Gold World News Flash |
- Wednesday ETF Wrap-Up: VXX Tumbles, DBA Soars
- Gibson's Paradox and the Price of Gold
- Historical Gold:Silver Ratios Suggest Silver Could Reach $200! – Here's Why
- So Much For Gold! Chinese Stock Market to Outperform!
- Hourly Action In Gold From Trader Dan
- Gold/Bond and Dow Jones/Gold Ratio Charts From Trader Dan
- In The News Today
- Foreigners Buy $117 Billion in Treasuries During August
- The Economic and Financial NO SPIN Zone: Part III
- The Greek Dollar Swap Window
- Why Inflation is Always a Bad Thing
- Mickey Fulp: Cherry Picking Undervalued Juniors
- How to Book a 542% Gain in 10 Months
- Silver Exports From China Down 60% From Last Year
- Gold in a Low-Inflation Environment, Part I
- China Lowers the Boom
- LGMR: Gold & Silver Slip But Investors Still "Buying the Dips"
- The West's Pending Paper Money Implosion... Retiring CFTC Judge: We Covered Up Market
- Gold in State of Limbo
- A Dollar Surge and Risk Collapse Send Gold and Oil Tumbling
- Crude Oil Plunges on China Interest Rate Hike, Gold Gets Pounded on Dollar Rebound
- 7 Speculative Chinese Small-caps
- The #1 Reason Why Gold Collapsed
- New York Fed faces 'inherent conflict' in mortgage buybacks
- New York Fed faces 'inherent conflict' in mortgage buybacks
- Gold & Silver Slip But Investors Still "Buying the Dips"…
- Gold & Silver Slip But Investors Still "Buying the Dips"…
- Where's the FT story about 'speculators' buying government bonds?
- Where's the FT story about 'speculators' buying government bonds?
- India Was Buying Last Night + Interesting Comex O/I report…
- GLD (Gold Proxy)
- Rare earth prices soar even as China pledges supply
- What the Price Distribution is Saying
- Not Adding Up
- “Print, Print and Print”
| Wednesday ETF Wrap-Up: VXX Tumbles, DBA Soars Posted: 20 Oct 2010 07:38 PM PDT ETF Database submits: After Tuesday’s sharp correction, equities rebounded across the board in Wednesday’s session as all of the major indexes stormed higher. The Dow led the way on the upside–gaining 1.2%–and was closely trailed by the S&P 500, which jumped by 1.1%, and the Nasdaq, which finished ahead by 0.8%. Commodity markets also recovered nicely from their Tuesday slump as gold rose by $9/oz. and oil regained its level above the $82 a barrel mark. These gains were largely due to a sharp reversal in the U.S. dollar index, which fell by almost $1 to end the day at $77.23, a decline of close to 1.3% on the day. Quality earnings reports also helped propel the markets higher, as solid numbers from market bellwethers–including profits from three major airlines–boosted investor sentiment. Markets also reacted very positively to news from Boeing which swung to a third quarter profit and raised its full-year outlook. “People are getting confident that earnings are going to be good this year,” said Maris Ogg, president of Tower Bridge Advisors. “Maybe not to the level where we have 75% or 80% of companies beating expectations, but people are more confident the economy is on a more even keel.” Complete Story »
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| Gibson's Paradox and the Price of Gold Posted: 20 Oct 2010 07:35 PM PDT One of the most controversial topics in investing is the price of gold... [with] many goldbugs say[ing]...that gold will soon break $2,000, then $5,000 and then $10,000 an ounce but, [frankly,] how can anyone reasonably calculate what the price of gold [should be when they don't understand the factors that drive gold? So let me explain.] Words: 992
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| Historical Gold:Silver Ratios Suggest Silver Could Reach $200! – Here's Why Posted: 20 Oct 2010 07:35 PM PDT More than 108 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 (75) 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: 1348
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| So Much For Gold! Chinese Stock Market to Outperform! Posted: 20 Oct 2010 07:35 PM PDT There has been a great deal of excitement about the recent performances of gold and silver with most analysts extremely optimistic regarding its potential. That being said technical analysis shows that it is in for some choppy seas ahead compared to the surging seas of the Chinese stock market. Perhaps today the refrain "Got Gold?" should be replaced with the words "Buy Chinese Stocks!" Words: 1004
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| Hourly Action In Gold From Trader Dan Posted: 20 Oct 2010 07:05 PM PDT View the original post at jsmineset.com... October 20, 2010 10:38 AM Dear CIGAs, It sure didn't take long for market participants to look at each other and say, "what the hell were we thinking yesterday", when a mini selling panic hit the commodity markets on account of a miniscule ¼% interest rate hike in China. The Dollar gave back every bit of its gains from yesterday while the Euro promptly reversed course as if yesterday had never happened. We just dreamed that it did. Just about every market out there experienced a reversal from yesterday as it was, "Game on" for the hedge funds and their algorithms. Gone was fear from any impact of an interest rate hike in China with anticipation of a bag of goodies called QE2 replacing it. "Fickle" does not even come close to doing justice to the madness that has gripped our markets these days. I cannot even begin to attempt to quantify the casualties mounting in that same hedge fund universe as they proceed to chop each other up and shred ...
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| Gold/Bond and Dow Jones/Gold Ratio Charts From Trader Dan Posted: 20 Oct 2010 07:05 PM PDT View the original post at jsmineset.com... October 20, 2010 10:45 AM Dear CIGAs, Click either chart to enlarge in PDF format with commentary from Trader Dan Norcini ...
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| Posted: 20 Oct 2010 07:05 PM PDT View the original post at jsmineset.com... October 20, 2010 12:04 PM Jim Sinclair's Commentary Assuming that Fannie Mae prevails, how many more fraudulent mortgage loans are they holding? Fannie Mae sued insurance companies, including Great American Financial Resources Inc. and The Travelers Companies, claiming they are responsible for losses on the $131 million Fannie paid for fraudulent mortgage loans. The lawsuit was filed today in federal court in Washington. Jim Sinclair's Commentary Here is Fred contemplating the gold price at $1650. As you can see, he is very concerned… Jim Sinclair's Commentary Where were all these geniuses in 2003? Gold to US$1,500, silver to US$25 by year-end: Scotia Eric Lam With both gold and silver prices on the rise and showing no signs of slowing down, best bets for investors include producers with either better than average sustainable free cash flow, growing reserves and resources, and/or those with growing production, a new ...
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| Foreigners Buy $117 Billion in Treasuries During August Posted: 20 Oct 2010 07:05 PM PDT The U.S. bond market is murky these days. [COLOR=#333333][COLOR=#333333][FONT=Times New Roman] [COLOR=#000000]Yields have been plummeting. But some of the action is almost certainly due to the Federal Reserve once again buying Treasuries. Since August 19, the Fed has bought $40 billion in government bonds. But the Fed has no influence over foreign buyers of U.S. Treasuries. And these purchasers have been coming on strong. Data last week showed that foreigners bought $117 billion in net Treasuries during August. This is the second-highest monthly total of all-time. Just a hair under the record $118 billion purchased by foreigners in November 2009. Foreign buying of U.S. government debt has been in an uptrend since early 2009. Apparently the death of the dollar isn't so convincing abroad. By Dave Forest for OilPrice.com who focus on finance and commodity news and who specialize in Crude Oil Prices, Commodity Prices & Finance News | Oil Price | Oil Price...
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| The Economic and Financial NO SPIN Zone: Part III Posted: 20 Oct 2010 07:05 PM PDT By Theodore (Ty) Andros Depression Written into Law, Central Banks’ Cannons Biggest Tax Increase in History Foreclosure Madness Securitization Meltdown Cap and Trade by Executive Order Oil Madness The US economy is being SHUTDOWN at a rapid rate by the radical Marxists in the beltway, whom having never met a businessman that they like other than those who pay political tolls -- known as campaign contributions – consider the rest of the WEALTH generating private sector to be the proverbial red headed step child. Ripe for abuse… As the denizens of the beltway do a Jack-the-RIPPER on the economy to SAVE you, runaway regulation and taxation have now killed wealth creation in the G7. “The more corrupt the state, the more it legislates.” --Tacitus With New York Fed president, Bill Dudley, and Chairman Bernanke on record for launching Quantitative Easing II, targeted inflation (financial asset inflation) and GDP, it’s full steam ahead for t...
