Gold Linked Wages

The general US markets had a tough week as corrections are sitting in hard now, but they may need to consolidate recent moves lower before they head any lower further.

As we know, the US dollar is inversely correlated to US equities as well as gold and silver. Once it begins to fall again, we should see a rally in the markets but until then we have to expect more weakness.

It's times like these that trading can chop you up hard so being very quick and not greedy is tantamount. Many successful traders also just opt to sit these periods out and wait for the next great setup which could take anywhere from 6 to 8 weeks or even longer.

Let's move into the precious metals charts whom are all looking to be on the ropes now this week.

Metals review

Gold slid 1.63% this past week and looks like it is set for a test of lower prices in the near future now.

As it broke it's uptrend line more volume came in which means sellers emerged. We're now teetering on the 21 day moving average and looking to break below it with more force in the week ahead.

I know there are rumbling of commercial failures and whatnot but that is always being talked about it seems and it's yet to happen. The fact is the chart is saying lower prices so trading on the long side would be detrimental to your trading account most likely for the time being.

That doesn't at all mean that I'm giving up on gold, I've not sold a single ounce of physical and can't imagine me doing so for years to come.

I've said earlier in the year that we may not advance much this year in terms of the nominal price in gold and that's fine by me. We've risen a lot so far in this secular bull market and we've got a long ways to go.

Just wait until the blow-off top, and yes, it is coming in time.

We've just got to be patient and wait it out. Gold is our insurance and will take us handsomely into the new era of currencies, whatever that may be.

Silver fell 3.12% this past week and broke it's wedge pattern. Now it's on the verge of moving lower harder, most likely to the $32 support area on the chart which is also the area where the 50 day moving average resides.

I tried to trade silver on the long side this week but was stopped out with a loss. I don't know why I keep trying to trade the precious metals when there are much better trading vehicles out there.

As for stores of wealth though, gold and silver are hard to beat.

Platinum fell 3.33% this past week and broke it's uptrend line. Now it's breaking down below it's 21 day moving average with volume coming in.

There is a real possibility we get to near $1,550 and almost a guarantee we hit the 100 day moving average at $1,572.

Palladium fell 4.38% this past week and is now breaking it's head and shoulders pattern. The measured move puts the low near the $570 area which has also acted as support from early July to mid-August.

Palladium has got an uptrend line as well as it's 100 day moving average around the $620 level so that could see some support emerge for a short time as well.

All in all, the four precious metals I cover here are not looking good for the time being.

I've advocated buying weakness for the past decade when it comes to physical gold and silver and that opportunity looks to soon present itself to us once again.

Fundamental Review

The US budget deficit was higher than $1 trillion in 2012 marking this as the 4th year in a row with such an honour!

For those of you who've yet to try and wrap your minds around what a trillion is exactly, here is a short video that helps.

Maybe if the US actually HAD a budget, they could keep it in check!

A very interesting court case has become public, but underreported, whereby US judges are looking to see their payment contracts upheld.

Basically, they have a contract of automatic pay increases which in turn keep them from feeling any effects of an economic downturn or inflationary episode.

Congress tried to stymie this contract but the judges took them to court and won.

Now what's most interesting about this case is that these "dollars" which they are paid in, or a measure of what a dollar is truly, was marked as 371 1/4 grains of silver or 1 15th as many grains of gold.

When the contract was struck they deemed gold and silver to be the only measure worthy of holding the contract to.

Basically US judges just won a court case which says 100% definitively that gold and silver ARE money, and more than that, they are what all currencies must be measured against.

Now this is nothing new to myself or anyone who's read any of my work but to the majority who have been brainwashed by the media and school systems alike this may come as a shock.

Actually, it most likely won't as this story will not be widely talked about or publicized.

Now if only the general public could enact such a contract for measuring minimum wage. That would be one hornets nest of a problem!

While our paper dollars are wasting away, so is the thought that markets are free and fair. It's been a long time since markets have been true and fair but lately it's becoming more and more talked about in the open.

Computer trading has taken over and it's making it harder and harder to trade profitably and even when you do get good entries, there are always computers nickel and diming us on every entry and exit of a position.

A couple weeks ago a single computer program made up 4% of the total market. While that isn't such a huge problem, the things is the program used phantom orders whereby order were entered and then cancelled before they could be executed which had the double effect of slowing down the system and probing for bids which would have put a false price on the markets they were probing.

It's all quite confusing and I can't pretend to understand anything but the basics of algorithmic trading. What I do know is that more and more investors are fed up with being gamed and are simply not participating in the markets anymore.

This is a big problem that has to be dealt with. I think the best way is to let these companies fail when the computers they rely so heavily on mess up, and they inevitably will.

It's bad enough having computer programs dictate our markets to a large degree, but when they do mess up, let's just let them fail.

I don't have much else to get into this week so with that, I wish you a great trading week ahead. Be careful and weary in this type of market.