Wednesday, 9 April 2008

Florida's Local Government Investment Pool run. 2007-12-07

Wednesday 7th December 2007: 9.23pm

Guess what? Gold is still in consolidation mode. In fact, the chart pattern looks like a shorter term version of the long converging triangle patterns exhibited on the gold charts after the runup to $390 in 2003 (now almost invisible on the charts), the runup to $455 in December 2004 and after the runup to $730 in May 2006. Maybe it's a bullish flag pattern given its apparently shorter term nature? For a while it looked like a possible double top but the slightly differing tops were not follwed by a further downleg, rather by a choppy sideways pattern, converging to a point within a few dollars of $800. Price objective for a double top would have been around $720, I guess: 780-(840-780) with 780 as the neckline and 840 as the peak. That wouldn't have been a disaster but it currently looks like we are in a converging triangle between 780 and 840 or so. See the excellent Feb '08 futures 4-hour chart posted most days by Trader Dan Norcini on the indispensible of the legendary Jim Sinclair.

It's a 4-hour time interval gold futures chart for the nearest (or most traded) contract with commentary and has become a regular feature on the site. Meanwhile, Jim's comentaries are certainly doing nothing to help the 'Don't worry, be Happy' pleas coming from all the Establishment mass media, as all kinds of 'important' people are currently being wheeled out to reassure us that the credit crunch and sub-prime mortgage fiasco isn't actually going to mean that all our pension funds will be worthless if we ever live long enough actually to see retrirement!

This week we have seen US Treasury Secretary Hank Paulson doing the media rounds reassurance job, the so-called Operation White Noise and Operation Overwhelm in an effort to shore up the ailing credit markets and forestall any collapse (at public expense of course - via potentially vast monetary inflation mostly), Pres. 'W' Bush being wheeled out to read from the script that all is OK and fluffing his lines* according to Adrian Ash in his article The Battle Between Debt & Recession on, another highly useful and varied source of gold opinion on the internet.

*GWB: "So when concerns about sub-prime loans begin to mount – began to mount – uncertainty spread to the broader financial markets."

Does this give the game away that the real uncertainty hasn't come yet? A Freudian slip, perhaps? One cannot be certain!

Mr. Ash also goes on to give an interesting copper/gold price ratio chart, which has apparently broken down from a previous uptrend and spike - and he suggests that this portends economic recession to come (where monetary metals such as gold might be expected to outperform industrial metals such as copper, due at least partly to lower demand for industrial metals in times of decreased economic activity).

Meanwhile, the credit ratings agencies continue to downgrade various tranches of debt of major and minor infinancial institutions and the stock market analysts continue to downgrade future earnings estimates for said institutions.

Meanwhile there is "trouble at t'mill" at Florida's Local Government Investment Pool, where municipalities (I guess the UK equivalent would be Local Coucils) stash their spare cash, if they have any - that is the vast amounts of cash they screw out of their local taxpayers plus any vast loans they have taken on for their incredible wasteful expenditures, presumably. This article on Bloomberg discusses that there has effectively been a 'Bank Run' at this institution, with depositors withdrawing nearly half of the total pool since Summer 2007 (in 6 months), leaving the Pool at $14 billion now versus $27 billion back then. That's stunning. Northern Rock, watch out - you've got competition!

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