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| Posted: 20 Oct 2010 07:05 PM PDT by Jim Willie CB October 20, 2010 home: Golden Jackass website subscribe: Hat Trick Letter Jim Willie CB, editor of the "HAT TRICK LETTER" Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. The Chinese are clever people. Their leaders play a good game of chess in the global scramble for commodity supply and financial dominance. T...
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| Why Inflation is Always a Bad Thing Posted: 20 Oct 2010 07:05 PM PDT Bloomberg had the news that the Labor Department released its new report to show that "Including volatile food and energy costs, wholesale prices rose 0.4 percent" from the prior month, which is pretty bad. Included was the snippet that "The cost of food increased 1.2 percent in September from a month earlier, the most since March." Yikes! Energy prices increased 0.5%, which made the Mogambo Food And Fuel Index (MFAFI) jump by 1.7% in One Freaking Month (OFM)! As a guy who fears inflation with an all-consuming dread that used to border on insanity but is now waaaAAAAaaay past that arbitrary boundary because of the fiscal insanity of the despicable deficit-spending Obama administration and the treachery of the foul Federal Reserve to create enough new money to accommodate the calamitous overspending, I can actually feel myself becoming hysterical with fear! Stunned, I slowly rise to my feet in preparation to scream my guts out in fear, as is usual for me, when I was rendered speechles...
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| Mickey Fulp: Cherry Picking Undervalued Juniors Posted: 20 Oct 2010 07:05 PM PDT Source: Karen Roche of The Gold Report 10/20/2010 Junior resource companies have been on a wild ride since 2009 and Mickey Fulp, the author of The Mercenary Geologist newsletter, thinks most of them are as overvalued as they've ever been. In this exclusive interview with The Gold Report, Mickey discusses the handful of undervalued plays he's unearthed in an overvalued gold market. The Gold Report: We spoke earlier this year after equities had a wild ride in 2009. You made the comment that you didn't see many undervalued junior resource companies. When we spoke again in April, you said many of these juniors were at an all-time high. What's your feeling about the junior sector now that we're in October? Mickey Fulp: Good companies have gone even higher in value right now. The entire junior gold sector is overvalued. You need to look for specific undervalued companies within that sector. TGR: Are there many undervalued companies at this point in time? MF: Investors have...
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| How to Book a 542% Gain in 10 Months Posted: 20 Oct 2010 07:05 PM PDT By Matt Badiali, editor, S&A Resource Report Wednesday, October 20, 2010 When do you take your profits? Seriously… when? Do you take profits when you're up 20%? More? Less? How do you decide when you'll sell? This is one of the biggest problems I see with most investors… They have no plan for when they'll sell. This, of course, leads to bad selling decisions. They'll lock in profits on a panic day because of fear. Or they'll hold onto a loser far longer than makes sense because of hope. But fear and hope don't qualify as a selling plan. Today, I'll show you what you need to know to maximize profits on your trades. Specifically, I'll walk you through a recent trade in my newsletter, where my readers made 542% in just over 10 months. Let's get started… Exactly 355 days ago, I told readers of Phase 1 Investor, Stansberry Research's exclusive microcap advisory, about a small gold mining company. The company, ATAC Resources, had discovered a gold ...
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| Silver Exports From China Down 60% From Last Year Posted: 20 Oct 2010 07:05 PM PDT "Silver eagle sales hit 2 million in October. China withholds 'rare earth' metals from the U.S.A. and Europe. Silver position limits delayed until mid-January? Jim Rickards says the mortgage debacle is far worse than most people imagine... and much more. " Yesterday in Gold and Silver Gold was basically flat during all of Far East trading on Tuesday. This lasted right up until lunchtime in London... then 'da boyz' showed up. The first bought of selling lasted fourty-five minutes... up until 1:00 p.m. in London. Then gold flat-lined for an hour until 8:45 a.m. in New York when the second bought of selling began... with a little bid-pulling to help it along. This 'selling spree' lasted for another fourty-five minutes. From 9:30 a.m. Eastern until 12:15 p.m... the gold price recovered about $15... then the selling began anew... with the absolute low of the day [around $1,327 spot] coming around 2:15 p.m. in electronic trading. From that point, gold basicall...
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| Gold in a Low-Inflation Environment, Part I Posted: 20 Oct 2010 07:05 PM PDT by Adrian Ash BullionVault Tuesday, 19 October 2010 Why this really isn't the early '80s recession replayed... WHATEVER the problem is,a lack of money it ain't. Just so we're clear. Quite how more money might help, therefore, we can't say. Still, that won't stop the world's No.1 central bank from creating yet more of the stuff. Not according to Ben Bernanke last week, nor to anyone listening or watching the Federal Reserve since America came round from his first stab at money-creation. Instead of punching adrenaline through the chest wall again, Dr.Ben's more likely this time to put up a drip (so analysts think), flushing $100 billion or so into the system each month, and reviewing America's vital signs before changing the bag every quarter. Either way, the problem for retained wealth – meaning your savings and pension...if not (just yet) the money you hold from pay-day to month's end – is trying to second-guess what Dr.Ben's patented deflation cure w...
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| Posted: 20 Oct 2010 07:05 PM PDT The 5 min. Forecast October 20, 2010 12:44 PM by Addison Wiggin [LIST] [*] China’s lowers the boom: why you should care [*] The dirty secret behind the “rare earths” ban… and how to invest successfully in the sector before it’s too late… [*] Yesterday’s market trends reverse -- dollar down, everything else up… another GUDD day in the markets… [*] 47 billion clouds over Bank of America, but FDIC chief’s gotta wear shades… [*] Cancer-fighting “smart bombs”… the reader debate that won’t die… and more fun with presentations! [/LIST] “It makes logical sense: Whenever you have a shortage of raw materials in the world, it historically has led to war.” So said investment biker and Vancouver veteran Jim Rogers during a recent address to the Mises Institute in Alabama. A couple of generations ago, Japan attacked Pearl Harbor within months...
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| LGMR: Gold & Silver Slip But Investors Still "Buying the Dips" Posted: 20 Oct 2010 07:05 PM PDT London Gold Market Report from Adrian Ash BullionVault 09:20 ET, Weds 20 Oct. Gold & Silver Slip But Investors Still "Buying the Dips" as China's Monetary Policy Stays "Very Easy" THE PRICE OF WHOLESALE gold and silver bullion failed to hold a rally in London trade on Wednesday, easing back from a bounce on "decent" Asian demand after a rise in China's benchmark interest rates yesterday sparked what one analyst calls "a knee-jerk sell-off across the commodities." US crude oil contracts had earlier crept back above $80 per barrel, while broad commodity markets added more than 1%. Losing 2.5¢ to the Dollar on Tuesday, the Euro rose back above $1.3850 this morning, pushing the gold price for French, German and Italian buyers down towards an 8-session low beneath €31,100 per kilo. "Nervousness abounds," says UBS metals strategist Edel Tully. But "Investors are still buying dips in the gold price," counters Walter de Wet at Standard Bank. "We expect this to continue for the next...
