Gold World News Flash |
- Richard Russell - “There’s No Fever Like Gold Fever”
- $5,000 Gold Bandwagon Now Includes These 55 Analysts – Got Gold?
- $2,500 Gold Could Easily Result in $178.50 Silver – Here's Why!
- Top Six ETFs From Last Week
- How to Sift Winning Resource Stocks from the Washouts
- james turk on silver: breakout at $21
- Peter Brimelow: Some gold bugs worried by Friday's market flop
- Peter Brimelow: Some gold bugs worried by Friday's market flop
- In The News Today
- Jim's Mailbox
- Gold “the Most Important Reserve Asset”?
- GLD – Gold ETF Trading Signals
- And The Obligatory “Selloff Day” Gold Plunge Is Here
- If Deflation Wins, What Will Gold Stocks Do?
- Gold Remains Glued To $1200
- Gold Meltdown or Mania – Batten Down the Hatches
- The Gold Bulls Are Vindicated
- Malaysia assists China's move to replace Treasuries with its own bonds
- Malaysia assists China's move to replace Treasuries with its own bonds
- The IMF itself has become the problem as Europe's woes return
- Jim?s Mailbox
- Got Gold Report – Uncharted Waters for Gold
- Gold Market Update - Sept 19, 2010
- Silver Market Update - Sept 19, 2010
- United States versus China
- Chinese Dollar Torture
- Gold – All About the Dollar?
- UK Government Stealth Debt Default Continues at Minimum Rate of 3% per Year
- Silver Market Projection
- Gold Market Update
| Richard Russell - “There’s No Fever Like Gold Fever” Posted: 20 Sep 2010 01:39 AM PDT Those who claim that we're in a new bull market don't understand what is actually happening. We're in a subtle bear market in purchasing power as our currency goes down the drain. And what if the dollar loses its reserve status and nobody will accept the fiat paper that we grind out? Talk about trouble, we haven't seen trouble yet.
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| $5,000 Gold Bandwagon Now Includes These 55 Analysts – Got Gold? Posted: 19 Sep 2010 07:19 PM PDT This little band of gold enthusiatists started out few in numbers a few years back but has made a parabolic move over the past year or so much like their projections for the future price of gold. They now number an unbelieveable 95 who have stated, with sound reasons in their opinions, why gold could quite possibly go to a parabolic top of at least $2,500 an ounce - to even as much as an unimaginable $15,000 - before the bubble finally pops! In fact, the majority (55) maintain that $5,000 or more for gold is likely. Words: 755
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| $2,500 Gold Could Easily Result in $178.50 Silver – Here's Why! Posted: 19 Sep 2010 07:19 PM PDT More than 95 respected economists, academics, analysts and market commentators are of the firm opinion that gold will go to $2,500 and beyond before the parabolic peak is reached. In fact, the majority (55) think a price of $5,000 or more -even as high as $15,000 - is actually more likely! As such, just imagine what is in store for silver given its historical price relationship with gold! Words: 1283
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| Posted: 19 Sep 2010 07:04 PM PDT Dan Pritch submits: Each week I publish the week’s hottest ETFs across various sectors and employing various strategies. For the prior week, we saw the S&P500 (SPY) gain 1.4%, while gold bullion (GLD) touched a new record. In the meantime, Treasuries sold off a bit and mortgage rates crept up, which is of no help to an anemic housing market. In the political spectrum, there were some surprise wins by Tea Party candidates which begged the question as to whether that bodes well for Dems by splitting the Republican party or whether it’s a sign that voters are fed up with Dems altogether. Market volume may continue to be low and range bound until we know for sure after mid-terms later in the year. With this backdrop, the hottest ETFs from last week across various sectors and strategies were the following: Conventional ETFs:PSI - Powershares Semiconductors – Up 7% - Semiconductors were very strong last week in an overall up market, one that realizes that while jobs may not be coming back, companies are putting cash to use on productivity improvements (Tech). This ETF is pretty broadly spread across dozens of chip and telecommunications companies. While it was a strong week for semis, overall this year, performance has been rather weak, down 8% YTD vs. a flat S&P500. Complete Story »
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| How to Sift Winning Resource Stocks from the Washouts Posted: 19 Sep 2010 05:14 PM PDT Last night should have been a quiet one at the Cowie residence. But my poor wife had to listen as I spent two hours on the phone to Africa. I recently returned from a fact-finding mission there, and was now catching up with one of my on-the-ground contacts: the Managing Director of an ASX-listed resource company with an incredible new mining operation in the works. This company I visited in Africa a few months back really gets my pulse going: It's sitting on a commodity that's been unloved for most of the year... but is set to roar back to life in 2011. But it's the vastness of this resource that took my breath away. Driving across it is the same distance as going from Sydney to Adelaide. If you're interested in Australian resource stocks, you need to keep an open mind and look outside our borders too. Because we're so proficient at getting valuable stuff out of the ground, you tend to find talented Aussies wherever the resources are the world over. This Aussie/Africa play is probably the most exciting stock I've researched this year. I don't get on a plane and fly to the other side of the world for every stock I research. (I'll show you exactly what I found - and what the Managing Director told me last night - later in the week.) If you want to find good resource stocks in this climate, you need to identify a commodity where demand is likely to continue outstripping supply for years to come. I know - I'm stating the obvious. But you'd be surprised at how many listed companies out there are sitting on the WRONG commodity for the next decade. You then need to make sure your company can produce this commodity cheaply. That's why I love the Africa play I'll introduce you to later this week. According to the World Mine Cost Data Exchange, the average industry cost of producing the commodity this company is sitting on was $1.68/lb in 2009. The company I'm looking at can produce it for $1.23/lb. You've also got to look at the QUALITY of the resource a company is sitting on. It doesn't matter if the tenement size is vast and production costs low if the ore grade is rubbish. (The ore grades of my Aussie/African find are DOUBLE the industry average...) Finally you need to focus on who is running the show. Don't just look them up on the web. Email them. Call them. Get on a plane and meet them! It takes a certain talent to turn a hole in the ground into a 10 to 15-year money-spinner. By focussing on the simple but crucial things, I've managed to make my readers good money in a very dark market. This is what our portfolio looks like at the moment. I've blocked out the name, code and current price so not to protect the readers and not give anything away for free! The average time we have held any one stock is just 7 months.  Right now, I can see even greater opportunities ahead. Certain commodities such as copper, tin, gold, platinum, and coal are looking really good. Gold is at an all time nominal high yet again, tin is not far off, copper is on the march once more, and platinum is not far behind. I just got back from the Diggers and Dealers conference in downtown Kalgoorlie. This is Australia's biggest mining conference, and dozens of companies presented there. I've got a stack of new ideas and the overall vibe is more energised than I've ever experienced. The sense is that big things are around the corner in 2011. So if you're going to be in the market, keep your eyes out the RIGHT KIND of resource stocks... with cheap production costs... trading at reasonable prices. And later this week, I'll tell you more about the Aussie/Africa play which I predict could be one our top performers in 2011. Dr Alex Cowie,
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| james turk on silver: breakout at $21 Posted: 19 Sep 2010 04:54 PM PDT http://www.fgmr.com/battle-for-usd-2...er-begins.html Technically, silver has nearly completed a huge accumulation pattern highlighted by the 'head-and-shoulders' pattern formed over three years. Silver is now approaching the breakout moment that I have been anticipating since April 1st when I wrote that silver looks ready to soar, or even earlier than that when I wrote in my outlook for 2010 that "We need to start thinking about silver hurdling above $50. If it doesn't happen in 2010, this important event – which is unimaginable to many – will I expect happen in 2011." So the important breakout that we have been waiting for months is at hand. When silver finally hurdles above $21, expect the momentum from new buying that will come into the market to take silver much higher in the months ahead. Notwithstanding the tremendous price appreciation it has achieved this decade, the bull market in silver has hardly begun.
