Let's talk a bit about gold
Richard Russell (snippet)
Dow Theory Letters
Feb 19, 2009
February 18, 2009 -- I'm going
to stick with orthodox Dow Theory, no excuses, no variations
-- no "ifs" and "buts." IF the Industrial
Average CLOSES below 7552.29 today [Wed] the scales will be removed
from this site and I'll make this call -- the primary trend of
the market has been re-confirmed as bearish under Dow Theory.
In that case, my advice will be as follows -- my subscribers
should be in (1) gold coins or GLD, GTU, CEF or (2) cash or T-bills,
(3) small positions in GDX or gold shares are OK. [Editor's note: FYI
the Dow closed on Wed. at 7555.63, up 3.3]
I will add that if the bear market is re-confirmed, I will take
it as a tragic omen. In which case I see extremely hard times
ahead for the US and its population. And a warning -- I see another
danger ahead -- civil disobedience. During the Great Depression,
Americans were largely law-abiding. I don't see those conditions
today. There are over a million gang members in the US today
and violence is prevalent everywhere. It will not be easy living
through the rest of through the rest of this bear market.
There's only one major bull market now in force, and that bull
market is in gold. We're talking about possibly making money
or at the very least surviving, so let's talk a bit about gold.
The dollar isn't fundamentally strong, but these days (with no
connection with gold) there is no definition for the dollar
-- the dollar must be measured against other world currencies.
The world's economies are sick -- they are even sicker than the
US economy (remember, the US alone has the advantage of owning
the world's reserve currency). Since a nation's currency is a
good gauge of a nation's economic health, we note that almost
all other currencies are weaker than the fundamentally weak US
dollar. Today, it's well to note that gold has been rising to
record highs against all major currencies except the dollar.
At this point, many countries are growing suspicious of the US's
massive creation of dollars, and they are looking for a safer
asset than the dollar to hold in their reserves. That safe asset,
history tells them, is GOLD. For this reason, it is instructive
to review the gold holdings of the major nations and the percentage
that gold makes up of each nation's reserves.
Here are some figures, the first number is the nation's holding
of gold and the second figure is the percentage that gold is
of their reserves. Nations with low percentages of gold in their
reserves may be expected to be potential buyers of gold.
US -- owns 8,135 tonnes of gold... Gold makes up 64.4% of US
reserves. The US will not sell any of its gold.
comment: Who says the US will not sell any of its gold?]
Germany -- 3,412... ...64.4% of reserves
IMF -- 3,217... ... ...(1)
France -- 2,508... ... ...58.7%
Italy -- 2,451... ... ...61.9%
Switzerland -- 1,040... ...23.8%
Japan -- 765.2... ...1.9% ...(a potential gold-buyer)
China -- 600.0... ...0.9% ...(should be a big buyer)
Russia -- 495. 9... ...2.2% ...(is a buyer)
Taiwan -- 422.2... ...3.6% ...(should be a buyer)
India -- 357.7... ...3.0% ...(should be a buyer)
UK -- 310.3... ... ...14.5% ...(sold most of its gold at the
Saudi Arabia -- 143.0... ...11.4% (should buy gold)
South Africa -- 124.4... ...9.0%
Australia -- 79.8... ... ...6.3%
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