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Gold Bugs! – Here's Our Pullback!

Forex Kong 20 Comments

Just fantastic.

The recent surge in gold now wiping out the “bottom pickers” and providing excellent long term opportunity across the board. This is the dip to be bought.

The price of Gold is now the exact same as it was back on May 14th! We’ve timed it perfectly, and haven’t missed a thing.

I’m still waiting for lower in both Gold, Silver as well the related mining stocks but as of today one can “offically” get it on their screens, and start creating those short lists.

EXK has always been a favorite of mine, but “it’s all gonna go” in the same upward direction once this pullback runs its course.

A blast from the past: Gold Going Down

You’d have to imagine that “letting gold out the basement” has some pretty braod sweeping implications…one being…..now that The Fed has losened the grip one can imagine that USD will also be allowed to move higher – as the “massive dilusion” will once again be masked with both Gold and USD moving higher medium term.

Fantastic!

 

 

 

Chinese Fire Sale – U.S Dollar Up In Smoke

Forex Kong 43 Comments

Make no mistake…China “will” take the hit on those warehouses filled with “useless dollar bills”, or at least what’s left of them by the time they’ve used all they can to buy gold.

As the “macro plans” continue to take shape, the Chinese will soon look back on the “massive fires that raged through the warehouse district” as a passing story in the news – in the context of a “time of change”.

Consider trading hockey cards with a couple of the other kids on your street. All of the same set and series, until a month or two later a new set is introduced and you start trading those. More kids are buying and trading these “new cards” until finally – all you’re left with is a tiny box of the “old ones” eating up precious storage space under your bed.

Eventually you forget all about them, as the trade of these “new cards” now has you buying and trading with little concern for the “few dollars lost” on the inventory of “old cards” gathering mold underneath your bed.

I think that sums it up.

As China continues to grow its domestic economy, and promote trade in Yuan as opposed to the U.S Dollar, it’s really only a matter of time until both China as well “a large portion of the industrialized world” separates completely from any dependence on a U.S imposed system of trade in U.S Dollars.

We good here?

No terrorism here. No “bash America” / China to rule the world type thing no.

Just a simple outline of how a couple of countries on this planet have grown to be less “export dependent” and more “domestically driven” and far less interested in the purchase and hold of U.S “funny money”- with the unfortunate result leaving The United States and it’s continued devaluation of the U.S Dollar  – out in the cold.

As the Fed continues to “mask” the true devaluation of the U.S Dollar by shorting the gold paper market and driving prices down, China gladly scoops up every ounce she can – demanding “actual delivery of the physical gold”.

China will continue to not only produce more gold, but as well purchase more gold “on the cheap” with every single “Fed raid in the paper market” to soon present the Yuan as a completely convertible currency on the global stage.

Complete with stockpiles of “real gold” sitting in vast warehouses behind it…..somewhere on the other side of the tracks.

So what does this mean for the future of the U.S Dollar and it’s use as the worlds reserve currency? What does this mean for the massive amounts of money previously gained by the U.S via the “use” of USD in trade world wide – soon to be lost?

 

 

The Nixon Shock – Gold, China And USD

Forex Kong 8 Comments

I want to explain something, that I think most of you will find beneficial ( much of the material reworded from Wikipedia ) as well bring it “up to speed” as to what it means in today’s day and age. This might go on for a couple of posts.

After WWII the “international financial powers that be” agreed to create a system wherein the U.S Dollar was placed deliberately as the anchor of the system, with the US government guaranteeing that every US dollar held in reserve – could be exchanged at a fixed rate for gold.

Everyone agreed to use a single currency ( the U.S Dollar ) for international trade, and that those dollars could be exchanged for a “fixed rate of 35 dollars” for an ounce of gold.

This is what is meant by a “gold backed” currency, providing holders of that currency the “confidence” that the pieces of paper in their hands are “actually worth something”…that something being gold.

For every dollar on the planet an equal amount / value in gold, should the holder of that dollar choose to own gold instead.

Got it? Excellent.

