The Financial System Is Sick: Are Precious Metals the Cure?

Source: Vin Maru, TDV Golden Trader  (2/27/12)

"History has show us over and over again that owning gold and silver is the best way of protecting yourself when currencies become devalued or inflated away to nothing."


The Virus that Plagues Our Financial System

Looking at the general equity markets overall, we can clearly see that the fear of sovereign debt downgrade and economic slowdown that started last summer ended during the fall. After four months of uncertainty on whether the bankers and government would allow another downward spiral in the economy and stock markets like we had in 2008, we now have our answer. The system will not be allowed to naturally correct and adjust, as free markets would have them do. Banks that own toxic assets are no longer keeping financial records under generally accepted accounting principles (GAAP) or applying mark-to-market valuation for the assets they hold on their books. However, we really can’t blame the banks for the entire problem we see in the financial world, they have been given bandages to conceal the wounds from the public’s eye.

Today’s western financial world operates much like our government-sponsored medical system. Mask the problem and give the bankers the pharmaceutical drugs (bailout money) to help them dull the pain and keep them on life support. Letting the free markets work in curing the ailment is not an option because then there would be little need for doctors (governments) or the manufacturers of these drugs (central banks). The banks are sick and should be allowed to pass on, peacefully ensuring the virus known as debt does not affect the rest of the population. Unfortunately, the governments and central bankers have only one prescription drug of choice to keep them alive. Printing money seems to be the cure to all sovereign debt problems around the world.

How much money was doled out to sick banks during the last few years is anyone’s guess, since the drug-dealing central bankers do not share information about the patents they hold (monopoly on money) or their sales figures (bailout money). There is absolutely no transparency on the amount of placebos they prescribe to every patient in the financial system or who is taking these pills to stay on life support. Lord James of Blackheath seems to think that the Federal Reserve injected these dying banks with $15 trillion (T) of lifesaving drugs, but where did the placebos come from? He does a good job trying to explain it (Bush, Fed, Europe Banks in $15T Fraud, All Documented), but no one is listening. This doesn’t surprise me: As long as the patient is still alive, who cares?

The Natural Cure to Kill this Virus

The western financial system, based on pure fiat currency, is the virus that will be the death of the financial world as we know it. Taking more and more of the same drug makes your immune system resilient to that drug, so each additional does becomes less effective. Printing more and more money does not cure the financial system, but in fact weakens our immune system to the point where the drug becomes a toxic mix of chemicals that will lead us to our death bed. An ancient healing system known as Ayurveda, "the knowledge for long life," has been used for thousands of years in India. It’s an ancient healing system that aims to naturally treat and heal the body, mind and spirit much like yoga, which also brings balance into your life. The financial world is out of balance and no dose of printing will cure its problems, it will only mask the virus brought on by the bankers that is now spreading throughout the world.

So how do we kill the virus know as paper money and debts? It’s very simple: You can starve the virus by taking away the food that allows it to grow in the first place, which means taking the printing presses away from central bankers, something they won’t give up easily. Or you can introduce a virus killer into the system to cleanse it and eliminate 99% of the ailments caused by this virus we know as debt and paper money. This virus nurtured by central bankers could easily be killed with the use of gold and silver as money in our monetary system, thus eliminating the need for a central bank. Ayurveda has been used for thousands of years to naturally heal and maintain a good balance between mind, body and spirit. For most of history, silver and gold has been used as money and has all the properties we need for a sound financial system. Silver was used as a common currency for everyday transactions by the average person, where gold was mostly for a store of value for the wealthy. Outside of money, silver also has many industrial uses, including in film, solar and electronics. One of the few uses that is rarely discussed is medical uses for silver, including its ability to kill 99% of the known viruses, thus helping eliminate the need for unnecessary medicinal drugs manufactured by big pharma. Spend a few hours googling silver’s medicinal properties and you will see what I mean.

So what does this mean for me and my financial health?

Don’t rely on big pharma—your government or central banks—to protect your health and wealth. The system is not designed to protect you. In fact, it is now stealing you wealth through inflation by endless printing of money. The real wealth is being transferring to people who take the necessary steps to protect themselves by owning the very thing that the bankers covet the most, gold and silver. History has shown us over and over again that owning gold and silver is the best way of protecting yourself when currencies become devalued or inflated away to nothing. You must take responsibility for your own actions in life, which means taking the necessary precautions to protect your wealth and health in order to bring balance back to your life, something Indians have know for thousands of years.

Gold Trading Range

In last week’s review, we mentioned that gold was trading in a sideways channel between $1,720/ounce (oz) and $1,750/oz, which is a good development for gold. The longer this consolidation and trading range held in terms of time, the less likelihood a downside correction would occur. As more people start accepting a $1,700 + gold price, it will eventually lead to higher stock prices in the gold mining shares.

Gold traded toward the top of the trading at $1,750/oz early in the week and from Tuesday onward the price has never looked back. Closing the week at $1,775/oz, gold was able to gain over $60 and most likely the $1,750 price will now act as support for the coming weeks.

Technical Analysis

The RSI has been holding above 60 this past week, with the gold price rising. We haven’t seen any spike higher above 70 and toward 80, which is still positive. An extreme reading above 80 is something we will look for in the future, at which point a significant correction could occur.

The MACD had been rising since the beginning of the year but is now flattened out, while the price of gold is still rising. It has yet to turn negative, so the trend for the price of gold is still up in a slow grind higher.

This week’s trading range: Support: $1,750, $1,725 and the 50 DMA at $1,671.50 (strong buy).
Resistance: $1,800 initially, then $1,850 and $1,900 (exit trading position at $1,900).

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Gold Mining Sector Index

The HUI index has yet to break above the negative downward trend line that has been acting as overhead resistance since the fall. So it seems gold is still outperforming the mining shares, which has been the general theme for the last year. Gold shares are still not getting the respect and higher prices as gold has. We still feel that these share valuations are low and the sector is mostly going higher toward the end of this year. Earnings are increasing with higher gold prices and the value buyers will be attracted to the gold mining as gold continues its trend higher.

Depending on which way gold trades this coming week, the HUI will most likely follow. If gold continues its rally and $1,750 becomes support, I suspect the HUI will hold above 540 and possibly trade toward 575 on a breakout above the overhead trend line. For now the technical indicators are still in a positive uptrend and bidding shares is probably a good idea since we have yet to see any overbought conditions that would cause us worry about holding these positions.

Over the last few weeks we mention placing lowball bids on the stocks we like at about 10% below market stock prices. After this final round of purchasing, we suggest not taking too many new trading positions. The strategy is to have your position early enough so that we can start selling into major rallies at higher prices during the first half of this year.

This week’s trading range:

Support: 525 at the lower channel line (buy gold stocks). Resistance: 550 at 200 DMA; if the bullish move in gold continues, resistance can be bumped up to the 575 range.

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Cheers,

Vin Maru, TDV Golden Trader

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