold call Goldline at 1-800-827-4653.  Goldline also provides several other helpful articles.  There are a number of other independent third party source articles that you will find extremely helpful and informative.  You will also receive the Client Account Agreement, a company brochure and a Coin Facts Risk Disclosure Booklet, read these carefully before you make an investment.  Call Goldline now to receive your free information package at 1-800-827-4653.

 

 

 

^{You should carefully read the client Account Agreement and the Risk Disclosure information. These explain important things you need to know before you invest in precious metals, such as: past performance does not guarantee future results. Transaction costs are generally 5% to 10% on bullion and 30% to 35% on coins. This is also referred to as the spread, or the difference between the buy price and the sell price. The market must go up enough to overcome this spread before an actual profit is achieved. All markets go up and down. Coins are a long-term, three- to five-year, preferably five- to ten-year investment, suitable for 5% to 10% of the average portfolio. Please see Goldline's Risk and Disclosure Statement for further details.}

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