This made things “relatively” straight forward as countries around the world “pegged” their local currency to the U.S Dollar, and the U.S Dollar was pegged to the price of gold.

Price “stability” had been established.

So for the first years after World War II, the system worked well as foreigners wanted dollars in order to  spend on American goods such as cars, steel “manufactured” in the U.S.

The U.S. owned over half the world’s official gold reserves ( 574 million ounces at the end of World War II ) so the system appeared secure.

Well….by around 1966 ( due to excessive spending by the U.S for the Vietnam War as well many domestic programs ) the U.S realized that foreign banks reserves had grown to about $14 billion dollars, while the United States had only $13.2 billion in gold reserve. Of those reserves, only $3.2 billion was able to cover foreign holdings as the rest was covering domestic holdings.

essentially the U.S had printed ” a few too many dollars” to cover the actual amount of physical gold held in their vaults.

Soon foreign countries ( holding depreciating USD ) began demanding redemption of these dollars for “real gold”. Switzerland redeemed $50 million, then France acquired $191 million etc until finally on the afternoon of Friday, August 13, 1971 President Nixon “literally pulled the rug out from under the system” ( The Nixon Shock ) and closed the gold window – forbidding foreign holders of U.S Dollars from exchanging them for gold, essentially “sticking foreign holders of U.S Dollars” with a currency now set to be dramatically devalued.

The Nixon Shock unleashed enormous speculation against the dollar as you can imagine. With no gold behind them, the value of “boatloads” of U.S Dollars distributed world wide……..now put into question.

I promise I’ll skip the middle part…and get this up to what’s happening in the world “right now” with China’s movement/interests  in particular.

 

 

 

Gary Savage – The Dumb Money Tracker

Forex Kong 40 Comments

Once again I have trouble containing myself.

Here’s the original post where I quite blatantly called Gary out to discuss his “incredible investment advice”. Specifically TO BUY LONG TERM PUTS ON QQQ AND SPY on December 22nd.

Calling Out Gary Savage – Shame On You Man

The crux of “my issue” with this was the suggestion of “buying long dated puts for 2016” with the expectation of “holding these puts” for “potencially massive gains”.

Now – only 3 weeks later “The Dumb Money Tracker” is suggesting – and I quote:

“””At this point I think one has to throw caution to the winds and just buy stocks. Knowing that the Fed is going to protect the market for the foreseeable future.”””

“””Don’t worry about momentum divergences or trend line breaks. All one needs to know is that the Fed is handing out free money and all you have to do to get your share is buy stocks.”””

3 WEEKS LATER! This……only 3 weeks later.

I can’t for the life of me imagine what “other gems” Gary offers for a “$1 trial subscription”.

You can do your best again man….should you choose to “pop in” and clarify – but to be honest I really don’t see the point.

Smart money?

How bout “No Money”.

Safe Havens – Who Gets The Lions Share?

Forex Kong 22 Comments

As a larger and more pronounced “correction in risk” draws near – we’ll likely get “on more” attempt at new highs – regardless of what’s already underway in currency markets.

It also looks pretty clear to me that this will line up “right on the money” with the ol standard correlation of weaker stocks = stronger dollar, or at least for the initial “zig” of the “soon to be created” series of lower highs and lower lows.

As per the last 6 – 8 months these “zigs n zags” will often see “inverse movement” on smaller time frames, as the “cross winds of influence” push and pull in a generally “confusing manner”.

Sounds like a bunch of hooey doesn’t it? Now try trading it.

To be honest – we really can’t say for certain how things will shake out when / if we do finally get our first “real and true” correction in risk, as it’s been so long, and so much has changed since last time.

For currency traders here’s a mind bender. Do not be surprised at all to see BOTH the Japanese Yen AS WELL the U.S Dollar rise TOGETHER. So if you see the currency pair USD/JPY moving lower – it means that JPY is rising MORE than USD – get it? I thought not.

Otherwise, as suggested by JSkogs ( reader / trader “profesionale”) consideration of where U.S Bonds will go, and of course Gold.