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| Peter Brimelow: Some gold bugs worried by Friday's market flop Posted: 19 Sep 2010 04:50 PM PDT By Peter Brimelow http://www.marketwatch.com/story/some-gold-bugs-worried-by-fridays-flop-... NEW YORK -- Gold just closed a fine week with a poor Friday. Some gold bugs are getting worried -- but by no means all of them. During the week gold got into all-time high territory. The New York spot close on Thursday was $1,275.50. The free long term point-and-figure chart kept by Australia's The Privateer looks magnificent: http://www.the-privateer.com/chart/gold-pf.html But after a strong start, gold spent most of Friday going down. The New York close was $1,274.70. The gold shares hated the action, being weak all day. The Arca Gold Bugs Index (NYSE:HUI) ended near its low, down 1.15% on the day. In fact, overall it was up distinctly less than gold for the week. ... Dispatch continues below ... ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php This is very disconcerting for the many gold watchers who respect the short-term forecasting ability of the shares. Ed Steer, who writes a wide-ranging daily commentary for Casey Research, was particularly upset and spelled out the bad news: "I believe that the chart patterns in both gold and silver yesterday were what technicians call a key reversal to the downside. ... There were new highs set in both gold and silver on Friday, but I must admit that I take cold comfort from that at the moment. ... Every long contract placed will have a bullion bank on the short side of it. And unless they get overrun at his particular juncture, this rally will probably end up the same as the rest of them." But by no means everyone shares these concerns -- partly because some are distracted by the recent powerful performance of silver. Martin Pring's Weekly InfoMovie said on Thursday: "This week we focus on silver because it has broken out from a very long-term consolidation formation. ... I am expecting it not only to be a valid move but a very worthwhile advance." James Turk at Free Gold Money Report on Saturday felt the same: "Silver has nearly completed a huge accumulation pattern highlighted by the 'head-and-shoulders' pattern formed over three years. ... The important breakout that we have been waiting for months is at hand. When silver finally hurdles above $21, expect the momentum from new buying that will come into the market to take silver much higher in the months ahead." Of course, such silver strength would be very likely to influence gold. Generally those who take a fundamentalist or macro view of gold are not much concerned. The Privateer sees great importance in the current disruption of foreign exchange markets. "Japan has signaled the possible beginning of competitive currency devaluations among the major nations with their unilateral intervention of September 15. This is the act which pushed US dollar-denominated gold to new highs." In a sense, currency gyrations underpin the confidence at Bill Murphy's LeMetropolecafe too. There the recent strength of the rupee is deemed to have supported gold by sheltering Indian demand despite higher US dollar prices. The Website also notes confirmation at the end of the week that Thailand's central bank bought gold in July: another fruit for gold from exchange-rate stress. Sellers/bears in New York; buyers/bulls in the East. Same old story. And the East keeps winning. Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Peter Brimelow: Some gold bugs worried by Friday's market flop Posted: 19 Sep 2010 04:50 PM PDT By Peter Brimelow http://www.marketwatch.com/story/some-gold-bugs-worried-by-fridays-flop-... NEW YORK -- Gold just closed a fine week with a poor Friday. Some gold bugs are getting worried -- but by no means all of them. During the week gold got into all-time high territory. The New York spot close on Thursday was $1,275.50. The free long term point-and-figure chart kept by Australia's The Privateer looks magnificent: http://www.the-privateer.com/chart/gold-pf.html But after a strong start, gold spent most of Friday going down. The New York close was $1,274.70. The gold shares hated the action, being weak all day. The Arca Gold Bugs Index (NYSE:HUI) ended near its low, down 1.15% on the day. In fact, overall it was up distinctly less than gold for the week. ... Dispatch continues below ... ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php This is very disconcerting for the many gold watchers who respect the short-term forecasting ability of the shares. Ed Steer, who writes a wide-ranging daily commentary for Casey Research, was particularly upset and spelled out the bad news: "I believe that the chart patterns in both gold and silver yesterday were what technicians call a key reversal to the downside. ... There were new highs set in both gold and silver on Friday, but I must admit that I take cold comfort from that at the moment. ... Every long contract placed will have a bullion bank on the short side of it. And unless they get overrun at his particular juncture, this rally will probably end up the same as the rest of them." But by no means everyone shares these concerns -- partly because some are distracted by the recent powerful performance of silver. Martin Pring's Weekly InfoMovie said on Thursday: "This week we focus on silver because it has broken out from a very long-term consolidation formation. ... I am expecting it not only to be a valid move but a very worthwhile advance." James Turk at Free Gold Money Report on Saturday felt the same: "Silver has nearly completed a huge accumulation pattern highlighted by the 'head-and-shoulders' pattern formed over three years. ... The important breakout that we have been waiting for months is at hand. When silver finally hurdles above $21, expect the momentum from new buying that will come into the market to take silver much higher in the months ahead." Of course, such silver strength would be very likely to influence gold. Generally those who take a fundamentalist or macro view of gold are not much concerned. The Privateer sees great importance in the current disruption of foreign exchange markets. "Japan has signaled the possible beginning of competitive currency devaluations among the major nations with their unilateral intervention of September 15. This is the act which pushed US dollar-denominated gold to new highs." In a sense, currency gyrations underpin the confidence at Bill Murphy's LeMetropolecafe too. There the recent strength of the rupee is deemed to have supported gold by sheltering Indian demand despite higher US dollar prices. The Website also notes confirmation at the end of the week that Thailand's central bank bought gold in July: another fruit for gold from exchange-rate stress. Sellers/bears in New York; buyers/bulls in the East. Same old story. And the East keeps winning. Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Posted: 19 Sep 2010 04:49 PM PDT
Jim Sinclair's Commentary Three solid fellows present their view on the future of the price of Gold. Alf Field: $4,250 – $10,000 Harry Schultz: $6,000 Martin Armstrong: $5,000
Jim Sinclair's Commentary The Green Hornet makes two points concerning the Western World pension disaster. 1. This is a quiet disaster because pension managers have a legal liability towards their performance. US Pensions Are Massively Underfunded, And Have Ridiculously Rosy Assumptions A piece in the WSJ on the rosy forecasts that US pension funds are making is getting a lot of buzz. Here's the key stat: The country's 15 biggest public pension systems have an average expected return of 7.8%, and only a handful recently have changed or are reconsidering those return assumptions, according to a survey of those funds by The Wall Street Journal. Given how low rates are, and how dicey the economic outlook is, this seems insane. But it's all about extending and pretending. After all, reducing expectations is very costly: The Colorado Public Employees Retirement Association showed in its 2009 financial report the impact of reducing the rate. Using a 8% expected return rate, the plan faced a $23.4 billion deficit, based on market values, at the end of 2009. If the rate was cut to 6.5%, the shortfall would jump to $34 billion.
