Market Update 3/14/2014

From the Desk of Craig Griffin, President and Founder of ITM Trading

In these updates I can post what gold did today, last week or even last year, but what really matters is why. Why is gold rising, or why might it rise further – maybe much further – in the not too distant future? In my opinion the reasons why gold will continue to climb the wall of worry, eventually reaching higher and higher levels, is because the debt situation here in the United States is spiraling out of control! The national debt is now over $17 trillion and when one includes unfunded liabilities the debt is estimated to be over $80 trillion.

Over the weekend stories broke regarding global debt. Since the great recession global debt has expanded dramatically increasing $30 trillion between mid-2007 and mid- 2013 according to Bloomberg.

Source: http://www.bloomberg.com/news/2014-03-10/debt-exceeds-100-trillion-as-governments-binge.html

If you have never seen what a trillion is, Google it… the mind can not even grasp the concept of a trillion. But remember, all debt has to be paid back or it will be defaulted on. Richard Russell, author of the Dow Theory Letters has stated over and over that in order to avoid a deflationary crash that the Federal Reserve along with central banks around the world will step up the pace of the printing machines several times over to fight deflation.

Russell was born in 1924 and he has been writing the Dow Theory Letters since 1958. Over the last few months Russell has been cutting back on his writing and it saddens me to think that one day I will not be able to read his wonderful but sometimes scary remarks! He truly is one of a kind. I have placed Russell’s remarks from yesterday, March 13, 2014 daily remarks section below for you to read and consider.

And remember, “It would be foolish to acquire gold for the short term but it would also be unwise not to own some gold for the long term!”

Richard’s Remarks

The world is caught betwixt and between. The betwixt is inflation and the between is deflation. By now Janet Yellen must know she is fighting the forces of deflation, and it’s a question of how she will address this problem. My guess is that she will address it with additional QE. The battle against deflation is very serious and the Fed knows that once deflation gains the upper hand, we are headed for a serious recession. While inflation can be halted easily with higher interest rates, deflation is another story; it tends to take on a life of its own. For holders of gold, ironically, deflation is a convoluted form of good news, since it will require massive infusions of liquidity in the fight against inflation.

My stance continues to be “gold, gold and more gold,” with just enough cash to handle the needs of the day. This may sound boring. But in this case, boring equates to peace of mind.

Below, GDXJ, one of the most sensitive indicators of gold’s direction, has turned bullish, having surged out of its impressive base — with a price projection to 63. Fingers crossed and waiting.

Later comments: It seems the whole world is now fighting deflation. This is going to require massive infusions of liquidity from all the main central banks.

On top of this, it seems China is in trouble. Thus a major importer of commodities has turned feeble.

As this is written, the Malaysian plane is still hidden from the eyes of the world. I take back my theory that the plane’s disappearance is an act of God. God’s acts are always good. And a plane lost with 239 souls is hardly a good thing. Nevertheless it may be an omen.

When the world deflates, the price of everything goes down. Even oil? Yeah, oil, as you can see via the chart below. We are now in the process of deleveraging and deflating, like taking an Alka Selzer after a drunken binge. In this phase debt becomes an enemy, since in deflation money gets harder to come by.

If I were the government, I’d reflate by resetting the price of gold at $10,000 an ounce. Can we do that? Sure we could, FDR did it, and we could too — if we only had the gold. C’mon, I double dare the Treasury to give us an honest audit of our gold. Why doesn’t Obama demand an honest audit and settle the question once and for all? Dammit, The Treasury’s gold is yours and mine. So I have a right to demand — “Where is it?” and “How much do we have?”

Stock market closed on its butt. One of the lousiest closes this year. But the Dollar Index held on, no crash yet, and gold closed higher at 1337.3. All gold items closed higher.

I suggest that you buy and hold smaller physical gold and silver and even platinum coins, just in case you need them in the future. One ounce bullion coins are too large and expensive for everyday trading.

Below the Dow crosses bearishly below its 5-day MA. the right shoulder of a potential H&S formation is breaking down.

I don’t like it — below the US dollar index at a new low for the move, now below both its moving averages — and not oversold yet. Ugh. If the dollar crashes, it’s all over.