Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Monday, February 23, 2009

DJIA, S&P 500 at 1997 Level. Gold Holds.

Wall Street has turned the clock back to 1997.

Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday. The Dow Jones industrial average tumbled 251 points to its lowest close at 7115 since May 7, 1997, while the Standard & Poor's 500 index logged its lowest finish at 743 since April 11, 1997.

Meanwhile, gold continues to hold its ground.
UOB quotes GML 1 oz = RM 3,771 sell / 3,686 buy
MBB quotes KIJANG 1 oz = RM 3,835 sell / 3,713 buy
MBB gold saving passbook ac./gm = RM 122.84 sell / 113.74
PBB gold invest ac./gm = RM 119.15 sell / 114.43

If you have bought at GML at RM 2,850 your gain would have been RM 836, a massive 29%.

Wednesday, February 18, 2009

Watch this Indicator IYF

THE WORST NEWS IN THE WORLD RIGHT NOW comes in the form of the IYF; iShares Financial Fund (IYF).

This fund is loaded with companies like Goldman Sachs, JPMorgan, American Express, and Bank of America. These firms live and die according to America's ability to conduct business, spend extra cash, and pay off debts. Yesterday, the IYF blasted through the $34-per-share level it reached during the November panic... and it now trades for around $31 per share.

Stock prices, GDP, and employment in America all go up over the long term. But for now we have to respect what the market is telling us- to be very cautious. If the IYF keeps on sliding, it's a sign the stimulus and bailout isn't working... and times are getting worse.
... Brian's Hunt Market Notes.
IYF must stay above 35 to indicate the worst may be over.

Why Gold Rallying in all currencies

In the latest manifestation of the world financial crisis, gold is rallying strongly now in all major currencies. Gold detached from the usual commodity drivers gradually over the period August 07 to the present, and closely reacted to any major new developments in the credit crisis.

In any case, gold and the USD have been beneficiaries of flight to safety. That is why gold and the USD are rallying together. Gold now is almost totally dominated by ongoing credit crisis developments, and the massive attempts to bailout the financial system in every country.
A big question will soon be, when gold exceeds record prices in the USD this time, will the flight to safety then move relentlessly to gold then? I think so.

As we know, the trillions $ the US, ECB, BOE, Japan, Russia and China have thrown at either bailouts or stimulus are causing gold now to rise relentlessly in the major currencies. Obviously, at some point, $20 trillion worth of stimulus and financial bailouts by the world central banks since August 07. The US alone has now committed over $10 trillion fighting the world financial chaos.

Ironically, the USD rallies along with gold to date. Massive flight to ‘safety’ is finding its way to the USD and gold both. The Yen is also strengthening a lot too, but much of that is from Yen carry trade deleveraging, where people sell the stocks and financial assets and then buy Yen and pay off their hundreds of $billions worth of Yen they borrowed in the carry trade.

But, gold rallying in the face of a very large rise in the USD for the last few months clearly indicates the strength in gold’s rally so far. We suspect gold will soon hit a new high in 2009, and gold stocks can too hit new highs as well, when people realize gold continues to rally.
Adapted from Chris Laird, Prudent Squirrel.

In simpler terms, risk aversion-> selling of equities -> USD , Corporate Bonds, Treasury bills, Yen, Gold.
Ultimately, will people sell their USD, T- bills, Yen and buy gold.?
Will the American sell their USD and buy gold, knowing their $ is due to collapse.?
Will the T-bills large holders (Chinese and Japanese) sells the bills for gold bullion.?
Will the Japanese sell Yen and buy gold, knowing their currency is due for devaluation to boost export.?
Will the collapse of banks, markets, currencies lead to gold be the ultimate safe haven.?

Tuesday, February 17, 2009

Gold will do well - but gold miners will do better.

In this period where gold will do well, gold miners will do even better. Even if the gold price barely moves, the cost of energy (some 25% of mine operating cost) is down; the cost of labour is down; the cost of drill rigs and other equipment is down. This all means that profit margins are up.

The significant demand for their end product, gold, will remain and that product will be sold in dollars. The dollar, despite what you may read elsewhere, is not set to collapse imminently. It is the senior global currency and people have turned and will continue to turn to stronger forms of cash as this depression unfolds. While miners’ end product is sold in dollars, their operating costs will be in weaker foreign currencies – the Mexican peso, the South African rand , for example.

Bill Reid of Gold Resource Corp (US:GORO) explained how the peso has fallen from 10 to 14 against the dollar. All his costs are in pesos while his profits are in dollars . That currency play is a very significant 40% mark up in profits. The strong dollar, ironically, is another source of increased profit margins for gold miners. This outperformance by gold stocks has been in place since last October. The HUI, the index of unhedged gold miners is up some 75%, while the S&P is down some 15%. Adapted from Money Morning

Spot gold price at US 968. Gold Maple Leaf at US 1,008
UOB selling GML (1 oz) at RM 3,623
MBB selling Kijang coin at RM 3,616

Saturday, February 14, 2009


Check out the platinum/gold ratio.