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| The West's Pending Paper Money Implosion... Retiring CFTC Judge: We Covered Up Market Posted: 20 Oct 2010 07:05 PM PDT The West's Pending Paper Money Implosion Wednesday, October 20, 2010 – by Staff Report In China, a City With Lots of Buildings, but Few People ... Patrick Chovanec, who teaches business at Tsinghua University in Beijing, says the building boom is driven by frenzied investors — not the housing needs of millions of migrating workers. "People are using real estate as an investment, as a place to store cash — they treat it like gold," Professor Chovanec said. "They're stockpiling empty units. This is going on in cities of virtually every size." ... Property development here is so hot that last year, housing sales in Ordos reached $2.4 billion, up from $100 million in 2004, according to government statistics. ... "This is a city of the future," Li Hong, a government official, said during a recent tour of Kangbashi. But the future has not yet arrived, despite Mr. Li's best efforts to persuade a visitor otherwise. ... Only a few minutes earli...
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| Posted: 20 Oct 2010 07:05 PM PDT courtesy of DailyFX.com October 20, 2010 06:07 AM 60 Minute Bars Prepared by Jamie Saettele “Gold has tanked after spending a few days above its channel. Initial support is from former lows and the 21 day SMA near 1325. We cannot proclaim the end to the gold bull move yet. An impulsive decline on intraday charts would indicate as much however.” A drop to a new low would make the decline an impulse (5 waves) after which we would expect a corrective advance before the decline accelerates....
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| A Dollar Surge and Risk Collapse Send Gold and Oil Tumbling Posted: 20 Oct 2010 07:05 PM PDT courtesy of DailyFX.com October 19, 2010 04:16 PM Confidence in 3Q earnings and FOMC stimulus seems to be waning across the capital markets. The limits for growth and yields through the near future are starting to overshadow the unrestrained optimism founded on pure speculative interests alone. North American Commodity Update Commodities - Energy US Oil Breaks Two-Week Congestion as Risk Appetite Stumbles Crude Oil (LS Nymex) - $79.49 // -$3.59 // -4.32% Energy trades have grown accustomed to significant bear swings over the past few weeks; but these intraday declines have generally been restrained to the bounds of congestion between $83.85 and $80.50…until we came to Tuesday’s plunge. The 4.3 percent tumble was the biggest daily loss since May 20th on a continuous contract basis; while the November contract (which is due to expire tomorrow) suffered its largest loss since February 4th. Aside from this particular loss reflecting a very active session, th...
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| Crude Oil Plunges on China Interest Rate Hike, Gold Gets Pounded on Dollar Rebound Posted: 20 Oct 2010 07:05 PM PDT courtesy of DailyFX.com October 19, 2010 10:51 PM An interest rate hike, a dollar reversal, and a sell-off in equity markets were the ingredients for enormous declines in both crude oil and gold. Is this the start of a larger trend? Commodities – Energy Crude Oil Plunges on China Interest Rate Hike Crude Oil (WTI) - $80.27 // $0.78 // 0.98% Commentary: Crude oil got slammed in Tuesday’s session after China raised interest rates for the first time in three years. The commodity slumped $3.59, or 4.32%, to settle at $79.49. The Chinese central bank increased its benchmark rate by 25 basis points, sending deposit rates to 2.25% and one-year lending rates to 5.56%. Given how overbought crude oil and risk assets in general had become, this was the catalyst traders were looking for to lock in profits. But the door is quite narrow when everyone is looking to exit as once, thus we saw huge moves across the board. Fundamentally this does not change things much, but risk...
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| 7 Speculative Chinese Small-caps Posted: 20 Oct 2010 06:54 PM PDT Bruce Vanderveen submits: Looking for investments outside the U.S.? You are not alone! With the dollar plummeting almost daily, money seems to be fleeing U.S. shores faster than the Fed can print it. Complete Story »
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| The #1 Reason Why Gold Collapsed Posted: 20 Oct 2010 06:24 PM PDT Following the gold market as we do here at MarketClub, it was amazing that nobody, and I mean nobody, was bearish on this market. This always creates a problem as the markets tend to reverse when everyone is on one side and there's no one else left to buy. Another tip-off was on Fox Business News [...]
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| New York Fed faces 'inherent conflict' in mortgage buybacks Posted: 20 Oct 2010 06:00 PM PDT By Caroline Salas and Jody Shenn http://www.bloomberg.com/news/2010-10-21/new-york-fed-faces-inherent-con... NEW YORK -- The Federal Reserve Bank of New York's effort to recover taxpayer money used in bailouts during the crisis may be at odds with its mission to ensure the stability of the financial system. The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., joined a bondholder group including Pacific Investment Management Co. that aims to force Bank of America Corp. to buy back some bad home loans packaged into $47 billion of securities, people familiar with the matter said this week. Concern that Bank of America may be forced to buy back soured mortgages helped send its stock down almost 5 percent in the last two days, wiping out $5.92 billion of its market value. The decline runs counter to the Fed's goal of strengthening the banking system after the worst crisis since the Great Depression. ... Dispatch continues below ... ADVERTISEMENT Prophecy Resource Goes Into Production A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there. For the company's complete announcement, please visit: http://www.prophecyresource.com/news_2010_oct14.php "This is an inherent conflict," said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. "They're transferring the loss from what would have been Bear Stearns through the Fed to the originators of the mortgages. That's an odd chain, and I don't know how you manage that." The bondholder group that includes the New York Fed sent a letter to Bank of America and Bank of New York Mellon Corp., the trustee for the bonds created by Bank of America's Countrywide Financial Corp. unit, saying that Countrywide failed to service the loans properly, according to a statement this week from their lawyer. The statement didn't name the firms. Countrywide's servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases, said Kathy Patrick, the bondholders' lawyer at Gibbs and Bruns LLP in Houston. Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover "many billions of dollars," she said. The Fed has no choice except to shield the assets it acquired as it stepped in to prevent a collapse of the financial system, said Joseph Mason, a finance professor at Louisiana State University in Baton Rouge. "The New York Fed, acting along with other institutional holders, is trying to preserve the value of their securities holdings," Mason said. "To act otherwise would be inappropriate and would be viewed as a waste of the government's money that was invested in this bailout." The Federal Reserve System, made up of 12 regional banks plus the Washington-based Board of Governors, works with other regulators to ensure the safety and soundness of the financial system. The New York Fed plays a key role because it oversees many of the biggest Wall Street bank holding companies, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. Bank of America, the largest U.S. bank by assets, is based in Charlotte, North Carolina, and overseen by the Richmond Fed. The Dodd-Frank Act enacted this year expanded the Fed's authority by giving it responsibility for overseeing non-bank financial firms deemed "too big to fail" because their collapse might pose a risk to the system. Those may include insurers such as New York-based AIG and Fairfield, Connecticut-based General Electric Co.'s GE Capital unit. The Fed's effort to avoid losses on mortgage securities originated by Countrywide and then bought by Bear Stearns creates "a vicious circle," Cumberland's Eisenbeis said. "It all comes about because of the Fed's unwillingness to impose losses on creditors" when it bailed out Bear Stearns. Had the New York Fed let the investment firm collapse, "then we wouldn't have this problem,' he said. New York Fed spokesman Jack Gutt declined to comment. In August, he said that the institution was involved in "multiple efforts related to exercising our rights as investors," which would "support our primary goal of maximizing the value of these portfolios on behalf of the American taxpayer." The Fed's actions during the crisis have brought heightened scrutiny from Congress, which approved legislation that will require government audits of the bailouts and force the central bank to reveal recipients of emergency credit. The Fed owns assets from the Bear Stearns and AIG bailouts in three holding companies. The New York Fed, which has policies to manage conflicts of interest between its multiple units, created its Special Investments Management Group in January to oversee the assets. Maiden Lane LLC, named for the street bordering the New York Fed's Manhattan headquarters, bought