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Gold, Silver and The Declining Dollar


No matter how you shine light on it, the US dollar has lost its sparkle...

Editor's Note: This article was originally written for December 8, 2006.

It seems that the Minyans in Manhattan was a raging success from all accounts. It looked like a fun night after what must have been some entertaining and thought provoking panel
discussions. To say I am disappointed to miss it is an understatement but the cards didn't fall right for me. Que sera sera. Next year, perhaps. Nice to see that if my mate Weldon was gonna get rolled at poker, at least it was by that little Starks fella. (Well, "little" compared to Weldon and Ewing etc). I dunno how many times I've gotta remind him to watch out for us little blokes – we play above our weight. Good luck in Vegas, Greg. Always carry an ounce of gold with you, it's magic. Trust me.

I've been enjoying being awake during the daytime and have been cranking out some great tunes on the new sound system we built recently. It's great having no neighbors to worry about. My 7-year old daughter wanted to play her favorite album so we put it on. Loud. "We even got the volume up to 4 of 10 and that's a record" she tells my brother's good mate, Paul Mac. Interestingly, American Idiot by Green Day is my little girl's first choice CD, closely followed by Jet's Get Born, The Veronica's (a young girls band),and The Offspring. She will never go past a Ministry of Sound album either! Dad must've rubbed off somewhere on her music taste. Go figure. In 1972 when I was seven, I didn't even have FM radio!! Hmmmm, best keep a close eye on her, methinks.

My little angel bought Green Day as a joke about The Lisa a year or so back and now it travels with her everywhere. She really likes the Green Day grungey music, as I always have. I hadn't really listened to them closely in recent times due to our then nasty-sounding audio equipment. The themes and topics are lost on the little one, unfortunately. I was intrigued reading over the lyrics (rather than what I thought I heard) and have included some snips in bold italics from just 3 songs (American Idiot, Jesus of Suburbia and Holiday) throughout this blabber that I thought were just so worthwhile.

I beg to dream and differ from the hollow lies,
This is the dawning of the rest of our lives.

The Green Day sentiments just about sum up my position at Christmas 2006 give or take a few aspects of life. I've been banging the drum since 2000 on precious metals and I expect that 2007-09 will go down in history as a couple of "those" years. I've stopped banging the drums, it's too hard and only hurts the banger - I'm all banged out. You either heard 'em or you didn't. Where the hell did 2002-2006 go anyway??? Hmmm.

Giddy-up 2007. I hope and expect that physical gold and silver will be included in every member of your family's x-mas stockings this year. A Google (GOOG) share nearly equals gold? Gimme a break! Should you buy physical metal, I can only guarantee the worst, being that you own real gold or silver. How bad is that for a "worst" outcome?

The rest of our lives are going to be very different from what I see. Not overnight, but it's gonna change massively, soon, IMO. Get out of debt and into physical precious metals. There is no alternative. Simple. Well, there is one alternative and that would be to borrow every cent you could and buy gold/silver, hide it, then declare bankruptcy when everyone else does. Then just go get your gold! But that wouldn't be playing fair, right? Hmmm.

"You can't polish a turd, Beavis." – I hadn't heard that line for so long it wasn't funny, that was until The Lisa, while surfing the idiot box, stumbled onto an old Beavis and Butthead episode. I dunno why but the US Dollar immediately came into my head. Hmmm.

No matter how you shine light on it, the US dollar has lost its sparkle, specifically through the eyes of those who own it by the truckload and they're the only ones that count! This is still only early stage development in what will eventually be the re-balancing of the past 20 years of financial excesses brought to you by Sir Alan Greenspan and Co. I'm just surprised holders haven't acted sooner, but then again someone's been buying a heap of physical gold and silver and that's a big tell. "Hear the drum beating out of time, another protestor has crossed the line, to find the moneys on the other side." Dollar diversification we hear? How many paper claims over precious metals do they own? Will they demand delivery? Hmmm, that could be a big problem for COMEX as I have previously discussed the 550 million ounce shortfall should long futures players demand delivery. Hmmm. Too many pieces of increasingly produced paper is chasing bugger all precious metals and that means only one thing - prices don't go down much.

I scan my very long list of reasons as to why I think the US dollar is overvalued versus precious metals, much of which readers would be aware of by now. I also look at the "shiny side" of the dollar argument and to me it's a no brainer. "...and I leave behind this hurricane of *#$!% lies." The dollar will get much weaker and I'm amazed that any rational human being could argue for five minutes otherwise. How do people reconcile personal living fact with the numbers emanating from Government/Official sources which are obediently accepted/promoted by much of the financial media, most financial institutions and increasingly, individual "high profile market commentators" across the board. I just don't get it, I guess. "One nation controlled by the media, information age of hysteria, calling out to Idiot America." Deficits don't matter said Mr. Cheney, Bernanke's printing presses blah blah blah. Even Fed Gov Fisher recently admitted that inflation numbers used by the Fed have been significanty understated. Someone's gotta tell these blokes that ya just can't print your way to prosperity. It's been tried before and has literally destroyed those who got suckered. Fiat currencies never work for long, so history tells me, and he is batting 1.000. "...calling out to Idiot America."

To actually own the US Dollar (IOU's from the US Government) is indeed hard for me to fathom, but I take solace in sitting back in front of my simple four screens, grabbing hold of my little bar and having a good old fiddle. It's so relaxing. Settle down, we're talking gold bars… sicko's.

What do you really trust, Physical Metal or a Governments' paper promises? Simple, really. Isn't it?

The London Fixes tell the story, IMO. Intervention versus manipulation is always a dark subject and the elephant in the room won't be ignored for much longer. I have said many times previously that I believe that paper metal is the bludgeon that keeps gold in its "place" at present – until it doesn't. Former Fed-Head Volcker said recently that "not controlling the gold price was the error of the 70's early 80's." The same mistake is not being made at present, IMO. The simple interbank forward and option markets, Exchange Traded Futures and Options, OTC cash-settled Derivatives and associated leverage, the new EFT's, precious metal swaps, leasing agreements and borrowed gold as well as simple spot deferred contracts provide a myriad of alternatives in which to operate any such "intervention." We see "intervention" in foreign exchange and money markets everyday but what about other markets? One would be naive to think it does not occur. Seriously, just open your bloody eyes.

Hi Ho Silver and those who got in sub $11 should be taking a few profits (say 30% of position up near $14) but don't get off this pony completely, there's a long way to go and we are on Kingston Town (see my article: The King and Gold). I reckon another crack at 12.25 is a 50-50 proposition, before a new high sets early next year; well that's what I'm thinking at present. How many arguments am I gonna get if I suggest a print of 18.65 in silver sometime before Melbourne Cup Day 2007? Over the same period, I reckon the Downside is $10.45 at worst, probably not below $11 again.

BTW, in the interest of disclosure, I sold 27% of my retirement fund's holding in Silver Standard Resources (SSRI) in last few days as a function of risk management and diversification. I still like it as the silver play going forward and it has been very, very good to me over the last five or so years. Note I did not sell any SSRI for any other accounts

Gold maybe to 605-10 on a stuffing but the physical market sets the pace these days indicating the physical market won't tolerate downside moves of much more than 1.5% on a given day no matter what the currency does. Demand is seriously strong via India and the Middle East. Intraday moves of greater are just trade opportunities, IMO. The London AM fix seems like a siren for the sellers to come out these days. Oh well, don't whine about it, take advantage of it. Check your charts.

More to come in similar vein.
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Position in gold, silver, SSRI

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