Gold Continues To March Toward $2,000
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In This Issue.

* Gold still has work to do!

* Currencies are stronger this morning.

* Swiss in, Japanese jawbone.

* Boondoggle week for the Fed!

And, Now, Today's Pfennig For Your Thoughts!

Gold Continues To March Toward $2,000

Good day. And a Marvelous Monday to you! After a very rainy Saturday morning, the rest of the weekend's weather was beautiful, which always brings me out of my "cave" to enjoy the outdoors. We celebrated Dawn's birthday Saturday night, with a family dinner "on the hill" (St. Louisans know where that is) and I had a funny thing happen to me at a restaurant yesterday morning that I'll talk to you about later. First, we must get to the markets!

Well.. Friday morning I wrote about Gold extensively, eh? Well, guess what? I'm going to spend a few minutes doing the same today, because, don't look know, but Gold is $1,881!!! In the "mother of all flights to safety" Gold continues to wind its way toward $2,000. I was reading about Gold this past weekend and came across something interesting. Although Gold is booking all-time record highs in spot price with every tick higher, the shiny metal has still got some work to do, to reach its "inflation adjusted high". That's right. Gold's previous high of $850 in today's dollars or adjusted for inflation, is equal to around $2,400.

But Inflation isn't what's really driving Gold right now. yes, investors are scared to the bone about all the work the printing presses have been doing, but right now, fear is what's driving the price of Gold higher and higher. fear and uncertainty, and haven't I for the past 3 years or so, said that Gold was the "uncertainty hedge"? I would say we have "uncertainty" in the markets and economies of the U.S. , Japan, and Europe, eh?

OK. On Friday, I also told you that the currencies were weaker. and that remained the soup of the day for the rest of Friday, but this morning, things are looking a bit better for the currencies. The euro just can't catch a break for more than 2 days, before some news gets printed about this, that or the other thing going on there. You know, I have to mention this. but, Greece is the poster child for the debt problems of the Eurozone periphery countries. But did you know that Greece has cut 11% of their spending since the austerity measures began in 2009? If congress were to cut 11% of their spending, it would amount to about $400 Billion in cuts a year. That's far more than what I believe we'll see from the newly formed debt commission made up of 6 Republicans and 6 Democrats.

The debt commission might want to also know that by cutting 11% of their spending, the Greek economy has gone into a deep recession, and caused all that social unrest that's been documented on TV.

Back to the euro. the offset currency to the dollar, is held hostage each and every day to the just how much the media wants to focus on the Eurozone's problems. Last week, it was the Merkel / Sarkozy meeting that produced very little. The calls from the markets last week for a "Euro-bond" have been met with resistance by Germany's Merkel, so unless she changes her mind, you can forget about a "Euro-bond", because with Germany being the largest economy of the Eurozone, they can dictate what they do and don't do.

In my opinion, there are two things that keep the euro stronger VS the dollar. the biggest thing is the ugly contest that I've told you about. the dollar is just uglier in trader's minds. and the other thing is the credibility that the European Central Bank (ECB) and its president, Jean-Claude Trichet, has built with the markets. The U.S. Fed is losing is credibility every time they implement another plan to "save the economy".

Besides the euro, the rest of the currencies from Norwegian krone to New Zealand dollars are stronger this morning. In the "intervention room" that Switzerland and Japan have decided to be co-habitats of. there is talk in the markets that Switzerland was in the markets intervening overnight, while Japan has chosen to just jawbone the currency weaker. Unfortunately for both of them, neither is going to work in the long run. Especially the jawboning, because it's all stuff we've heard before from the Japanese officials. You would think they would be able to come up with something new to say, but apparently that's too difficult to do, because it's the same-old, same-old situation. and I think the markets are growing tired of this jawboning, and are getting ready to push yen higher still. just to test the Bank of Japan's resolve.

A month ago, when I was in Vancouver, the Brazilian Gov't introduced a new plan to stem the real's appreciation, and I thought it would be akin to the "kitchen sink" that the Brazilian Gov't hadn't pulled from the wall yet, to throw at the markets. You may recall, that I sounded a bit concerned, and poor Chris got thrown in the middle of me sounding concerned and the Legal Beagles, and we had to print an explanation? Well. that "kitchen sink" that the Gov't threw at the markets, only lasted a couple of weeks, before the markets went back to work at pushing the real higher. You may also recall me telling you last week that with the World Cup and then the Olympics coming to Brazil, they're going to need all the incoming investment they can get, and the Gov't is just attempting to keep the currency trading orderly.

If it weren't so dumb, I would think it to be pretty funny. I'm talking about the fact that the U.S. V.P. went to China, and since he went, the Chinese renminbi has been weakening! Every time in the past 8 years that someone from the U.S. goes to China to discuss their currency, the Chinese smile and say they'll allow a faster appreciation, and then as soon as the visitor leaves, they allow the renminbi to weaken! I do believe this is just their way saying. "Thanks, but no thanks, we'll do what's best for China, and move the currency stronger when we believe it should be moved stronger"

Well. this week, is the annual Fed boondoggle at Jackson Hole, Wyoming. ( I grew up on Wyoming Street in South St. Louis, so my mind flashes back to my youth whenever I type: Wyoming) At last year's boondoggle, Fed Chairman Big Ben Bernanke, chose to announce that the Fed was going to implement another round of Quantitative Easing (QE2). Big Ben doesn't speak until Friday, so as the week goes on, there will be lots of buildup and perspective as to what he will say this year. I've even read that he could announce QE3 here. I doubt that, but, you never know!