about $30 billion of Bear Stearns assets that JPMorgan didn't want when it acquired the company. Maiden Lane II and III were created to hold the assets from AIG's rescue. BlackRock Inc., the world's biggest money manager, was hired to manage the assets and is also part of the bondholder group. "This is a highly unusual position that the Fed has put itself in," said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of "Elements of Structured Finance," which was published in May by Oxford University Press. "They made their bed and now they have to lie in it." Efforts to recoup losses from soured mortgages that spawned the credit crisis come amid probes of the wave of foreclosures that followed. Attorneys general in all 50 states are investigating whether loan servicers have improperly foreclosed on homes, contributing to concerns that banks will be forced to buy back billions of dollars in loans from investors because of faulty paperwork. New York Fed President William Dudley said this week that the Fed is working with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. to review foreclosure practices and "evaluate any potential impact on the housing market, financial institutions, and the overall economy." Future losses from forced repurchases of soured U.S. mortgages whose quality failed to meet sellers' promises will likely total $55 billion to $120 billion, JPMorgan analysts John Sim, and Ed Reardon said in an Oct. 15 report. The $47 billion of Countrywide securities affected by the bondholder letter represents the current face amount of the debt, not the potential recovery for investors. The intensification of bondholder efforts to get banks to repurchase loans "suggests that the fallout from the credit crisis is far from over," said Brian Yelvington, head of fixed-income strategy at Knight Libertas LLC in Greenwich, Connecticut, citing the "the huge amount of mortgages that might be involved." The Fed isn't the only one in the group to face conflicting goals in trying to get banks to absorb losses. BlackRock Chief Executive Officer Larry Fink said in response to a question on an Oct. 20 conference call about the letter to Bank of America that his firm's "No. 1 job is to be a fiduciary for investors." At the same time, Bank of America is New York-based BlackRock's third-largest shareholder, according to data compiled by Bloomberg based on filings, and Fink's firm oversees a range of assets that would likely be affected by weakened banks. Bank of America Chief Executive Officer Brian T. Moynihan said this week that the company will "defend" its shareholders against unfounded claims. The Standard & Poor's 500 Index fell 1.6 percent on Oct. 19, the day that Bloomberg News reported that the Fed was part of the group seeking to force banks to buy back loans, on concern other banks might also be at risk. It was the index's biggest drop since August. Fink said in a Bloomberg Television interview that the market reaction has been overdone as bond investors won't be able to prove "that large" of a number of repurchases are required and because some banks' reserves are "probably adequate." Government-controlled Fannie Mae and Freddie Mac, which the U.S. has been supporting with almost $150 billion of capital to help stabilize the housing market and protect investors in their debt from losses, face a similar dilemma as they try to shift their losses to lenders. Freddie Mac also joined the bondholder letter, and about 53 percent of Bank of America's $12.9 billion of outstanding repurchase requests stem from loans directly owned or insured by Fannie Mae and Freddie Mac, according to the company. "The losses are extraordinary, and we owe it to the American taxpayer to find out where these losses are coming from," Edward J. DeMarco, the Federal Housing Finance Agency's acting director, told lawmakers last month. The New York Fed's participation in bondholder campaigns increases the chances banks will be forced to repurchase loans, said Raynes of R&R Consulting. "It's like having a big gorilla in the room," Raynes said. "It's a big advantage if you are dealing with people. It's like being sued by the government -- it does make a difference." Join GATA here: 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 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, Plans Aggressive Exploration of Elizabeth Gold Property 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: A Canadian gold opportunity ready for growth
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| New York Fed faces 'inherent conflict' in mortgage buybacks Posted: 20 Oct 2010 06:00 PM PDT By Caroline Salas and Jody Shenn http://www.bloomberg.com/news/2010-10-21/new-york-fed-faces-inherent-con... NEW YORK -- The Federal Reserve Bank of New York's effort to recover taxpayer money used in bailouts during the crisis may be at odds with its mission to ensure the stability of the financial system. The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., joined a bondholder group including Pacific Investment Management Co. that aims to force Bank of America Corp. to buy back some bad home loans packaged into $47 billion of securities, people familiar with the matter said this week. Concern that Bank of America may be forced to buy back soured mortgages helped send its stock down almost 5 percent in the last two days, wiping out $5.92 billion of its market value. The decline runs counter to the Fed's goal of strengthening the banking system after the worst crisis since the Great Depression. ... Dispatch continues below ... ADVERTISEMENT Prophecy Resource Goes Into Production A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there. For the company's complete announcement, please visit: http://www.prophecyresource.com/news_2010_oct14.php "This is an inherent conflict," said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. "They're transferring the loss from what would have been Bear Stearns through the Fed to the originators of the mortgages. That's an odd chain, and I don't know how you manage that." The bondholder group that includes the New York Fed sent a letter to Bank of America and Bank of New York Mellon Corp., the trustee for the bonds created by Bank of America's Countrywide Financial Corp. unit, saying that Countrywide failed to service the loans properly, according to a statement this week from their lawyer. The statement didn't name the firms. Countrywide's servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases, said Kathy Patrick, the bondholders' lawyer at Gibbs and Bruns LLP in Houston. Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover "many billions of dollars," she said. The Fed has no choice except to shield the assets it acquired as it stepped in to prevent a collapse of the financial system, said Joseph Mason, a finance professor at Louisiana State University in Baton Rouge. "The New York Fed, acting along with other institutional holders, is trying to preserve the value of their securities holdings," Mason said. "To act otherwise would be inappropriate and would be viewed as a waste of the government's money that was invested in this bailout." The Federal Reserve System, made up of 12 regional banks plus the Washington-based Board of Governors, works with other regulators to ensure the safety and soundness of the financial system. The New York Fed plays a key role because it oversees many of the biggest Wall Street bank holding companies, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. Bank of America, the largest U.S. bank by assets, is based in Charlotte, North Carolina, and overseen by the Richmond Fed. The Dodd-Frank Act enacted this year expanded the Fed's authority by giving it responsibility for overseeing non-bank financial firms deemed "too big to fail" because their collapse might pose a risk to the system. Those may include insurers such as New York-based AIG and Fairfield, Connecticut-based General Electric Co.'s GE Capital unit. The Fed's effort to avoid losses on mortgage securities originated by Countrywide and then bought by Bear Stearns creates "a vicious circle," Cumberland's Eisenbeis said. "It all comes about because of the Fed's unwillingness to impose losses on creditors" when it bailed out Bear Stearns. Had the New York Fed let the investment firm collapse, "then we wouldn't have this problem,' he said. New York Fed spokesman Jack Gutt declined to comment. In August, he said that the institution was involved in "multiple efforts related to exercising our rights as investors," which would "support our primary goal of maximizing the value of these portfolios on behalf of the American taxpayer." The Fed's actions during the crisis have brought heightened scrutiny from Congress, which approved legislation that will require government audits of the bailouts and force the central bank to reveal recipients of emergency credit. The Fed owns assets from the Bear Stearns and AIG bailouts in three holding companies. The New York Fed, which has policies to manage conflicts of interest between its multiple units, created its Special Investments Management Group in January to oversee the assets. Maiden Lane LLC, named for the street bordering the New York Fed's Manhattan headquarters, bought about $30 billion of Bear Stearns assets that JPMorgan didn't want when it acquired the company. Maiden Lane II and III were created to hold the assets from AIG's rescue. BlackRock Inc., the world's biggest money manager, was hired