Successful speculation is about finding extremes and betting against them. For instance, Chinese stocks were extremely expensive in late 2007. The euro was extremely overvalued in 2008. Commercial real estate was extremely popular in 2007. We wrote about each of these "extreme" situations... and each was crushed soon after.

The extreme effect is why we're interested in our colleague Jeff Clark's "buy" recommendation on platinum right now. Gold and platinum are both precious metals... so they typically trade in a "band" together. One ounce of platinum usually buys two ounces of gold. Right now, that band is stretched to an incredible multiyear extreme. Platinum is super cheap.The auto industry uses platinum to make catalytic converters... so the recession sent the price of platinum from $2,200 an ounce to $800 in 2008. This huge fall has caused the platinum/gold ratio to reach "extreme" levels. Adapted from Brian Hunt's Market Notes
Spot gold price USD 943 /oz
Gold Maple Leaf (GML) USD 983
UOB selling GML at RM 3,531
MBB selling Kijang at RM 3,601

Wednesday, February 11, 2009

Those Buying Gold in Non-US Dollars

Gold spot price at USD 915.
Physical Gold Maple Leaf (GML) quoted at USD 957, i.e. additional USD 42 for minting the gold into coins.
Translating that into Ringgit Malaysian, price = 957 x 3.59 = 3,436

When buying gold, always be aware of both the directions of gold price in USD and your country currency exchange rate.
Either a weak gold price in USD or a weak US dollar will lower price of gold price in Ringgit. Conversely a strong gold price in USD and a strong dollar (weak ringgit) will ensure more Ringgit to buy gold.

With USD/RM steady at 3.59 and gold price in USD trending up, those who bought in earlier have gain. But continue to watch directions of both gold and US dollar. If one goes up more than the other goes down, then your earning is still positive.

If you possessed gold holdings, treat it like an overseas biz venture in US dollars. International gold price trend up means your asset appreciates in value and a weak ringgit will bring more earnings back. Strong ringgit will pinches your earnings.

UOB selling GML at RM3,436
Physical Gold Coin Kijang at RM3,490

Wednesday, February 4, 2009

Biggest Mistake Traders Make

They Have No Game Plan!!!

This is an important element in trading and one that should not be brushed to the side. When you have a game plan it allows you to get in and out of the market in a non-emotional way.
So often I see new traders jump into the markets based on emotion, hearsay, and rumor. This is the worst possible way to trade and the quickest way to lose all of your money.

In my humble opinion, nothing is more important than a game plan and sticking with it.
By creating a game plan, you are setting yourself up to be prepared emotionally. No matter what happens to a particular stock or futures market, you have a pre-planned way to enter and exit the market. Having a successful exit strategy is enormously important.
With the kind of volatility that we are seeing in the marketplace today, having a game plan has never been as important as it is right now.

Creating a game plan is very easy and you can do in a matter of minutes. Here are the key steps to creating a very basic game plan:
1) Write down your reasons for buying or selling a particular market.
2) Write down your entry point for the market you’re about to trade. Why are you getting in? Did you see a technical set up?
3) Write down when you are going to exit this market. Why and when are you going exit? Was your profit target reached, or were you stopped out?
4) Do not make market decisions during trading hours. It may sound easier said than done, but watching the daily ticks can cause your emotions to go haywire.
5) Review your game plan every day to see if things are going according to your plan. This allows you to adjust your money management stops and your target zones in a non-emotional way.

It couldn’t be easier and it’s only costs is a sheet of paper and some of your time.
So there you have it … five easy steps that can both make you money and save you money in the future.
Every success in training and in life,
Adam Hewison.

Tuesday, February 3, 2009

Australia Plans $26 Billion Stimulus Package

CANBERRA, Australia (AP) -- Australia's leader unveiled a new stimulus package Tuesday to try to shield the economy from the global downturn, promising 42 billion Australian dollars ($26 billion) in spending that will send the budget into the red for the first time in nearly a decade.

The package comes on top of one launched late last year worth A$10.4 billion ($7.4 billion) and underscores the threat the downturn poses to Australia's resources-based economy, which has shuddered to a near halt since the worldwide financial turmoil began mid-last year.

Two hours after Prime Minister Kevin Rudd's stimulus announcement, the central bank slashed the benchmark cash rate by a full percentage point to 3.25 percent in another bid to reinvigorate the stagnating economy. It was the lowest level since the Reserve Bank of Australia took control of monetary policy 19 years ago, and the lowest money market rate since 1964.

Sunday, February 1, 2009

Who Moved my Black Gold.?

Many fundamental and technical indicators are pointing to oil prices heading lower in the near term.
US slumping homebuilding industry posted its worst annual sales in two decades. Business sales down, slashes jobs across all sectors resulting in record unemployment.
Manufacturers cutting energy use, airlines cut flights and consumers reduce oil demand.

Even OPEC’s pledges of production cuts have failed to stabilize oil prices. According to the Energy Information Administration, oil storage tanks in the U.S. are filled to the rim, storing over 338 million barrels of crude oil.
Don't feel too bad for these oil guys though - they'll have plenty to sing and shout about soon.