There's lots of talk in the markets about another round of QE, but I don't think the timing on the announcement this week is right. However, I do believe that Big Ben will choose to discuss the Fed's options. and if QE is one of those "options" then the floodgates will open.

Well. the data cupboard this week has some interesting data to print, but a lot of insignificant data too. The interesting data prints will be New Home Sales for July, Durable Goods Orders for July, and the next revision of 2nd QTR GDP, which previously printed at 1.3%, but most likely will be revised downward to about 1.1%...

In data prints outside of the U.S.. Canada will print June Retail Sales tomorrow. The Eurozone will print their latest manufacturing index report tomorrow, along with Economic Sentiment as measured by the think tank, ZEW. And in New Zealand, the latest report on their Trade Balance will print tomorrow.

So. it looks to me that tomorrow is the BIG day for data around the world, including the U.S.! Today? Well, we'll have to be stuck with stories all day about the fall of the Libyan regime, and most likely more stock weakness.

Speaking of stock weakness. I was wrapping up the day on Friday, when I looked up to see a story flash by that was talking about the confidence of Hedge Fund Managers. They have this thing called a Hedge Fund Index, and much like the Manufacturing index a number above 50 represents confidence, and a number below 50 represents no confidence. So obviously, the further you move away from the line in the sand, which is "50", the more the greater or worse things are.

Well. as I recall. the hedge fund index fell below 50 in their last survey. in fact the number fell from 54. 2 to 48.5. So, Hedge Fund Managers certainly don't feel warm and fuzzy about the what's going on.

Then there was this. Ok. this could be long winded. But, long time customers know about how in 2005, the U.S. passed the Homeland Investment Act (HIA), which allowed U.S. Corps doing business overseas to bring back their profits to the U.S. at a reduced tax rate. The U.S. did this, because, those Corporations told the Gov't that the money would be used to increase employment, which would help the economy. Instead they bought back stock and paid dividends. and the dollar was propped up for the 9 months that the HIA was in effect.

Well. there's talk of another HIA (HIA2) and once again the Corporations are touting increased employment. But something funny happened on the way to the forum. and the Washington Post has the skinny. Here's the Washington Post.

"Some of the country's best-known multi¬national corporations closely guard a number they don't want anyone to know: the breakdown between their jobs here and abroad.

So secretive are these companies that they hand the figure over to government statisticians on the condition that officials will release only an aggregate number. The latest data show that multinationals cut 2.9 million jobs in the United States and added 2.4 million overseas between 2000 and 2009.

Some of the same companies that do not report their jobs breakdown, are pushing lawmakers to cut their tax bills in the name of job creation in the United States.

But experts say that without details on which companies are contributing to job growth and which are not, policymakers risk flying blind as they try to jump-start the hiring of American workers. "

To recap. It's Fed boondoggle week at Jackson Hole, Wyoming, the markets are awash of thoughts on what Big Ben Bernanke will say come Friday. Gold adds to it spot price all-time record, as it marches toward $2,000. Currencies are stronger this morning, led by the euro, which continues to get dragged through the debt gauntlet each day. And there are thoughts that Switzerland was intervening overnight, while Japan kept to jawboning in an attempt to weaken the yen.

Currencies today 8/22/11. American Style: A$ $1.0465, kiwi .8260, C$ $1.0165, euro 1.4425, sterling 1.65, Swiss $1.2715, . European Style: rand 7.19, krone 5.4340, SEK 6.3335, forint 188.95, zloty 2.8950, koruna 16.9660, RUB 29.10, yen 76.75, sing 1.2060, HKD 7.7990, INR 45.67, China 6.40, pesos 12.23, BRL 1.5995,dollar index 74.84, Oil $82.75, 10-year 2.11%, Silver $43.46, and Gold. $1.874.15

That's it for today. Cards salvage one of three VS the Cubs. UGH! OK.. here's the funny story. I was in the Panera Bread Co yesterday morning.. I made my order, and began to walk over to the counter to pick it up, and my left "eye" itched, so not thinking I rubbed it so rough that I caused the shell to pop out of my eye socket, and it fell on the floor. You should have seen the young girl's face that was standing there! I picked it up, went into the bathroom cleaned it up and put it back in. That was pretty funny. Gives new meaning to "eye popping"! I go back to the Endodontic today, to see if my infection is clearing up. I don't think it is, well, maybe just a little. UGH! And with that. it's time. So, go out and have a Marvelous Monday, and I'll talk to you tomorrow!

Chuck Butler


EverBank World Markets



Posted 08-22-2011 12:07 PM by Chuck Butler