to manage the assets and is also part of the bondholder group. "This is a highly unusual position that the Fed has put itself in," said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of "Elements of Structured Finance," which was published in May by Oxford University Press. "They made their bed and now they have to lie in it." Efforts to recoup losses from soured mortgages that spawned the credit crisis come amid probes of the wave of foreclosures that followed. Attorneys general in all 50 states are investigating whether loan servicers have improperly foreclosed on homes, contributing to concerns that banks will be forced to buy back billions of dollars in loans from investors because of faulty paperwork. New York Fed President William Dudley said this week that the Fed is working with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. to review foreclosure practices and "evaluate any potential impact on the housing market, financial institutions, and the overall economy." Future losses from forced repurchases of soured U.S. mortgages whose quality failed to meet sellers' promises will likely total $55 billion to $120 billion, JPMorgan analysts John Sim, and Ed Reardon said in an Oct. 15 report. The $47 billion of Countrywide securities affected by the bondholder letter represents the current face amount of the debt, not the potential recovery for investors. The intensification of bondholder efforts to get banks to repurchase loans "suggests that the fallout from the credit crisis is far from over," said Brian Yelvington, head of fixed-income strategy at Knight Libertas LLC in Greenwich, Connecticut, citing the "the huge amount of mortgages that might be involved." The Fed isn't the only one in the group to face conflicting goals in trying to get banks to absorb losses. BlackRock Chief Executive Officer Larry Fink said in response to a question on an Oct. 20 conference call about the letter to Bank of America that his firm's "No. 1 job is to be a fiduciary for investors." At the same time, Bank of America is New York-based BlackRock's third-largest shareholder, according to data compiled by Bloomberg based on filings, and Fink's firm oversees a range of assets that would likely be affected by weakened banks. Bank of America Chief Executive Officer Brian T. Moynihan said this week that the company will "defend" its shareholders against unfounded claims. The Standard & Poor's 500 Index fell 1.6 percent on Oct. 19, the day that Bloomberg News reported that the Fed was part of the group seeking to force banks to buy back loans, on concern other banks might also be at risk. It was the index's biggest drop since August. Fink said in a Bloomberg Television interview that the market reaction has been overdone as bond investors won't be able to prove "that large" of a number of repurchases are required and because some banks' reserves are "probably adequate." Government-controlled Fannie Mae and Freddie Mac, which the U.S. has been supporting with almost $150 billion of capital to help stabilize the housing market and protect investors in their debt from losses, face a similar dilemma as they try to shift their losses to lenders. Freddie Mac also joined the bondholder letter, and about 53 percent of Bank of America's $12.9 billion of outstanding repurchase requests stem from loans directly owned or insured by Fannie Mae and Freddie Mac, according to the company. "The losses are extraordinary, and we owe it to the American taxpayer to find out where these losses are coming from," Edward J. DeMarco, the Federal Housing Finance Agency's acting director, told lawmakers last month. The New York Fed's participation in bondholder campaigns increases the chances banks will be forced to repurchase loans, said Raynes of R&R Consulting. "It's like having a big gorilla in the room," Raynes said. "It's a big advantage if you are dealing with people. It's like being sued by the government -- it does make a difference." Join GATA here: 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 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, Plans Aggressive Exploration of Elizabeth Gold Property 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: A Canadian gold opportunity ready for growth
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| Gold & Silver Slip But Investors Still "Buying the Dips"… Posted: 20 Oct 2010 05:39 PM PDT
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| Gold & Silver Slip But Investors Still "Buying the Dips"… Posted: 20 Oct 2010 05:39 PM PDT
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| Where's the FT story about 'speculators' buying government bonds? Posted: 20 Oct 2010 05:37 PM PDT Speculators Polish Up the Price of Silver By Jack Farchy http://www.ft.com/cms/s/0/25b81f4e-dc65-11df-a0b9-00144feabdc0.html "Almost anything is better than paper money. ... Any fool can run a printing press." These are not the words of a modern-day gold bug but attributed to Nelson Bunker Hunt, the billionaire oil baron who went long on silver in the 1970s. So long, in fact, that he and his brother cornered the market, were sanctioned by the regulator for market manipulation, and went bankrupt in the process. After their move, the price of silver hit a peak of $50 an ounce in 1980 before dropping to $10 the following year. In the past month silver has bounced back to prices not seen since the Hunt brothers' day. No single investor is cornering the market but, just as in the 1970s, the price is being driven by surging speculative demand as investors sweep up supplies of the grey precious metal whose primary use is industrial. ... 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: A Canadian gold opportunity ready for growth Investors in silver, also known as "poor man's gold," are persuaded by many of the same arguments that have driven the gold price higher: the prospect of a global "currency war" in which central banks race to devalue their currencies to support domestic growth and the belief that a second round of emergency monetary easing by the Federal Reserve could eventually lead to a sharp jump in inflation. Gold has captured the headlines, ticking off one new record high after another, but volatility in bullion is near a five-year low, which for some investors makes it a less exciting prospect. Returns on silver, they say, could be greater. Indeed, there are symptoms of spreading silver fever. Sales of silver coins are set to hit a record high this year, while investors have snapped up more than 1,500 tonnes of silver through exchange-traded funds (ETFs) in the past two months alone. That is more than 5 per cent of total annual silver supplies. Michael Kramer, president at Manfra, Tordella & Brookes, a large US coin dealership, says: "Silver coins are doing very well." David Madge, director of bullion sales at the Royal Canadian Mint, says it has already sold in excess of 30 per cent more of its popular silver Maple Leaf coin than last year's record 10 million ounces. The US Mint has sold 27.5 million ounces of silver American Eagles so far this year -- already within reach of last year's record 28.8m ounces with the busy Christmas period still to come. The interest in ETFs, coins and futures has helped to drive prices higher. Silver is one of the best-performing commodities this year. In the past two months it has rallied 31 per cent -- to $23.72 an ounce on Wednesday -- more than three times gold's 8.9 per cent rise. The price rises, in turn have prompted a response from the main silver mints. The US Mint this month raised the premium above the value of the metal content that it charges dealers buying silver American Eagles. The Canadian mint has run out of 2010-dated silver Maple Leaf coins, although Mr Madge says it would produce more if needed. Analysts and investors, though, are divided on the outlook for the metal. Some see silver as having brighter prospects than bullion. The reason for this is that, unlike gold, for which investment is now the biggest single source of demand, silver consumption is still largely accounted for by its traditional end-uses in the production of jewellery and in the electronics industry and photography. In theory, this should mean that, as the world economy recovers, silver will benefit from an extra shot in the arm and outperform gold, says Daniel Brebner, commodities analyst at Deutsche Bank in London. Matthew Turner, analyst at Mitsubishi, the Japanese trading house, says: "There are two drivers for silver: industrial demand and gold. The two drivers are both positive at the moment." Traders and refiners have reported a strong rebound in industrial demand for silver. Solar power, which uses silver-containing chemicals to convert sunlight into electricity, is a source of new demand. Traditional consumers in the electronics industry are also bouncing back strongly, refiners say. Scott Morrison, chief executive of Metalor, one of the world's top precious metals refiners, says: "Industrial demand for silver is very strong -- back to 2008 levels or even better." Nonetheless, silver prices are likely to remain driven by the investment community in the short term. Hedge funds that are bullish about gold have begun taking positions in the silver market, aiming to profit from its higher volatility, bankers say. That could lead to sizeable price swings in the short term. As the silver market is a good deal smaller than that for gold, a large investment can have a bigger impact on prices. Some senior traders are looking for silver to hit $30 an ounce in the next year, a 25 per cent increase on current prices. But analysts, bankers, and industry executives alike are wary of the higher volatility that hedge funds and other investors are bringing to the silver market -- especially as mine production of silver, unlike some other metals, is relatively plentiful. "Investment demand is critical in a market where growing fabrication demand is not sufficient to propel prices," says Suki Cooper, precious metals analyst at Barclays Capital. "If investors stop accumulating fresh metal to position against market uncertainties, prices could correct sharply before finding fundamental support." No one is trying to corner the market, at least not yet, but the risk-averse should probably tread warily. Join GATA here: 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 Resource Goes Into Production A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there. For the company's complete announcement, please visit: http://www.prophecyresource.com/news_2010_oct14.php