Jim Sinclair's Commentary Not bad for a week, however they are a few years late in getting a good price. Central Banks Cut Holdings of U.S. Agency Debt by 7% This Week Sept. 17 (Bloomberg) — Central banks outside the U.S. are among investors that cut holdings of debt from government- related companies including Fannie Mae and their mortgage bonds by $57 billion in a week, according to Federal Reserve data. Concern the U.S. government may hurt mortgage bondholders by acting to boost home refinancing partly prompted official foreign investors to reduce their holdings to $752.5 billion on Sept. 15, Nomura Holdings Inc. analysts said. The portfolios reached a weekly average of $831 billion in early August and have fallen below the $769 billion recorded at the end of 2009, according to data compiled by Bloomberg. Most of this week's plunge likely reflected maturities of short-term agency corporate debt, the analysts wrote today in a note to clients. "A small portion" of the decline probably stemmed from investors completing mortgage-bond sales arranged in August amid speculation the U.S. might try to increase refinancing among consumers with no home equity or relatively poor credit, Nomura said. "At least some of that seems to have happened," Ohmsatya Ravi, the New York-based head of Nomura's U.S. securitization products research, said in a telephone interview. "When the higher coupon bonds were lagging a lot, we did hear that overseas investors were selling." Fannie Mae and Freddie Mac-guaranteed 30-year fixed-rate mortgage securities with coupons between 6 percent and 7 percent have underperformed U.S. Treasuries by 0.39 percentage point since July 30, according to Barclays Capital index data.
Jim Sinclair's Commentary The "New Normal" includes the untouchable caste (red, white and blue trash) of perma-poor US citizens. Income Poverty: One in Three Americans Lacks the Income Needed to "Make Ends Meet" Today the Census Bureau released a report on trends in income, including median income, income inequality and income poverty, and health insurance coverage between 2008 and 2009. As expected given the increase in unemployment—which grew from 7.4 percent in December 2008 to 10 percent in December 2009—the report shows a substantial deterioration in Americans' economic security between 2008 and 2009. The Census figures show that in 2009 one out of every three Americans had incomes that fell below the amount (roughly $45,000 for a family of four) that most Americans and various budget estimates show is needed to "make ends meet" at a basic level. Also, of particular note, the report shows substantial increases in the poverty rate and the rate of people without health insurance, as well as declines in median income for various demographic groups. Income Poverty and "Making Ends Meet" In 2009, some 43.6 million people had incomes below the federal poverty line. The income-poverty rate increased both overall—from 13.2 percent in 2008 to 14.3 percent in 2009—and for all racial and ethnic groups, except Asians (for whom the increase was not statistically significant). The number of persons living below the poverty line has now increased for three consecutive years. The largest percentage increases in poverty were experienced by families headed by a single man (3.1 percent) and children under age 6 (2.6 percent). There is broad recognition that the current poverty line ($21,756 for a family of four in 2009) falls far below the amount of income needed to "make ends meet" at a basic level.1 When established in the early 1960s, the poverty line was equal to nearly 50 percent of median income. Because it has only been adjusted for inflation since then, and not for increases in mainstream living standards, the poverty line has fallen to just under 30 percent of median income. As a result, to be counted as officially "poor," you have to be much poorer today, compared to a typical family, than you would have in the 1960s.
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| Posted: 19 Sep 2010 04:47 PM PDT Now Brazil Is Intervening To Weaken Its Currency, As The Competitive Devaluation Cycle Heats Up Several months ago the British Pound took a hit. Soon afterwards, it was the Euro's turn. Last week the Bank of Japan took steps to weaken the Yen. Now the Brazilian Real appears to be headed behind the global liquidity woodshed. These competitive currency devaluations, designed to benefit one nation at the expense of another, only temporarily redistribute rather than alter the size of the economic pie. Yet, despite minimal long-term impact, there's no end in sight for fiat devaluations. Why? Currency devaluation or the cheapening of previously issued bonds through on-going default maintains the status quo. Yes, it punishes saving and savers within the paper world, but that voice is relatively quiet in terms of influence. Fear not, the world of risk and reward vote with their feet. As the fiat world continues its on-going default, capital both large and small, continues to move into the safety of gold (and silver). This is reflective in the persistence, secular up trends in the global fiat price of gold. British Pound Gold Euro Gold Yen Gold Real Gold Source: businessinsider.com
Jim, Do you hear what I hear? An Angel is calling! CIGA "The Gordon"
Dear Jim, I am wondering if after all this is over if there will be more than four banks in the world. I had a very learned gentleman tell me this. I would appreciate any insights. Have a great trip! Best, Dear Big Tatanka, Four may well be low, but FEW is correct. There is a reasonably founded opinion that what we are going through from the Lehman flush to conclusion has all been to monopolize the Western world financial business. Regards,
Dear LT, It looks like the people over at Leap are in agreement with you for your gold move as it really hits the fan. We haven't seen anything yet! CIGA Big Tatanka Click here to read the article…
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| Gold “the Most Important Reserve Asset”? Posted: 19 Sep 2010 03:55 PM PDT Tim Iacono Apparently, after what's happened to the global financial system over the last few years, the world's central bankers have had a dramatic change in thinking about gold bullion, formerly known as the "barbarous relic". A metal once considered to be a remnant of a bygone era is now increasingly viewed [...]
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| GLD – Gold ETF Trading Signals Posted: 19 Sep 2010 03:55 PM PDT This 60 minute chart shows gold getting hit hard on Wednesday morning. Investors and traders around the globe were closing out positions and moving to cash. This high volume dumping of positions pulled virtually all investments lower and was the first tip-off that the market was in panic mode. One the dust [...]
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| And The Obligatory “Selloff Day” Gold Plunge Is Here Posted: 19 Sep 2010 03:55 PM PDT by Tyler Durden Just when you thought gold could go through at least one major selloff day without some remarkable fireworks, here comes a perfectly natural $10 selloff in the span of under a minute, because that is precisely how a quantized and "deep" order book looks like. Just how related this [...]
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| If Deflation Wins, What Will Gold Stocks Do? Posted: 19 Sep 2010 03:55 PM PDT By Jeff Clark, Senior Editor, Casey's Gold & Resource Report The talk of a possible double dip is now common banter on TV investment programs. And indeed, deflationary forces seem to have the stronger grip right now than inflationary ones. So if deflation is the next reality we have [...]
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| Posted: 19 Sep 2010 03:55 PM PDT Joe Weisenthal It's been a long time since gold appeared to be moving in one sharp direction or another, and almost every time we check it, it's right near $1200. Everyone expects the markets to make a mad dash in one way or another after the Fed announcement, and gold will probably be no [...]
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| Gold Meltdown or Mania – Batten Down the Hatches Posted: 19 Sep 2010 03:55 PM PDT by Louis James, Senior Editor, Casey's International Speculator As Doug Casey said recently, we expect things to come unglued soon. With the ongoing madness in Europe, it seems to me that things are starting to look visibly less well glued already. In contemplating the possibility of another stock market meltdown, [...]
