Friday, September 2, 2011

Staying power (updated)

8:18 am (Hawaii) At last check, those amazing Asians had pushed spot gold skyward overnight to $1,854 an oz and silver to 42.18.

It is now 100 minutes to the close for the week, all overseas markets have closed shop for the weekend, and the strength endures. Gold is $1,875/oz and silver is 43.23. The midline of Brother Turd Ferguson's charts for both precious metals is being surpassed by silver (42.50) and tested by gold (1880). Talk about powerful. The latest catalyst was this morning's zero-growth jobs report. No shocker there.

I am in neither as a paper trade, though recently AGQ tempted me at 220 and DGP, I sold at 64, fearing another margin hike. What has happened, I surmise, is that demand from India (festival season) and China is so heavy — 55% of global gold demand comes from those two nations — and the end of what is usually a doldum (summer) for PMs have converged. Sprinkle in major demand from citizens of America and the Eurozone who are escaping the shackles of shriveling paper currency, and we have what we have.

When I got up a few hours ago and saw spot gold at $1,880, I had to do a double take. This is where we were just a couple of weeks ago on the way to $1,900 and the high of $1,917. But all the dollar signs and near-2,000 numbers are meaningless, in one sense. I don't buy physical gold and silver with my pittance of resources to get rich. I do it because inflation is killing my little stash. Yet, the vast majority of our fellow citizens prefer to let their hard-earned money get eaten away by inflation termites rather than protect that wealth by storing it in gold and silver.

My lone paper trade is FAZ, which is up from my entry point before yesterday's close (54.50) by 11%. As it neared 60 today, it was also closing in on a 10% gain (possible govt lawsuit against the banksters announced today), and with two round numbers in play, I guessed that it would hit a ceiling. Not so. It shot right through 60 after hovering at 58-59. FAZ is now at 60.41 after hitting a high of 60.64. Again, 70 is clearly in view and it was at 81 just a few weeks ago. FAZ will hit 100, though it could easily fall back to 50 and 41 (support) first. I can see that happening if and when the White House comes out with some kind of bullish chatter next week.

What the WH cannot rein in is the mess in Europe, which was exacerbated by the Fed and the dumping of all those toxic assets via QE2. We feed the drug addict with more lethal drugs, then penalize him for being addicted. It's World History redux.

AGQ has passed 244, which means my hesitation at 220 and 225 (yesterday) has costed me. I thought about entering a tiny position at 241, but chose to wait for a dip. No dip. Silver may be the hottest single thing into the close. There are no silver takedowns by the CME mafia on a Friday afternoon. They save it for Sundays before European holidays.

DGP is steady at 71.43, up 5.6% for the day. Sure, I could've held this at 64, or just held the shares I bought back at 49. I've said this before: Two ways to deal with this schizo, alien-robot-invasion-HFT-algo market is to zip in and out to avoid the next crash, or to buy and forget certain protective vessels. My weapons of defense are gold, silver and FAZ.

AGQ can return to 382 without the speculators of last April, but my guess is it'll go to 300 before stalling out, no matter how favorable the trade for PMs is. Pending a miracle cure from the Fed/White House/etc, AGQ will eventually get back to the all-time high.

DGP is something I once thought I would hold for months. The margin requirement hikes last month spooked me out, but I underestimated the buying power of central banks and citizens of the world. They don't give an F about margin hikes. They're buying with straight cash. So am I. But I don't think I'll enter here with DGP up big, AGQ up 8.2% and FAZ up 11.2%. I'll enter (or add FAZ) on a dip. Profit-taking is the natural course of all winning stocks, so I'll wait. Again.

Update 9:40 am Risk vs. Reward. I took risk off and sold my little sack of FAZ shares at 60.03. That's fine with me. It reached 60.95 today before pulling back on profit-taking, as expected. I made a modest profit (+$5.53/share), no sense holding all the way back to 55 or 50. There is no way to guarantee that there will not be some crazy scheme cooked up by the WH and Fed Sunday night or Thursday morning that will be bullish for banksters.

Please remember, much as Obama has his socialist tendencies, he relied heavily on Wall Street contributions in his first presidential campaign. Think he'll continue to brush them off for the next campaign? Of course not. Problem is, in reality, it's impossible to realize lofty goals (health care for all, stable economy, etc) while trying to appease the big banks. Can't be done. I'm a gray scale kind of guy, but it's a damned fact that the banksters and their elite protectors don't want stability for peons like us. It doesn't profit them much, not like war and reconstruction.

So I'm back to all cash, along with my metal stash. Still believe FAZ goes to 100 at some point, but not before revisiting 50 or 41 first, in probability. AGQ (243.26) and DGP (71.55) steady going into the close. Sunday night will be interesting when the Asian markets open and buyers come flocking to gold and silver. Still considering a re-entry into AGQ or DGP today. I'll hold off on FAZ until the next catalyst, which could be as far away as Thursday, when Obama meets with the mercenaries of Capitol Hill.

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