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| Where's the FT story about 'speculators' buying government bonds? Posted: 20 Oct 2010 05:37 PM PDT Speculators Polish Up the Price of Silver By Jack Farchy http://www.ft.com/cms/s/0/25b81f4e-dc65-11df-a0b9-00144feabdc0.html "Almost anything is better than paper money. ... Any fool can run a printing press." These are not the words of a modern-day gold bug but attributed to Nelson Bunker Hunt, the billionaire oil baron who went long on silver in the 1970s. So long, in fact, that he and his brother cornered the market, were sanctioned by the regulator for market manipulation, and went bankrupt in the process. After their move, the price of silver hit a peak of $50 an ounce in 1980 before dropping to $10 the following year. In the past month silver has bounced back to prices not seen since the Hunt brothers' day. No single investor is cornering the market but, just as in the 1970s, the price is being driven by surging speculative demand as investors sweep up supplies of the grey precious metal whose primary use is industrial. ... 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: A Canadian gold opportunity ready for growth Investors in silver, also known as "poor man's gold," are persuaded by many of the same arguments that have driven the gold price higher: the prospect of a global "currency war" in which central banks race to devalue their currencies to support domestic growth and the belief that a second round of emergency monetary easing by the Federal Reserve could eventually lead to a sharp jump in inflation. Gold has captured the headlines, ticking off one new record high after another, but volatility in bullion is near a five-year low, which for some investors makes it a less exciting prospect. Returns on silver, they say, could be greater. Indeed, there are symptoms of spreading silver fever. Sales of silver coins are set to hit a record high this year, while investors have snapped up more than 1,500 tonnes of silver through exchange-traded funds (ETFs) in the past two months alone. That is more than 5 per cent of total annual silver supplies. Michael Kramer, president at Manfra, Tordella & Brookes, a large US coin dealership, says: "Silver coins are doing very well." David Madge, director of bullion sales at the Royal Canadian Mint, says it has already sold in excess of 30 per cent more of its popular silver Maple Leaf coin than last year's record 10 million ounces. The US Mint has sold 27.5 million ounces of silver American Eagles so far this year -- already within reach of last year's record 28.8m ounces with the busy Christmas period still to come. The interest in ETFs, coins and futures has helped to drive prices higher. Silver is one of the best-performing commodities this year. In the past two months it has rallied 31 per cent -- to $23.72 an ounce on Wednesday -- more than three times gold's 8.9 per cent rise. The price rises, in turn have prompted a response from the main silver mints. The US Mint this month raised the premium above the value of the metal content that it charges dealers buying silver American Eagles. The Canadian mint has run out of 2010-dated silver Maple Leaf coins, although Mr Madge says it would produce more if needed. Analysts and investors, though, are divided on the outlook for the metal. Some see silver as having brighter prospects than bullion. The reason for this is that, unlike gold, for which investment is now the biggest single source of demand, silver consumption is still largely accounted for by its traditional end-uses in the production of jewellery and in the electronics industry and photography. In theory, this should mean that, as the world economy recovers, silver will benefit from an extra shot in the arm and outperform gold, says Daniel Brebner, commodities analyst at Deutsche Bank in London. Matthew Turner, analyst at Mitsubishi, the Japanese trading house, says: "There are two drivers for silver: industrial demand and gold. The two drivers are both positive at the moment." Traders and refiners have reported a strong rebound in industrial demand for silver. Solar power, which uses silver-containing chemicals to convert sunlight into electricity, is a source of new demand. Traditional consumers in the electronics industry are also bouncing back strongly, refiners say. Scott Morrison, chief executive of Metalor, one of the world's top precious metals refiners, says: "Industrial demand for silver is very strong -- back to 2008 levels or even better." Nonetheless, silver prices are likely to remain driven by the investment community in the short term. Hedge funds that are bullish about gold have begun taking positions in the silver market, aiming to profit from its higher volatility, bankers say. That could lead to sizeable price swings in the short term. As the silver market is a good deal smaller than that for gold, a large investment can have a bigger impact on prices. Some senior traders are looking for silver to hit $30 an ounce in the next year, a 25 per cent increase on current prices. But analysts, bankers, and industry executives alike are wary of the higher volatility that hedge funds and other investors are bringing to the silver market -- especially as mine production of silver, unlike some other metals, is relatively plentiful. "Investment demand is critical in a market where growing fabrication demand is not sufficient to propel prices," says Suki Cooper, precious metals analyst at Barclays Capital. "If investors stop accumulating fresh metal to position against market uncertainties, prices could correct sharply before finding fundamental support." No one is trying to corner the market, at least not yet, but the risk-averse should probably tread warily. Join GATA here: 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 Resource Goes Into Production A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there. For the company's complete announcement, please visit: http://www.prophecyresource.com/news_2010_oct14.php
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| India Was Buying Last Night + Interesting Comex O/I report… Posted: 20 Oct 2010 05:08 PM PDT Source: India Was Buying Last Night + Interesting Comex O/I report…Looks like India was in serious "buy" mode last night after the London/NY ambush of paper gold. Per JB's invaluable report to be found at http://www.lemetrolecafe.com/:
In addition, the daily open interest report from the CME, found HERE shows that the open interest for gold declined by a surprisingly small 7.7 thousand contracts. Even more interesting was the fact that the open interest for the February contract actually increased by 3,903 contracts. This o/i report stands out because historically on a day when gold gets shot by the cartel for $40+, we would typically see a much larger o/i liquidation and would never see any single-month increase. February is the next "front-month" for gold after December. In silver, the o/i declined by a surprisingly small 362 contracts. Again, historically on day when silver is hit for a buck, typical o/i liquidation would be 10x that amount. It would appear to those of us who have been trading/investing/observing the precious metals market for the duration of the bull market that it is possible, maybe probable, that opportunistic dip-buying is being front-run by the competition of a growing number of accumulators (i.e. strong hands) globally looking to increase or start core positions.
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| Posted: 20 Oct 2010 05:06 PM PDT Source: Gold (GLD proxy)
GLD fills one of the gaps we speculated upon yesterday. Now the reversal and all's fine in Goldbugville? Maybe, given that yesterday was triggered by news and a policy maker's b/s, which is typically not sustainable. But what really made gold decline – along with most everything else is… yes, you got it; the air came out of this mess because unhealthy, soulless players who just could not stand watching the fun anymore have been grudgingly coming back into the markets. Their punishment was all but assured sooner or later. Gold has not been special of late, it has been another 'play'. The momos should not want to see the upside gap filled yet but they are the momos and they will probably cheer this. So I will not be at all surprised to get the lower gap subsequently filled as well. Then? Higher we go sans the momos.