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| Posted: 19 Sep 2010 03:43 PM PDT
For the faithful who have crossed the desert and suffered the slings and arrows of critics and the ridicule of non believers, gold’s move today to an all time high of $1,286 delivers the greatest of all vindications. All it took was some comments by Ben Bernanke about quantitative easing triggering dollar weakness, and it was off to the races. It didn’t hurt that the Indian wedding season, the largest annual purchaser of gold, is just beginning. Actually, it wasn’t much of a desert, maybe more of a Zen rock garden, as the barbarous relic sold off for only six weeks, down to $1,155, before it resumed its recent ascent. The Chinese buying I predicted put a floor under the price much higher than traders anticipated, frustrating hoards of buyers lower down (click here for “China’s Insatiable Appetite for Gold” at http://www.madhedgefundtrader.com/august-30-2010-3.html ). So now the question arises of what to do with your bounteous profits, and how much risk does the yellow metal present here? I get asked this question a dozen times a day, by some who have been long since the current move started more than a decade ago at $260, and others who stood on the sidelines and watched in awe as it went to the moon, kicking themselves all the way. Is it too late to get in? They call the yellow metal the barbarous relic for a reason. Let’s face it. We’ve had a great run. Gold is one of the top performing assets of 2010 by a long shot, soaring 16% YTD to its peak today, when most other asset classes sucked. Investors did even better in the futures, leveraged ETF’s like the (UGL), and gold mining shares or their out of the money calls. If you are the world’s greatest day trader, and think you can grab something here on the short side, then go ahead and knock yourself out. But you will be going against the long term trend. Obama has not suddenly turned into a paragon of fiscal rectitude, and Ben Bernanke still has the keys to the printing presses. The Fed has yet to even admit its role in the credit bubble of the last decade. Fiat paper currencies are still running a frenzied race to the bottom. Politicians of both parties see the only way to win elections is to inflate. Almost all short term money market alternatives globally are yielding close to zero, meaning that the opportunity cost of owning the gold is nil. It turns out that they aren’t making gold any more. The output of gold has fallen by 12% annually for the past decade, compared to a doubling of production costs to $500/ounce. Reserves everywhere are playing out, and top producer Barrick Gold (ABX) isn’t opening a new mine at 15,000 feet in the Andes because it likes the fresh air. The upcoming slugfest in Congress over whether to extend tax cuts for 97% of the populace, or the whole 100%, will almost certainly cause many investors to just throw up their hands in despair and start shopping for American gold eagles at Amazon (click here for that link at http://www.amazon.com/2010-Gold-Eagle-Limited-Mintage/dp/B002W0HFLI/ref=sr_1_13?ie=UTF8&s=miscellaneous&qid=1284496899&sr=8-13 ). Now that we have broken out to a new high, many traders think the yellow metal won’t pause to catch its breath until we hit $1,300. I still think my long term target of $2,300 is a chip shot, but it might take three years to get there. There are higher predictions of $5,000, $10,000, and $50,000 based on ratios of gold to broadening definitions of monetary assets, but I won’t bother with those here (click here for “The Ultra Bull Case for Gold” at http://www.madhedgefundtrader.com/july-13-2010-3.html ). First things first. To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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| Malaysia assists China's move to replace Treasuries with its own bonds Posted: 19 Sep 2010 03:27 PM PDT Malaysian Bond Boost for Renminbi By Kevin Brown, Robert Cookson, and Geoff Dyer http://www.ft.com/cms/s/0/fecc16fc-c417-11df-b827-00144feab49a.html Malaysia's central bank has bought renminbi-denominated bonds for its reserves, marking a significant advance for Beijing's attempts to internationalise the use of its currency, pitched by Chinese policymakers as a long-term rival to the US dollar. The central bank's move is also expected to herald further diversification into Chinese government securities by other Asian countries. "This brings the renminbi's credibility to a whole new level," said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole. "It will have a domino effect, starting among China's trading partners in Asia. Then it will gradually spread globally." The Malaysian central bank refused to comment on the move, saying that it never discusses the composition of its reserves, which amounted to M$311 billion (US$100 billion) at the end of August, which was then equivalent to US$95 billion. ... Dispatch continues below ... ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth However, people with knowledge of the transaction said it had taken place recently and was thought to have been accompanied or followed by purchases by other Asian central banks, although none of these has yet been identified. In August, China opened its domestic interbank bond market to foreign central banks that have access to renminbi through a series of bilateral currency swaps totalling Rmb800billion ($120 billion). The agreements, signed since 2008, are with Argentina, Belarus, Hong Kong, Iceland, Indonesia, Malaysia, Singapore, and South Korea, although there are no details about how many of these swap lines have actually been activated. Commercial banks such as HSBC and Citigroup that have accumulated renminbi through cross-border trade settlement were also told last month they would be able to invest in China's interbank bond market, although none has yet been given formal approval. The decision to allow some central banks to invest in the domestic bond market is part of a push by Beijing to increase the international use of the Chinese currency. An expanded role for the renminbi would be a threat to the position of the US dollar, although many economists believe it will be years before it becomes a major reserve currency, given China's tight financial market controls. In the short term, the news may even be welcomed in Washington. If other countries are starting to buy Chinese bonds as reserve assets, it may put upward pressure on the renminbi by increasing the two-way flows with the currency. Indeed it actually increases the possibility that, as some have suggested, the US could retaliate for Beijing's purchases of US Treasuries by buying Chinese assets. According to an official at an international agency close to the Chinese and other Asian central banks, the Malaysia bond purchase is "a breakthrough." But he added: "It's still a baby step. China's intention is not to upset the international monetary system; it's to incrementally increase the role of the renminbi." Join GATA here: Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| Malaysia assists China's move to replace Treasuries with its own bonds Posted: 19 Sep 2010 03:27 PM PDT Malaysian Bond Boost for Renminbi By Kevin Brown, Robert Cookson, and Geoff Dyer http://www.ft.com/cms/s/0/fecc16fc-c417-11df-b827-00144feab49a.html Malaysia's central bank has bought renminbi-denominated bonds for its reserves, marking a significant advance for Beijing's attempts to internationalise the use of its currency, pitched by Chinese policymakers as a long-term rival to the US dollar. The central bank's move is also expected to herald further diversification into Chinese government securities by other Asian countries. "This brings the renminbi's credibility to a whole new level," said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole. "It will have a domino effect, starting among China's trading partners in Asia. Then it will gradually spread globally." The Malaysian central bank refused to comment on the move, saying that it never discusses the composition of its reserves, which amounted to M$311 billion (US$100 billion) at the end of August, which was then equivalent to US$95 billion. ... Dispatch continues below ... ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth However, people with knowledge of the transaction said it had taken place recently and was thought to have been accompanied or followed by purchases by other Asian central banks, although none of these has yet been identified. In August, China opened its domestic interbank bond market to foreign central banks that have access to renminbi through a series of bilateral currency swaps totalling Rmb800billion ($120 billion). The agreements, signed since 2008, are with Argentina, Belarus, Hong Kong, Iceland, Indonesia, Malaysia, Singapore, and South Korea, although there are no details about how many of these swap lines have actually been activated. Commercial banks such as HSBC and Citigroup that have accumulated renminbi through cross-border trade settlement were also told last month they would be able to invest in China's interbank bond market, although none has yet been given formal approval. The decision to allow some central banks to invest in the domestic bond market is part of a push by Beijing to increase the international use of the Chinese currency. An expanded role for the renminbi would be a threat to the position of the US dollar, although many economists believe it will be years before it becomes a major reserve currency, given China's tight financial market controls. In the short term, the news may even be welcomed in Washington. If other countries are starting to buy Chinese bonds as reserve assets, it may put upward pressure on the renminbi by increasing the two-way flows with the currency. Indeed it actually increases the possibility that, as some have suggested, the US could retaliate for Beijing's purchases of US Treasuries by buying Chinese assets. According to an official at an international agency close to the Chinese and other Asian central banks, the Malaysia bond purchase is "a breakthrough." But he added: "It's still a baby step. China's intention is not to upset the international monetary system; it's to incrementally increase the role of the renminbi." Join GATA here: Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| The IMF itself has become the problem as Europe's woes return Posted: 19 Sep 2010 03:17 PM PDT September 19, 2010 01:37 PM - Once a quorum of big names says the game is up in a debt crisis, events move fast and furiously. Read the full article at the Telegraph......