As all four of these assets ( JPY , USD , U.S Treasuries and Gold ) have all at one time or another represented “a play for safety” – it remains to be seen which will take the lions share, when indeed safety is sought.

I for one can’t see the U.S Bonds doing anything but “bouncing”, and am positive that the Japanese Yen will blow people’s faces off, if only for an incredible blast higher.

I’d “like to think” that any USD bounce will be short-lived ( and certainly not a macro change in trend ) and that Gold yes gold…….finally makes its turn.

It will be very interesting for those of us who’ve been trading markets prior to 2008 ( and I can only imagine for those who’ve been trading longer ) to see how this plays out.

I plan on it been equally profitable as well.

Thoughts welcome as always!

Silver And Gold – Is Now The Time To Buy?

Forex Kong 17 Comments

The question has never really been “Kong – should I buy gold?” but more so “Kong – WHEN should I buy gold?”

The long-term fundamental case for owning gold and silver is as solid today, as it will be tomorrow – and as it’s always been. You can’t go wrong owning silver and gold  “if” – you’ve got a long enough profit horizon.

Up until now, gold and silver haven’t been a “trade” as the metals have “generally” fallen like mad, and sat consolidating in range for what feels like eternity. Silver is just a touch lower than the price a full 6 months ago. For the most part when any asset consolidates for this kind of “extended period” the move “out of this consolidation” is usually quite powerful. Very powerful.

In fact, in this case it’s very likely that the first move upward in both gold and silver will be so fast, and likely so large – that anyone who “wasn’t already in the trade” will be left chasing. Not to say that “you’ll miss the boat” as the PM’s (precious metals) have miles of upward potential – just that…..you may be looking to buy “EXK” for example at 7 dollars – as opposed to getting started, down here around 4 bucks.

We are very close to where I would suggest “starting to build positions”, and I feel that the “miners” will provide the largest “bang for your buck”.

Forex_Kong_EXK_Silver_Gold_Nov

Forex_Kong_EXK_Silver_Gold_Nov

It doesn’t matter which “silver miner” you look at as…the charts all look more or less exactly the same. I like EXK as a “trading vehicle” to make a play in the space – but a pile of others will also move in tandem when the PM’s move.

Check out “GPL” for a super low value play – currently trading at .76 cents!

Gold Priced In USD – Invest Don't Trade

Forex Kong 5 Comments

It remains to be seen as to what kind of “legs” this USD rally may have, and it’s implications with respect to the price of gold.

We’ve been over the “theory” as to why the Fed would prefer a lower price in gold as the US Dollar devaluation continues, but of course that’s all it’s been – theory. I fully understand the “short selling” in the paper market by Ben’s friends on the street, but to consider some kind of “global conspiracy” to keep the price “in line” with a sliding US Dollar would be a stretch for sure.

Looking at recent price movement we are “once again” in a position where both the U.S Dollar as well as gold have been falling together ( more or less ) where as just today, a decent “inverse” move with the dollar up and gold down another 17 bucks.

The analogy of “turning around a big cruise ship” as opposed to a motor boat comes to mind in that….these things play out day-to-day but are really moving on a much larger scale over a much longer period of time – and it does take time to turn that ship around. More time than most traders can bear.

It’s my view that anyone “building positions” in the precious metals around this area of price and time ( and lower ) shouldn’t really get into “to much trouble” looking longer term. It’s certainly not a trade, and it’s a big, big boat to turn so….weather or not you can take/manage the drawdown and slug it out is always a matter of ones personal trading / account / exposure / leverage etc…

Looking at specific “price levels” in an attempt to “nail it” on an asset worth 1300.00 bucks is a fools game, as fluxuation’s of 50 bucks here and there would apear normal ( % wise ) when trading “anything” of lesser value.

Hang in there is about all you can do.

Gold And Silver – Manipulation Explained

Forex Kong 12 Comments

If you’re having trouble accepting the general idea that the U.S Federal Reserve will continue its assault on the U.S Dollar ( devaluing USD providing considerable relief to the current government debt obligations) then I can’t imagine you’ll be particularly thrilled with the following breakdown on gold and silver.