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| Rare earth prices soar even as China pledges supply Posted: 20 Oct 2010 04:56 PM PDT Mark Drajem and Gopal Ratnam http://www.bloomberg.com/news/2010-10-20/china-pledges-to-maintain-rare-... WASHINGTON -- Rare-earth prices have jumped as Chinese export quotas crimped worldwide supplies for the elements used in the manufacture of disk drives, wind turbines and smart bombs. Prices have climbed sevenfold in the last six months for cerium oxide, which is used for polishing semiconductors, and other elements have more than doubled, according to Metal-Pages Ltd. in London, which tracks rare-earth prices. Actions by China, which produces more than 90 percent of the world's rare earths, have drawn criticism from U.S. lawmakers and officials in Japan and Germany. China reduced its second-half export quota for the minerals by 72 percent in July. It is now further restricting exports, according to industry participants. ... Dispatch continues below ... ADVERTISEMENT Prophecy Resource Goes Into Production A commission appointed by Mongolia's Ministry of Mineral Resources and Energy has conducted the final permit inspection at Prophecy Resource Corp.'s Ulaan Ovoo mine site and has instructed the company to begin coal production. Prophecy Resource (TSX.V: PCY) has begun production of its first 10,000 tonnes of coal as a trial run of supply to be taken by rail to electric power stations in Darkhan and Erdenet, Mongolia's second and third largest cities after the capital, Ulaanbaatar. The company is the second-ever Canadian mining company to get a permit to mine in Mongolia and start production there. For the company's complete announcement, please visit: http://www.prophecyresource.com/news_2010_oct14.php "Materials are still being held up in customs and shipments are delayed," Jeff Green, president of J.A. Green & Company LLC in Washington, who represents miners and users of the elements, said in a telephone interview yesterday. "Many believe rare-earth quotas for the second half of 2010 are exhausted, leaving materials unavailable for sale." President Barack Obama's spokesman said the National Security Council staff is looking into reports that China is blocking shipments. "They've seen the reports," press secretary Robert Gibbs told reporters traveling with Obama on a West Coast campaign trip. "They're looking into them but don't have anything they could confirm about those reports." China said the quota reduction was needed in order to shut polluting mines and still be able to meet domestic demand. It will "continue to supply rare earth to the world" while maintaining restrictions "to protect exhaustible resources and ensure sustainable development," the Commerce Ministry said in a statement yesterday. Contributing to the rise in prices is an expectation of further restrictions. China will probably tighten export controls on rare earths next year, Shigeo Nakamura, president of Advanced Material Japan Corp., said at a conference in China yesterday. Rare earths are a group of 17 chemically similar metallic elements, such as lanthanum, cerium, neodymium, and europium. The elements are used in radar, high-powered magnets, mini-hard drives in laptop computers, catalytic converters for vehicles, electric-car batteries, and wind turbines. "It's pretty frightening that there may be a gap where U.S. industry pays an extraordinary price," U.S. Rep. Mike Coffman, a Colorado Republican, said in an interview. He said U.S. rare-earth mining isn't likely to resume until at least late 2012 at a mine in Mountain Pass, California. "The administration needs to join with other countries and have a unified front to tell China this is not appropriate," he said. China's control of the $1.2 billion market for rare-earth elements gives it "market power" over the U.S., the Government Accountability Office, the investigative arm of Congress, said in a report in April. China restricts exports of the elements through quotas and export taxes, the GAO said. China has begun to use that market power recently, according to Japanese officials. They said supplies of the elements to Japan were cut after a Chinese fishing trawler collided with two Coast Guard boats in the East China Sea near islands claimed by both countries. This week, Chinese customs officials began stopping shipments to the rest of the world, according to two people involved in the industry who spoke on the condition of anonymity because of concern about Chinese reaction. Chinese customs officials are delaying shipments by requiring shippers to open containers of the elements for chemical analysis, one of the people said. What's not clear is whether China has imposed new restrictions or exporters have simply filled the quotas that China imposed in July, the people said. "Right now it's very difficult to find prices because the situation is so fluid," Ed Richardson, vice president at Thomas & Skinner Inc. in Indianapolis, a maker of magnets for the military who has sought U.S. funding to use rare earths. "China is not talking, but this does fall in line with the quotas they laid out in July." Prices for cerium oxide rose to $36 a kilogram Oct. 19 from about $4.70 a kilogram on April 20, according to Metal-Pages. Neodymium, used in magnets, rose to $92 a kilogram from about $41 in April and $46.50 in July, the company said. About 37 percent of worldwide rare-earth sales in 2008 were for magnets used in products such as hard-disk drives, hybrid-electric vehicles, and guided missiles, according to Industrial Minerals Co. of Australia. An additional 31 percent went into phosphors, used in making energy-efficient lights. China set a production cap of 89,200 metric tons this year, while reducing its export quota to 22,300 tons, according to estimates by Guosen Securities Co. It announced that quota in July, and prices have climbed since then. Companies and government officials have already begun to react to the threat of a shortage of the elements. The U.S. rare-earth mine in Mountain Pass, California, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it, and Chief Executive Officer Mark Smith said this week that it may double the planned capacity to 40,000 metric tons. Glencore International AG, the world's biggest commodities trader, also said this week that it would try to restart the Pea Ridge rare-earth mine in Missouri. The U.S. Defense Department is studying the national- security risks of dependence on China, and Congress is considering legislation to boost U.S. mining and production. Gamesa Corp. Tecnologica SA, Spain's biggest wind-turbine maker, said countries such as the U.S., Canada, and Australia hold unexploited deposits of rare earths. While most of the minerals are currently obtained from China, "there is no scarcity of rare-earth minerals in the medium to long term," a Gamesa spokeswoman said by e-mail, declining to be identified in line with company policy. In Germany, the government yesterday adopted a strategy to secure supply of raw materials including rare earths. Chancellor Angela Merkel said last week that it's "urgently necessary" to boost European investment in eastern Europe and Central Asia to counter expanding Chinese interest in rare minerals. China has cut the number of rare-earth companies this year, said Li Zhong, deputy general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. By 2015, the government wants to reduce the number of rare-earth oxide producers to 20 from 90, he said. Traders are now waiting to learn what quotas China may impose on exports for 2011, Green said. "China might raise the production cap and export quota slightly next year," said Wang Caifeng, who until last week was deputy director at the Ministry of Industry and Information Technology who oversaw the sector, saying that was her opinion. She is now in charge of setting up the ministry- affiliated China Rare Earth Industry Association. Join GATA here: 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 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, Plans Aggressive Exploration of Elizabeth Gold Property 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: A Canadian gold opportunity ready for growth
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| What the Price Distribution is Saying Posted: 20 Oct 2010 04:39 PM PDT A correction to yesterday's DR. The original idea that the U.S. Federal Reserve would prefer (and perhaps even engineer) a gruesome little stock market correction as the base from which to launch its next Quantitative Easing assault came from Slipstream Trader Murray Dawes over coffee last Monday. Like all good ideas, we tried to take credit for it. After a few days our memory of it had morphed into a clear recollection that it really WAS our idea. But it wasn't. Murray sat down last Monday and showed us a chart of the trading range the Australian stock market is currently in. It's near the top of what he calls a "price distribution." If the market confirms to past charting patterns, then it will test the top of the distribution and break out (which may or may not be a "false break out") or it will trend back towards the bottom of the range (where it may break below). At least this is what we understood Murray to mean. Normally such conversations are held over beer and loud music. But our meetings with Murray are more like the old summits between Reagan and Gorbachev; but not because either of us are bald, or because we are bitter enemies who are gripped in an ideological death war. In fact, they are not like those at all, now that we think about it. But they ARE summits. Why? Your editor takes an orthodox, morally-driven view of markets (that honest money is backed by gold). Thus, all the daily moves in the markets are weighed and measured against some basic truths about what things ought to be worth, even if they aren't at just that moment. The traders and chartists, of whom Murray is a leading practitioner, don't necessarily worship a different God. But they do speak a different language with a very precise, technical, somewhat obscure vocabulary. Communicating with them requires much patient effort, lots of pictures, and lots of questions. It feels like a summit. It's important to remember that most traders - or the good investors who know when they are investing and when they are trading - are basically amoral and market neutral with their trading portfolios. They are seeking to exploit short term technical trends in the market for profit. That is all. As a caveat, some value investors may be traders too, trying to find securities the market has mispriced. But they are a rare breed, especially in a fiat money world where all securities float higher on a sea of money. We'd venture to say that what things should be worth or ARE worth (or whether they are really worth anything at all, intrinsically) is probably not a question a trader would bother with (or so we imagine). But it is a perspective you can find quite useful from to time, even in managing your own long-term wealth. It is especially helpful when you're trying to determine whether stocks you own are overbought or oversold. This has been the whole Slipstream Trader project from the very beginning - to see