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| Posted: 19 Sep 2010 03:17 PM PDT View the original post at jsmineset.com... September 19, 2010 12:45 PM Jim, Do you hear what I hear? An Angel is calling! CIGA "The Gordon" Dear Jim, I am wondering if after all this is over if there will be more than four banks in the world. I had a very learned gentleman tell me this. I would appreciate any insights. Have a great trip! Best, CIGA BT Dear Big Tatanka, Four may well be low, but FEW is correct. There is a reasonably founded opinion that what we are going through from the Lehman flush to conclusion has all been to monopolize the Western world financial business. Regards, Jim in Mwanza. Dear LT, It looks like the people over at Leap are in agreement with you for your gold move as it really hits the fan. We haven’t seen anything yet! CIGA Big Tatanka Click here to read the article…...
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| Got Gold Report – Uncharted Waters for Gold Posted: 19 Sep 2010 03:17 PM PDT By Gene Arensberg Esse quam videri – To be rather than to seem. Silver “confirms” with an impressive breakout attempt of its own. “Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.” – Thomas Paine ATLANTA (Got Gold Report) – With gold printing new all time highs in the $1,280s and silver testing new multi-decade weekly closing highs above $20.70 this week, can it be any more natural for people to be warning us that both precious metals are in a bubble? From our perspective, the people doing the warning about gold being in a bubble are the same ones who told all of us that gold was not a worthwhile “investment” because it cost money to store and it doesn’t earn any interest or dividends. Now that gold has been above $1,000 for a year we believe those calls by the anti-gold babblers are a form of “metal envy.” We cannot wait to see what t...
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| Gold Market Update - Sept 19, 2010 Posted: 19 Sep 2010 03:17 PM PDT Clive Maund In recent days many commentators proclaimed that gold and silver have "broken out", but THIS IS NOT TRUE, so what is the current situation? In the last update we looked at both the bullish and bearish case for gold and silver, what you might otherwise call the best and worst case scenarios. Some interpreted this as fence sitting, but it was no such thing - it was dispassionate pragmatic analysis the result of which is that we won't get caught by surprise whatever happens. However, whilst we have defined what will constitute a breakdown and know in advance what action to take should breakdown occur, we are now in the bullish camp and have been buying a range of selected stocks in expectation of an upside breakout which should lead to a powerful broad based advance. We require 3 conditions to be be met to be sure that we have an upside sector breakout, which are expected to be synchronously fulfilled. First gold has to break out upside from its current potenti...
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| Silver Market Update - Sept 19, 2010 Posted: 19 Sep 2010 03:17 PM PDT www.CliveMaund.com Many have been trumpeting a silver breakout over the past week, but while silver has clearly broken out of its Summer triangle, it HAS NOT broken out to clear new highs, although the indications are that it is going to before much longer. On the 3-year chart for silver we can see how it has advanced steeply following the breakout from its Summer Triangle, and while this action has taken it away from the danger zone and is certainly construed as bullish, it has yet to break out above its early 2008 highs at about $21, at which it has arrived in a critically overbought state. What does this mean? - it means that it is likely to consolidate/react for a short while to "recharge its batteries" before it blasts through to clear new highs. Of course it could blow through the highs immediately, but that would make it even more overbought so the gains would be unlikely to stick and there would be a risk of it slumping back into pattern. The strong advan...
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| Posted: 19 Sep 2010 03:17 PM PDT Richard (Rick) Mills Ahead of the Herd As a general rule, the most successful man in life is the man who has the best information The Chinese government, in an effort to maximize exports and minimize US imports prints their yuan to buy dollars. This prevents their currency from rising and the dollar from falling. Then it loans those same dollars back to America by buying US debt. At the same time China: [LIST] [*]Puts in place purchasing restrictions [*]Permits piracy [*]Delays legitimate items from entering the country [*]Provides massive direct subsidization of export production in many key industries [*]Maintains strict non-tariff barriers to imports [/LIST] In 2009 U.S. imports from China were worth $296.4 billion. U.S. exports to China equaled $69.5 billion. In the first half of 2010 the U.S. trade gap with China equaled $119.5 billion. The American Congress is facing a restless, very concerned, and increasingly vocal American public. Lawmakers in both the S...
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| Posted: 19 Sep 2010 02:33 PM PDT Recently, the US Treasury Department released data showing an 11% decline in official Chinese holdings of US government bonds during the past year. For US dollar holders, this is a troubling trend. Not so much for those holding gold. To put it simply, the Chinese government isn't adding to its US bond position, at least not in any meaningful way. Nor is it rolling over its previous purchases. According to the latest Treasury International Capital report, China resumed net purchases in July for the first time in three months. China's US Treasury holdings rose $3 billion. Dollar bulls looking to cheer the modest purchase may first consider the following, longer-term trend: Between September 2009-July 2010, Chinese holdings of US bonds fell from $938.1 billion to $846.7 billion, a drop of over $91 billion over nine months. In short, the Chinese are backing away from US debt. They're reducing their exposure to the US dollar, and by extension their vulnerability to a declining US economy. What's going on? Is the decline in Chinese holdings of US bonds strictly an economic assessment? Or is there something else afoot? What factions are driving this decision? And what does all of this mean for precious metals? First let's note how, in recent years, China has exhibited a newfound measure of international confidence, if not swagger. It's easy to understand why. China's leaders see that the US suffers from a weak economy, hampered by chronic overspending on consumption and underinvestment in new capital. In the wake of the global financial crisis of the past few years, Chinese leaders have concluded that US-style democracy and Wall Street-style capitalism are discredited. In other words, to use a Chinese term, the US is a "sunset power." China, on the other hand, sees itself as a "sunrise power." The Chinese are going places in this world. The Chinese have developed a different approach to development than other nations, and they have the economic statistics to back it up. The Chinese are not afraid to trumpet their success, either. Recently, for example, the German magazine Der Spiegel noted, "All around the world, from Africa to Asia to South America, Beijing is trying to tout its model of authoritarian state capitalism as the better alternative." One way to look at things is that we're watching historical waves unfold. China is on the rise, while US power and influence wanes. But in a nation and culture as complex as that of China, it's also useful to take a close look at how and why things happen. One key source of influence within China is a hard-core military faction. The Chinese military offers a viewpoint that almost always holds sway on issues of supreme national importance. Such issues definitely include areas of so-called "core Chinese interests" that cover Taiwan and Tibet, as well as the South China Sea and the Yellow Sea. It's common knowledge, for example, that Chinese military advisers are incensed over US arms sales to Taiwan. No amount of US diplomacy ever is enough to smooth the troubled waters that divide mainland China from Taiwan. Indeed, the Chinese view their relations with Taiwan as an "internal matter" and consider most US activities that touch on that relationship as "officious meddling." In a new development this summer, the Chinese military expressed outrage over joint US-South Korean military maneuvers in the Yellow Sea. That is, the US and South Korea announced plans to conduct military exercises in the waters west of South Korea where a South Korean warship was sunk - apparently by a North Korean torpedo - in March of this year. The Chinese military, in turn, went ballistic (so to speak). One recent article on the state-run Xinhua news website warned the US not to move the aircraft carrier USS George Washington into the Yellow Sea. The author of the article took care in his choice of words, but left no room for doubt about the Chinese position: On another news site, People's Liberation Army Daily, Rear Admiral Yang Yi, former head of strategic studies at the Peoples' Liberation Army's National Defense University, was no less forceful, stating: Adm. Yang believes that the US threatens China. Earlier this year, he said: In a recent editorial, Adm. Yang expressed dismay over US policies, stating, "Rarely has there been such wavering and chaos in US policy toward China." Adm. Yang expanded the point in another article in China Daily, China's main English-language newspaper: "Washington will inevitably pay a costly price for its muddled decision." Not to be outdone - or perhaps simply to offer a consistent message - Maj. Gen. Luo Yuan, deputy secretary-general of the People's Liberation Army Academy of Military Sciences, added his authority to the discussion. In a scathing editorial in the Chinese newspaper Global Times, Gen. Luo said that moving the USS