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Bullion Charts and Commentary
posted May 7, 2005 at 01:38PM

Country Comparison of External Debt Levels

I noted to a reader comment that although political discourse in America is described in terms of conservative vs liberal, the situation on the ground is that neither currently exists in governing American affairs.

Certainly these levels of indebtedness to outside parties would not have occured under conservative leadership. Conservatives hate debt because it puts restrictions on future freedom of action, and being dependant on the good will and understanding of others can be "risky".

In FY04 the U. S. Government spent $322 Billion on interest payments to the holders of the National Debt. Compare that to NASA at $15 Billion, Education at $61 Billion, and Department of Transportation at $56 Billion

No doubt there will be much finger pointing in the future but here are some annual spending numbers to consider:

"Official" Defence Budget - $442 Billion

Iran/Afghanistan operations - $98 Billion

Department of Homeland Security - $41 Billion

CIA - $35 Billion (Time Magazine year 2000 estimate)

Coast Guard, INS, Customs - $6-7 billion a pop

"Official" War on Drugs Budget - 11 Billion

One has just scratched the surface of what is the labyrinth of federal security, intelligence and law enforcement agencies and one can see how a good chunk of federal tax revenues is accounted for.

(As well some of this is duplicated at state levels. The tab for the Michigan State Police? $544 million. Detroit City Police? $488 million. When that guy shot those people in an Atlanta Courtroom, a half-dozen agencies were involved the second he touched the side-walk, each with thier own administrave tails wagging the dog.)

Of course there is no sign that any of this is going to change any time soon. We are talking about sacred cows of the highest order.

But a conservative person would still want to step back and ask what exactly are we getting for all this money. Despite spending more than the next 15 countries combined, we have a military that is overstrecthed, that cannot supply essential equipment and is having trouble maintaining troop levels.

There should be no surprise that the US has come to this impasse. We have a foreign policy whose driving instincts are that of paranoids and busybodies. Everything is a threat, and they just have to have thier fingers in everyone's pie. The results is a force that is weak everywhere, and strong nowhere.

The paranoia comes from the 50 million religious fundamentalists who see everything outside of their ideology as a threat. Tens of millions of these are Rapturists who are working diligently to bring about the end of the world. One has to understand that when you strip local circumstance and geography away, the thought processes of a hard-core Christian fundamentalist is little different from his Islamic counterpart. Both are antiethical to the ideals that have made Western Civilization the dominant force on the globe.

By sheer force of rhetoric everything "liberal" has been esconsed within the realm of the left. But there is nothing tremendously liberal about the left. Their driving ideology over the past 25 years has been the linear logic of nannyism. In lieu of Big Brother we have the smiling face of Big Mother.

The language may not be as vile and full of hatred as their religious counterparts but the mindset is a perfect complement. The right wing has been spared a lot of the heavy lifting of taking established rights away for no other reason that the left has enthusiastically given them up.

When you have spent all your time convincing a populance that they should be shitting thier bricks over cigarette smoke in a bar, what can one really say when airliners are being driven into buildings? Not much. When you treat smokers like Mississipi "niggers" what can you really say about locking up suspected terrorists, American citizens or not, with no due process? Not much.

How about the right to be free from unreasonable search and seizure? The right wing will take that right away under the guise of nebulous sleeper cells driving cars filled with anthrax...but what can the left really say when they already gave up that right in order to search for guys who had a few beers at the local pub? Not much.

Of course when it comes to wasting money the left wing are not much better. The US spends more per capita on education and health care than nearly every other country. And yet by most objective measures the results obtained put them near the bottom of most developed countries.

One must remember that the original meaning of inflation comes not from "spending" money or even "creating" money - it derived from the term flatulence..i.e. wasted "gas"

Of course all of this general stupidity, falls nicely into the needs of the neoconservatives elite, who are really running the show. This inability of the populace to seperate or communicate illusion from reality allows the "Powers To Be" to sell a destructive economic policy that has nothing to do with national interest, or raising standards of living, or building a free and just society, but everything to do with the unethical redistribution of wealth from the many... to the few.

To sum up, this is all going to end badly; the only question is timing. For that we go to the gold charts to see if the time is ripe.

Bullion Charts


Bullion at critical support. MACD starting to roll over. Decision trinagles mark many of the momentum indicators.


The developing triangle appears to be the dominant intermediate term structure. Break above is bullish. Below is bearish. Either way we are looking at a 50-60 dollar move being indicated.


Which way the triangle breaks will have a big impact on the monthly chart


COT is not the most reliable of data points for foretelling future moves. But the rather large long position held by large specs is not what you would expect to see at the beginning of any grande wave 3 action.

Gold Equities


A bounce off of bullish daily divergences. As of yet no resistance trend-lines have been overcome. Nice candle on Friday versus bearish stochastics set-up. My reading of the tea leaves suggest some weakness early in the week.


The chart pattern is bearish. It going to take a move above 210 to start giving things are more bullish tone on an IT time scale.

From EWA perspective one can pick their poison but to my eyes it still looks to me that we are in a C wave of a high degree wave 2 correction.

Ratio charts

On the whole equity underperformance mars the entire sector. It suggest that care, through stop loss or other risk mitigation measures, should be part and parcel of your trading plan.


The move below a prior peek gives support that the first leg of the bull is complete and that this is a correction of the entire bull leg to date.


I have read other analysts give buy reccomendations on the basis of this ratio. Stocks are undervalued with respect to bullion, but not quite at "prime" buying levels.

US Dollar


The dollar is still in buy mode. The price bounce off the 50 dma, and the bounce off the 50 level of various momentum indicators is short-term bullish, and suggests that another go at the 200 dma resistance level will be attempted early in the week.. (which dove tails nicely with the bearish daily stochastics set-up on the HUI)


Still on a buy signal at the intermediate time scale.

Trading thoughts and strategies

Actually I had dipped my toes into the market earlier in the week. The oversold nature of equities along with the bullish divergence proved very tempting.

However looking things over I thought I had a bit too much cash into inflation friendlies, and bowed out to see how things will go. As well I was having second thoughts on my choice of trading vehicle and thought I could choose better companies.

If you go on the premise that stocks lead bullion then one is expecting bullion to break down through it's triangle. Such a technical event has obvious bearish inmplecations and I would think would put a lot of continued pressure on gold equities despite some oversold readings.

Of course the proof is in the pudding.

Right now my thoughts are the USD is going to make another try at its 200 dma, while bullion thouroughly tests out it's trend-line support and its own 200 dma. If these lines get breached it will make trading decisions easier. One, the breaches of these obvious technical metrics will reveal how much pent up buying and selling power there is in each respective market. If the breaches develop into extened moves then just stand aside, watch and keep your powder dry.

Any moves back down below the 200 dma for the USD and above for bullion would then mark, I believe, very strong buy signals, and I would enter the gold market in force, with reasonable, (not overly anal) stops to guard against any kind of demonic whip-saw action.

On a closing note I would like to mention it is nice to be back. The situation back home seems quite stable and promising for now. I would like to thank those who wrote and would have loved to have responded to each individually, but it seems that I have just been running around trying to keep all the balls in the air. I will try to maintain a regular schedule, but don't be surprised if the postings become a bit more irregular.

Good trading to all.

Bullet Bullet Bullet