There is no greater enemy to the Fed than a rising price in gold or silver.

Against a backdrop of such extreme money printing and currency devaluation in the U.S, if left to reflect its true value” (as we’ve seen with respect to the price of gold priced in Yen)  the price of gold would now be significantly higher – and I mean SIGNIFICANTLY HIGHER than we see reflected in the current “paper market”.

When ever Uncle Ben gets nervous about the price creeping higher, he simply calls his buddies at JP Morgan, sends them a couple suitcases of freshly printed U.S toilet paper and POOF!

JP Morgan piles in even further “short” (via naked short contracts placed at the CME / COMEX) and the “paper price” continues to flounder/move lower. Ben keeps printing useless fiat paper – and the continued “illusion of prosperity” runs across televisions country-wide.

As I understand it ( and please forgive me if I’m way off ) there is considerably more silver/gold current sold “short” than physical / actual metal currently “above ground” on the entire planet Earth, and as informed investors now look to take “actual delivery” of the physical as opposed to just “trading in the paper market” we are about to see some serious fireworks.

Many heavy hitters have already suggested that The Comex may soon be looking at default. (CME Group is the largest futures exchange in the world. Many commodities, of which gold is one, are traded on this exchange. The gold exchange – which is often still referred to as the Comex, its original name prior to being bought by the CME – is the largest gold exchange by volume in the world).

Take it for what it’s worth as JP Morgan is now under investigation by the FBI and other authorities – this all may fall into the category of “conspiracy theory” if one chooses to just bury their head in the sand. 

Your head would absolutely spin if we jump up another “rung on the ladder” to discuss the London Bullion Markets, The Bank of International Settlements and The Fractional Gold System – let alone where China fits in.

Gold And The Dollar – What's Next?

Forex Kong 5 Comments

If you consider the massive easing / devaluation of the Japanese Yen some months ago, and put yourself in the shoes of an average Japanese investor waking up,  morning after morning – only to see the price of Gold  (priced in Yen of course ) going through the roof,  you’d almost think you’d entered the Twilight Zone.

This doesn’t make any sense! I thought the price of Gold was going down, down down. What gives?

When traded “against” a currency that is rapidly losing it’s value ( via rapid printing / easing such as the methods currently being used by the U.S Fed) , it only makes sense that a hard asset ( such as Gold) which cannot be duplicated/printed/ reproduced “should” rise in value substantially – as in the simplest sense – you’ll need a whole lot more of that “local currency” in order to purchase it right?

The example seen in Japan is exactly what one would expect to see  – when a currency is rapidly debased in value, and then compared / traded against something that “cannot” be artificially created. Currency value down = Gold price up.

So what the hell has been going on in the U.S then? Why do I see the value of Gold taken to the cleaners AS WELL my USD / purchasing power getting smashed? How can this be?

How can this be you ask? How can this be?

………………………to be continued.

Should I Buy Gold Kong?

Forex Kong 6 Comments

I get this question a lot – a whole lot. Should I buy gold? Is gold going back up?

Interestingly, if you zoom out to a much longer time frame chart (maybe a weekly and even a monthly chart) you’ll see that Gold has suffered recently – yes…..but is “still” in an uptrend (pending it slows down and looks to reverse in and around this area sometime soon).

I would have to consider 1155.00 as a level of considerable importance and significance.

But please keep in mind (as we’ve discussed with respect to long-term charts) that turns on a weekly chart can take “literally” weeks, and weeks to stop then consolidate and finally turn to reverse course. Even at that ( considering we are looking at an asset that costs 1190.oo dollars) a hundred dollars here, a hundred dollars there – these aren’t “large swings” percentage wise. Putting an exact number on it is a fools game.

More important than the question of “should I buy gold?” would be the matter of “how do I buy gold?”

Don’t charge in there looking to call it a “trade” as you’ll likely miss on nailing an entry, but rather “build” a position over time “smoothing out” this volatility and not sweating the 50 buck swings.

Patience is your greatest asset here. You really can’t rush this one.