George Washington into the Yellow Sea was a "deliberate provocation" toward China and that the US should "think twice about the maneuver." Gen. Luo followed up with this comment: "Imagine what the consequences will be if China's biggest debtor nation challenges its creditor nation." China is the "world's largest market," and "offending China means losing, or at least decreasing, market share." I don't think we have to "imagine" the consequences at all. I believe we just have to look at the decline in Chinese holdings of US bonds - or "decreasing market share," like the man said. Thus, I believe that in addition to the Chinese economic concerns about the future of the US economy and US dollar, the Chinese military is also pushing its leadership to back away from holding US dollars. There's a component of military strategy to the decline in Chinese bond holdings. Then next question is if the Chinese are NOT buying US bonds, then who IS buying them? My hunch is that it's the US Federal Reserve. That is, the Fed is covering China's retreat from the dollar. For reasons both economic and military, China is gradually exiting is dollar position. The Fed is allowing this to happen quietly, without causing a dollar panic. Meanwhile, the consequence is that the Fed is monetizing the US national debt. Over the long term, this can only lead to the further decline of the U.S currency. Looking out over the medium and long terms, it can only mean higher prices for precious metals. And that, for our money, is exactly where the sunrise investors will want to be. Regards, Byron King,
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| Gold – All About the Dollar? Posted: 19 Sep 2010 02:09 PM PDT Gold is suddenly all about the dollar again. Or so you might think. The race to debase only looks set to raise gold's global appeal still further... After its longest run of moving in tandem with the trade-weighted Dollar Index since midsummer 1991 (45 trading days; average correlation +0.58), the gold price in dollars resumed its commonly-assumed relationship with the greenback last Friday, moving opposite to the currency's forex fluctuations. Tuesday then brought the first of this week's three new record highs. Only the Indian rupee, to date, has suffered a similar fate. What next? History says to expect further dollar-led gold action ahead, at least in the headlines. Because any approach of the strong, positive correlation achieved this summer is typically followed by a stretch of strong negative correlation, with the dollar and gold moving in opposite directions.  But that doesn't mean non-dollar investors won't also see fresh gains or highs in gold, however - not with gold continuing what remains a powerful long-term uptrend against all major currencies, and not with central banks everywhere desperate to devalue their own money against the greenback. "There's certainly investor nervousness about monetary policy around the world since the yen intervention," as Mitsubishi's new precious metals strategist Matthew Turner (formerly at the VM Group) tells Reuters. "A lot of people are sensing a race to the bottom by central banks to print more of their currency, to reflate their economies, and gold is getting support from that." The Bank of Japan is now actively selling yen to buoy the dollar, while the Bank of England has held real sterling interest rates below zero for 24 months running. Whatever the political rhetoric during May's Greek deficit crisis, France and Germany would rather see a weak than strong euro, while Beijing's new "flexibility" - a prelude, perhaps, to its new yen buying strategy - has so far delivered only a 1.4% rise in the yuan's dollar value since June. That's barely a ripple compared with the yuan's 4.8% rise of Q1 2008, and nothing against the 5.5% rise in the kiwi, 8.7% rise in the Aussie, or 15% rise in the Swissie of the last 3 months.  Longer-term, as you can see, gold's bull market to date hasn't really been about any particular currency. It really is about all of them. Gold has quadrupled and more against all the world's money since the start of 2000, as our Global Gold Index shows. (It maps the daily gold price in the world's top 10 currencies, weighted by size of economy and starting at 100 on New Year's Day 2000). And most critically for traders trying to second-guess the dollar gold price, throughout 2010 to date - and also across the last four decades as well - gold's correlation with the Dollar Index is statistically insignificant (+0.02 and minus 0.15 respectively). Regards, Adrian Ash
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| UK Government Stealth Debt Default Continues at Minimum Rate of 3% per Year Posted: 19 Sep 2010 02:08 PM PDT
You may be wondering what am I talking about? What sovereign stealth debt default at 3% ….? Perhaps I should use the label that the reader is more familiar with for the stealth sovereign debt default trend, that people have been conditioned into accepting to actually be a good thing for them and the economy i.e. INFLATION, as an outright debt default is near impossible as the government can keep printing money and issuing bonds that the Bank of England monetize's via the fractional reserve banking system. INFLATION is pure and simple THEFT by the government for the primarily purpose of enabling governments to exist in ever expanding size and scope of interference in everyday lives for without INFLATION i.e. in a normal deflationary world, in which big governments would not be able to exist because accumulated debt would INCREASE in value, thus ensuring that large long-term borrowings could not be entertained in an 'normal' deflationary environment. Yes deflation should be the normal environment for an economy, if it where not for big governments with big ideas on how to stealth tax the populations wealth and spend it on even bigger and usually worthless projects. Another word one could use for deflation is productivity, each year the productivity of workers increases due to innovation and new technologies which means that the price of goods and services should fall as workers become more efficient in their production and thus the value of hours worked increases. Off course this only tends to happen in the private sector as the public sector ironically becomes LESS productive the bigger it becomes as the number of bureaucrats expands exponentially until the economy folds under its weight, as witnessed by the NHS where a tripling in the budget under Labour has basically resulted in a tripling in the number of bureaucrats employed. This puts the economy into a perpetual worsening state as the Public sector displaces the far more productive and competitive private sector both on the large and small scale, for example small local post offices have been closing across the UK due to lack profitability. However many councils have responded by stepping in to re-open some of the small post offices with grants of say £50k a year towards their running costs, therefore no tax paying private sector postal service will ever be able to again step in to provide a service as it cannot compete against a perpetually subsidised loss making local postal service. So in our topsy turvy government brainwashed world, we are repeatedly told that DEFLATION is bad, if not evil, and that INFLATION is good, something to leap with joy at the prospects of seeing our wealth disappear down the inflationary spiral. Governments love inflation because it allows them to expand the size of the state which is the natural instincts of ALL governments no matter the political party, as once politicians get into office then out goes the ideology that they used to get elected and off they run to enjoy the trappings of the state as they seek to make their mark on history. You may at this point interject and state that the current UK coalition government is issuing statements left right and centre that it intends on cutting this that and the other to get a handle on the countries public debt mountain! Only one problem, the coalition government is not going to cut the debt at ALL! they can't cut the debt because the last Labour government has ensured that the gap between that which the government spends and earns is unbridgeable, all that the governments can do is erode the purchasing power of all workers and savers in the economy through inflation which devalues the value of the current total debt of approx £800 billion with another £400 billion due to be added, that THIS so called spending cutting government will rack up during the next 5 years which is why the Bank of England and Treasury pump out propaganda on the economy that never matches reality such as that the inflation rate is always destined to converge to 2% in 2 years time. for example if UK inflation compounds to 28% in 5 years time (RPI 5% per annum), then that means total debt of £1.2 trillion would be worth £864 billion in todays money i.e. Little change from the present! Hey presto the budget deficit is gone whilst the debt burden remains constant. But who has paid the price for this apparent miracle? The bond holders, savers and workers by means of inflation AND taxes on illusory nominal economic growth due to inflation. How Much of your Wealth Has Been Stolen by the Last Labour Government ? Well for that we have to take a look at the governments preferred inflation measure, the CPI index which despite under reporting real inflation still shows that the Labour government between April 1997 and May 2010 stealth taxed your wealth and earnings to the tune of 28% to give you the illusion of prosperity, whilst all the time enabling the government to go on an unfunded public sector spending spree to greece the palms of those who most likely voted Labour. However the problem is that the greater the debt burden in terms of % of GDP then the greater will be the future rate of inflation, which currently looks set to wipe out another 28% of the value of your wealth during the next 5 years which will be WITHOUT the benefit of illusory inflation linked pay rises.
