By John Galt
October 7, 2009
The evening started last night with The Independent breaking a story which has been covered and rehashed in the past by yours truly with some new twists. The news that the Gulf states, Saudi Arabia, Russia, China and France were working on a new alternative currency for the purpose of diminishing the dollar’s role as the standard bearer for pricing oil created a massive stir but not to the extent that one would think. Granted, precious metals made a nice move to the upside but there does not seem to be the volume to confirm this move YET. If you look at this chart of GLD, a good proxy for the market’s action you get some idea of what I am talking about:
If the gold futures market cracks the 1050 level and GLD breaks 105 with VOLUME, I might accept this as the big breakout move. Until we see that, this could be an intermediate blow off top and a retest of the 50 DMA would be logical here. After that, the last of the gyrations should be in place and an acceleration to the upside of gold priced in Sterling and Dollars should begin. If you look at the silver chart you see the same price action but it is in even worse shape:
The story from the UK newspaper seems to be the logical reason to buy or excuse of the day from Bubblevision but before everyone says it is “9 years from now” I would suggest you reflect on when the stories first appeared on the matter in 2005:
P.K. Abdul Ghafour, Arab News
JEDDAH, 29 March 2005 — The six-member Gulf Cooperation Council countries are committed to issue the GCC common currency in the year 2010, Finance Minister Dr. Ibrahim Al-Assaf stated yesterday. He denied press reports that the new currency has been named Gulf dinar. “We have not yet finalized the name of the currency as to whether it be Gulf dinar or riyal or any other name,” Al-Hayat Arabic daily quoted the minister as saying.
According to a study, the new currency will be the world’s most important currency union after the euro.
Thus you can see this has been in the planning stages for years and I have been following it since that time. The nations of Kuwait, Oman, Qatar and Bahrain have been eager to establish this new currency but the House of Saud and the Emirs in the UAE have been hesitant to pull the final trigger or agree on a set balance for gold, the euro and other currencies to include in the new basket for the GCC currency. This story has had its ups and downs for years, but there is a good chance that by mid to late 2010, this new currency will emerge as many of the banks in the region have quietly exited the US MBS markets and in fact flipped their holdings from long term Treasuries to short term notes. I would suggest paying attention to the December 2009 TIC report to see just how far along these plans are.
Until I return from Key Largo, have a good week gang and remember:
Last year when I went on vacation it was BOHICA time with the lock limit down day on the Dow and S&P 500. Gee, I wonder what kind of trouble I’ll trigger this year.