Island Reversal

The stockcharts.com blog has posted examples of Island Reversals. Taking a look at the weekly $USB chart, there is an unmistakeable repetition of Gap-ups leading to bearish island reversals.

A price rout soon follows.

Stockcharts Blog

Gold Confiscation

The gold confiscation in the U.S. was a policy decision, whereby the newly elected president passed legislation making it impossible to freely own gold, and offered the gold price fix in cash. Next, the dollar was devalued by fixing the price to $35/oz. U.S.

I assume this was not as sinister as it might sound, because it propped up first of all the gold mining sector, but also offered people a way to exchange their gold for currency.

The U.S. can consider the same move by devaluing their currency once again without any laws against gold ownership. In fact, they can change the laws to reflect the re-monetization of gold by removing all taxes from bullion grade bars and coins. They can also offer something like $3500/oz. U.S. (we're very near $2000/oz. U.S. anyways) and re-establish the ownership of the public trust.

This would not necessarily require a fixed gold price, either, because should this amount be grossly overvalued, the market would not support it. Similarily if this amount was grossly undervalued, then the market price would be chronically firm, well above this amount and premium over spot would have to be offered.

http://www.fgmr.com/myths-and-reality-of-gold-confiscation.html

Eurozone Bailouts Coming

Posted this morning was news of a Eurozone bailout. This will lower bond prices in North America drastically on Monday. The futures market will probably indicate the direction on Sunday night after 6pm.

This will also ensure that yields on the short end of the curve remain depressed, or negative. This is very positive both for gold prices and for resource sector equities.

As of this morning, Italian bond yields have dropped:

source: http://www.businessinsider.com/the-eus-camouflaged-bazooka-2011-12

-F6