Savers at this point may argue that they receive interest on their savings or enjoy capital gains on invested assets (despite the financial crash and bankster designed fraudulently investment instruments that result in only making money for the financial institutions rather than investors). The government has thought of that too and steps in with ANNUAL income taxes at the marginal rate on interest at 20% to 40% (depending on your tax band), and capital gains are also taxed. Which ensures savers / investors are going to find it very difficult to prevent the government from stealing your wealth as the system is designed to virtually guarantee that your wealth will eventually end up in the Treasury. On the other hand if there were no inflation then the rate of income tax on interest would not matter as you would always earn more than the inflation rate which is ZERO and neither would capital gains tax matter. Still it gets even better during deflation where due to increasing productivity general prices should fall so the value of your savings even if the rate of interest is ZERO increases, off course governments cannot allow for deflation because they are no longer able to steal your wealth. UK inflation presently is increasing at an annual COMPOUND rate of more than 3% as illustrated by the below graph with the August 2010 Inflation rate of 3.1% precisely in line with my forecast for 2010 (27th December 2009 – UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%), with little sign that there is going to be any change to this trend, especially as the stealth debt default inflation mega-trend is required to reduce the real terms value of total debt that is expected to increase by 50%, that's 50% more debt between now and 2015, which does not in anyway match the Bank of England's mantra of 2% inflation in 2 years time, more like 4%+. How are your savings going to survive being devalued and taxed and into oblivion ? How are wages going to be able to buy goods when the average pay rise is just 2% with many wages frozen or being cut ? That is what happens when a country is stealthily defaulting on its debts! Its just that people have been conditioned into thinking that its good for them when the opposite is true!
China Deflation Has Turned Into Exportation of Their Own Inflation Mega-trend The current situation of negative interest rates remains highly temporary as unlike the Bank of England's repetitive mantra of temporary high inflation some 9 months on, the ongoing surge in inflation is NOT temporary as it is as a consequence of the inflation mega trend that is being fed as a consequence of the rise of emerging markets that are now starting the process of exporting inflation abroad just as for well over a decade they had previously exported deflation abroad as they produced ever cheaper goods that the west consumed, however that has now gone as Chinese workers are starting to demand substantial pay rises of in some cases more than 50%. Why is this happening now ? Basically because after 20 years of hundreds of millions of Chinese farmers running from their small countryside villages to ever expanding cities to man the factories, China has now effectively ran out of cheap farm labour, in the future Chinese Labour will get ever more expensive and so will the prices of the goods produced in the shops as chinese workers will both be paid more and also thus consume more, either way the west needs to say hello to the China induced Inflation Mega-trend! Well until another country, perhaps India steps forward to take China's place as the worlds sweat shop, though I don't see how India will be able to achieve such a feat under its creaking and crumbling infrastructure. For investors it is clear, you want to ensure you have a piece of the China domestic consumption pie, that mega-trend will run for at least a decade or two. However for UK consumers it is all bad news, less real disposable income AND higher priced goods in the shops! Bank of England Ignoring Inflation In an earlier article I explained at length why the Bank of England is wrong 96% of the time in its inflation forecasts (13 Aug 2010 – The Real Reason for Bank of England's Worthless CPI Inflation Forecasts). The Bank of England Forecasts are NOT actually forecasts but propaganda aimed at soothing public concerns on the inflation and economic growth fronts by talking the economy in favour of where it wants the economy to be so as to enable the BOE to improve the probability of achieving its set economic targets and goals which would be far more difficult to achieve i.e. to target 2% inflation if it had to be more candid. Additionally admitting to the more probable implies that they are NOT able to do their jobs as it is far better for the Bank of England to be seen to be in error in its forecasting then to have seen high inflation coming but failed to have acted to prevent it. The fact that the Bank of England is engaged in pumping out pure propaganda should not come as any surprise for basically at heart they are politicians and as with all politicians tend to be economically with the truth, as we shall probably fund that the Coalitions mantra of cuts of 25% to 40% will probably amount to something akin to nominal cuts of less than 5% as we look back at where the budgets stand in 3 to 4 years time against today's spending totals as illustrated by the below graph.
The delusional self obsessed public sector unions are starting to rev up with propaganda against the spending cuts such as wanting to tax the British economy into oblivion as if there are millions of rich scrooges sat on mountains of gold coins. The unions threaten several winters and summers of discontent though in reality the unions no longer have any powers to do so. There is no rational case to maintain a public sector that is at more than 50% of the economy when in reality it should be less than 30% of the economy. All that such a large unproductive public sector does is to ensure INFLATION as the the public sector acts to leverage UP the countries real inflation rate i.e. private sector deflation due to productivity increases + Public sector Inflation due to loss of productivity equals Higher INFLATION. NHS Bankrupting Britain – Whilst the Unions and the Labour party busily pump out propaganda the debt interest time bomb continues to go off that will double from a cost of approx £33 billion for 2009-10 to £65 billion by 2014-2015 even AFTER real terms spending cuts of 25% have been enacted! Which is why I concluded several years ago that the NHS would kill the British Economy because that is precisely what is now coming to pass (24 Dec 2006 – The NHS is killing Britain as it wastes tens of billions every year ! ) and (03 May 2009 – Privatise the NHS and Save the UK Economy from Bankruptcy) and more recently (11 Apr 2010 – NHS Bankrupts Britain ). Where has all of the NHS money gone ? The below graph illustrates how tripling of the NHS budget has disappeared down a black hole, as pay between MP's and GP's started to diverge during 2003 as a consequence of the inept Labour government being hoodwinked into signing up to new GP contracts that were designed to let GP's enjoy 30% per annum pay rises whilst doing less work which contributed to the 2009 MP expenses scandal, which is indicative of how the public sector functions, where more money does not equate to more service because there is no concept of productivity and profitability which can only exist where there is a market for goods and services so providers have to compete rather than be handed blank cheque's to maximise spending as was Labour government policy.
Off course the REAL cuts will be due to INFLATION, which is why inflation exists as a useful tool to trick the populous into focusing on nominal figures, so in real terms many of the budgets will be cut by about 25% over the next 4 years. For instance the NHS is so badly run that just to stand still it requires at least a 6% increase in its annual budget! The coalition government has promised to ring fence and increase the NHS budget by 2.5% per year which amounts to a real terms cut of 3.5% per annum. Of course the government could introduce real competition between hospitals and GP practices by privatising the NHS and thus make the NHS far more productive. Such as the recent announcement that ALL 150 NHS PCT's will be scrapped and that GP practices will be forced to come together in some 450 competing consortiums. The GP's at this point may be gleefully eyeing the £100 billion annual budget as a means by which much more cash will end up in their back pockets, but the crunch point will come when supermarkets such as Asda and Tesco's start to compete with GP practices with GP surgeries within supermarkets. At the end of the day the governments favourite answer to demands for spending on public sector black holes such as the NHS is INFLATION. The only question mark is at what point does the market force interest rates higher to enable continuing issuance of new debt. Bank of England Paralysed By Fear Since August 2007 when the credit crisis first broke the Bank of England has been in a state of perpetual state of panic, always opting to do nothing rather than something. For instance during 2008 the Bank of England should have been cutting interest rates but instead it kept them on hold at 5% as it remained paralysed by the fear of inflation right up until Gordon Brown announced the first emergency cut on October the 6th 2008 from the Prime Ministers Despatch Box rather than by the Bank of England MPC, following which the Bank of England was instructed to keep cutting interest rates all the way to 0.5% by March 2009 where they have remained. Similarly the Bank of England during the whole of 2010 has again been paralysed by fear of non existant deflation into a state of inaction, this time failing to raise interest rates as INFLATION has run rampant at above the CPI 3% level for virtually the whole year. This to me suggests that the first interest rate rise will again come when the Coalition government deems it to be politically convenient to do so, rather than in response to INFLATION unless preempted by the markets. Deflation Delusion Persists You hear a lot of continuing talk about deflation, however the whole deflation argument is a delusion the reasons for which I covered at length in an earlier article (26 Aug 2010 – Deflation Delusion Continues as Economies Trend Towards High Inflation). Basically deflationists are living in either the 1930's or somewhere in ageing population shrinking Japan. They are not living in either the UK or the USA or much of the rest of the world. Deflation in our fraudulently fiat money printing central bank governed world cannot exist, not whilst governments run budget deficits that continue to pile on ever more debt that demands inflation to erode its real value as already mentioned earlier and the price for which is being paid for by the CURRENT generation not future generations which is another consensus driven myth that exits purely to condition the population into accepting the frauds of deficit spending, debt accumulation and inflation. Delusional deflationists that populate the mainstream media have been instrumental in ensuring that the likes of the stocks stealth bull market (02 Feb 2010 – Stocks Stealth Bull Market Trend Forecast For 2010) will continue to run for many years because they miss the most fundamental fact that asset prices are leveraged to consumer prices. Despite the focus of my analysis being on the UK economy, the United States most recent CPI inflation rose by 0.3% in August with the annualised rate of inflation at 3.6% as the mainstream press looks for rear mirror excuses so as to explain what has already happened. So a year on of perpetual deflation mantra instead of US inflation being at CPI -1.1% it is instead stands at +1.1%, where is the deflation ? Don't worry if the data does not fit then change the methodology as I warned would happen nearly a year ago that once proved to be wrong the deflationists will attempt to either rewrite history or change the definition of what inflation actually is which is precisely what is happening today (18 Nov 2009 – Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend ). Such as attempting to change the debate from Deflation vs Inflation to Deflation vs Hyperinflation ! When Hyperinflation is the END GAME ! When populations PANIC and loses confidence in the currency and hence dumps it for anything from consumer goods to hard assets, which in our fast moving financial world probably means that hyperinflation would occur within a matter of hours rather than months as Weimar Germany experienced during the 1920's. So hyperinflation is akin to market crashes i.e. something that cannot be forecast as to when it will occur but rather one can protect themselves from in advance of by engaging in Wealth INFLATION PROTECTION strategies rather than following the bankrupting deflationists recs such as parking ones money in cash or government bonds which are guaranteed to lose you ALL of your money as the first signs of hyperinflation would occur in the bond and currency markets, long before prices in the shops soar and the lagging official inflation indices surge higher! Bottom line – All analysis should be geared towards only one outcome and that is to arrive at actionable conclusions so as to monetize on trends, the only way to achieve this is by putting ones OWN MONEY on the line on EVERY market conclusion, without which you have the likes of the perma gold bears and deflationists who if they followed their own advice would have bankrupted themselves many times over! It is easy to pump out worthless propaganda based on the pseudo science of economics, it is infinitely harder to arrive at an actionable conclusion that is deemed to have a high probability for a positive outcome. UK Interest Rates and Inflation Risks So to gauge when UK interest rates will rise, we need to gauge what level of inflation will hurt the coalition government as clearly 3% despite being above the BoE target is not having any impact. Well Inflation is set to spike higher early 2011 to probably above 4% CPI and 6% RPI which after more than a year of temporary inflation mantra, I am sure that financial markets, never mind the general populous will no longer believe as being just temporary, which does suggest that UK interest rates should start to rise during the 1st quarter of 2011 but by not enough to quell inflation which is official government policy of the continuing stealth debt default trend. I suspect that the Bank of England and Government are gearing themselves up for substantially higher inflation for many years, far beyond the current rate of 3.1% which will come to be seen as period of low inflation as a consequence of the need stabilise public sector debt in terms of percentage of GDP especially if the government expects to achieve its target for debt at 65% of GDP by 2015-16 which I just do not see as being possible, the most probable outcome is debt stabilising at an inflation inducing 71%.
The risk that the Bank of England and Government is running is that the people start to see through the Smoke and Mirrors and realise that persistent high INFLATION is pure and simple THEFT of their wealth and start demanding higher pay hikes than the inflation rate which means go on strikes, which I am sure that the planned austerity cuts will act as a triggering mechanism for, to make all workers more militant. The effect of striking workers is INFLATIONARY ! Because even marginally less goods and services produced act to force up prices, a ratcheting up effect, the higher inflation goes the less control the government or Bank of England will have over inflation as it will become LESS responsive to interest rate hikes because people start to lose faith in the currency, they don't want to hold onto something that is fast losing its value, they want to get rid of it, SPEND it on goods and services if which they don't really want which is basically the path towards hyper-inflation. The governments are always playing a dangerous game with inflation because governments NEED inflation to DEVALUE the DEBT, but populations REACT to persistently high inflation by increasingly becoming more reluctant to hold the currency, they want out, whether its into hard assets, consumer goods or alternative currencies, and another point to consider is that the spark for high inflation has already been lit by the budget busting black hole across the Atlantic that is burning the worlds rese
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| Posted: 19 Sep 2010 01:59 PM PDT |
| Posted: 19 Sep 2010 01:00 PM PDT We require 3 conditions to be be met to be sure that we have an upside sector breakout, which are expected to be synchronously fulfilled. First gold has to break out upside from its current potentially bearish Rising Wedge - new highs are NOT GOOD ENOUGH and to claim they are is amateurish. Second, while silver has undeniably broken out upside from a Triangle, IT HAS NOT BROKEN OUT YET TO CLEAR NEW HIGHS. Thirdly, as more ordinary investors are well aware, Precious Metals stocks indices HAVE NOT YET BROKEN OUT to new highs, although there is strong evidence is that they will do before long.
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This article is part of a series towards an updated UK interest rate trend forecast. The UK government continues to stealth default on its government debt at the minimum rate of 3% per annum, a price that is being paid for by all workers and savers. The population of Britain has been successfully conditioned by successive governments deploying the pseudo science of economics that appears to exist purely to enable governments to psychologically manage the expectations of their populations such as coming to believe that the stealth sovereign debt default trend is good for them.
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