if a technical analyst with a proprietary method of analysing price action can spot and exploit tradeable moves in blue chip stocks. That's not to say Murray isn't a bit of a fundamentalist himself. He's the only real technical analyst we've ever met who also shares a basic understanding of the Austrian School of Economics. He shares our visceral dislike for the Federal Reserve and our visceral like for beer. But unlike your risk averse editor, Murray aims to profit from the Fed's blunders in a precise way which is beyond our brain. But it may not be beyond yours. Have a look at my recent letter about the Slipstream Trader if any of this sounds intriguing. Today Murray and your editor are probably asking the same question you are: is the QE planned by the Fed already fully priced into the market? Other questions include: will the American mortgage bomb cause a mini-asset price crash that gives the Fed a tailor-made reason to pump up the markets even more? And will that even work, or is QE already delivering diminishing marginal returns? And what about the future of the Mineral Resource Rent Tax (MRRT)? We spent about an hour this morning trying to work out what's going on with the MRRT. It's easy to get lost in the details. But it looks something like this: in its rush to get a deal done before the election that neutralised the mining tax issue with voters, the government left some gaping holes in its language about whether future increases in state mining royalties would be credited against the Mineral Resource Rent Tax. The miners now see their chance to back out of the plan. They are eyeing the door and judging how quickly they can dash for it. They probably have the PR firms that produced the ads against the mining tax on speed dial. But what legal issues are at stake? Remember, under Australian Constitutional law (assuming we understand it correctly), only the States have the legal right to collect royalties on their own property. Minerals and commodities, those on-shore anyway, are clearly State property. Thus only the States can legally tax them or collect royalties on them. Conversely, the States cannot impose taxes on "Commonwealth Property." Blah blah blah. So what? This feature of the law is why the Federal government can only tax profits and not the minerals directly. It's also why the Gillard government had to agree to credit back State royalties against the Federal tax, so as not to double tax the miners. It now appears there's a disagreement between the government and the miners over whether any FUTURE increases in State royalties can be credited against the Federal tax. You can understand the government's position easily enough. It wants every filthy penny it can get. It's claiming that future State royalty increases are not going to be "paid" by the government in the form of a credit. Why? The States would keep the new royalty money but the Federal government would forego that payment because of the rebate to the miners. This defeats the whole purpose of using super cycling mining industry profits to cover the structural whole blown in the government's finances by the GFC and the stimulus plan, which blew the government surplus. Why would you rob a bank that had already been robbed? You wonder why the States would ever give up the right to royalty revenues from their property. Or why they wouldn't fight against Federal moves that would seem to infringe on that right. The only States that would agree to this are probably ones that don't generate a lot of royalty revenue themselves, have large deficits and lots of public servants, but would love to share in the booty being generated by Queensland and Western Australia. Ah...The joys of Federation. But why would the miners have ever agreed to such an absurd tax plan at all when they probably had a legitimate legal challenge to the government's authority to even impose such a plan? Maybe they are good corporate citizens. Maybe they were bullied. Or maybe they saw it as the path of least resistance toward an inevitable result. Whatever the case, the agreement seems to be unravelling. For the stock market, this could be bullish if it means the end of the tax altogether. It could also be bullish if it means the unwinding of the mining tax means another Federal election is inevitable. Whether that election would deliver either party a majority - or Labor a big enough majority to pass the mining tax, is uncertain. Markets, as you know, generally don't like uncertainty. But this kind of uncertainty could go either way. An outcome where there is no tax because no one can govern seems like it's positive. But an outcome where no one knows if there will be a tax because no one is governing effectively, which might lead to a new government and a new tax...that's less positive. Given all those legal, economic, and epistemological factors, why don't we pare it down to just the charts and see what the market is telling us in its own terms. For that, over to Slipstream Trader Murray Dawes. Dan Denning
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| Posted: 20 Oct 2010 04:22 PM PDT I have been poring over my charts for the last few days and have noticed some large divergences opening up in our markets. The ASX 200 is underperforming the US markets massively at the moment. I find this fact quite intriguing when you consider that the Australian Dollar has been rallying strongly on the back of strong commodity prices caused by the threat of QE2. Something is not adding up. Source: Slipstream Trader Have a look above at this chart of the ASX 200 vs. the S+P 500. You can see quite clearly that a very high correlation from the past year has broken down sharply in the last month. The ASX 200 closed at 4661 on the 15th of September and is trading at 4640 today. By comparison the S+P 500 is nearly 5% higher than it was on the 15th of September. What gives? If we look at the Aussie Dollar the situation is even stranger. It is quite clear from this chart that the Australian Dollar has continued to rally over the past month. But the high correlation between the strength in the Aussie and the strength in the stock market has also broken down. If all of these offshore investors are piling into Australia en masse in an effort to gain commodity exposure before Bernanke starts printing, why is our stock market refusing to budge? Also, if the stock market is refusing to budge in the face of large offshore investor demand, then which direction do you think the stock market will go once the offshore buying stops? There are already stories that offshore fund managers are becoming less willing to take on the currency risk present by buying stocks now with the AUD near parity. There will also be other fund managers who have made a killing on the stock market and the currency appreciation who will be looking to lock in gains. I believe the large divergence in our market is sending a bearish signal. The Australian Dollar is now a very crowded trade and a quick glance at a weekly chart shows the chance that we could be looking at a multi-year double top being formed. Even if the AUD does end up trading to higher levels on the back of US money printing we could still see a short and sharp clear out of positions that could take the Aussie back to the low 90's. Another bearish sign is that the overall market breadth is falling. Have a look at the chart above of four different indices on the ASX 200. It is obvious from this chart that we have a two tier market. The financials and Consumer discretionary are looking very weak and have actually been selling off over the past month. The Resources are continuing to power ahead on the back of the large offshore demand but it is also apparent that the steam has been coming out of the Resources in the past week or so. The market internals are not looking that great to me and I would expect to see the slow consolidation of the past month break to the downside before long. Murray Dawes
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| “Print, Print and Print” Posted: 20 Oct 2010 04:14 PM PDT [Ed. Note: The following is an extract from the October edition of Dr. Faber's indispensable monthly newsletter, The Gloom, Boom & Doom Report.] No matter what central bankers and the cheerleading, mostly useless academics who surround them pronounce in their self-created aura of infinite academic "delicacy and refinement", under the auspices of the Fed they will do precisely one thing: print, print, and print. Sadly, as Mignon McLaughlin observed, "The know-nothings are, unfortunately, seldom the do-nothings." I should like to emphasize once again that the US Fed will continue to monetize massively on any sign of either further economic weakness or a more meaningful (10% or so) financial and property market decline. In the world I described above, the increased supply of dollars will flow somewhere. Recently, CNBC interviewed 81-year-old Bernie Marcus, one of the founding partners of Home Depot. (He was CEO between 1979 and 1997.) Marcus, who is a self-made man and completely level-headed and without arrogance of any sort, described how he and Arthur Blank (the other co- founder) struggled when they opened their first store in 1979, in Atlanta. For example, at 10 pm on his 50th birthday, he said, he was still in the store, moving boxes around without air-conditioning, because they needed to save money. He then said that he doesn't mix with "important people", such as Jeff Immelt of GE, and smooth-talking bankers and academics; instead, he talks daily with small businessmen, which is what he was when he started his business. He then cited several examples of people who run small businesses and who had told him how difficult business conditions were. He suggested that, like the king in a fairytale, Mr. Obama should dress up at night like a pauper and go out and talk to business people. According to Marcus, King Obama would then realize how unpopular he is and how destructive his economic policies have been for small businesses. He also suggested that the academics at the Fed and in the administration should, for once in their lives, go out and work, instead of sitting in big glass office towers and having no clue about what is ailing the economy. Marcus then emphasized that none of the small businessmen he talked to had any plans to hire staff, because they felt there was far too much uncertainty about what kinds of regulations and laws Congress and the administration would come up with next. All his business friends and customers had told him that Obamacare would be a complete disaster for them. (It imposes on small businesses enormous non-medical tax compliance. It will require them to mail IRS 1099 tax forms to every vendor from whom they make purchases of more than US$600 in a year, with duplicate forms going to the IRS. Obamacare will also fund 16,000 new IRS agents...) Asked what he would suggest as a solution, Marcus, who looks much younger than his age and is still very alert, responded that the US would be greatly helped if Congress went on a holiday for two years, as this would prevent the government from doing even more economic damage. I have mentioned on previous occasions the critical views of other businessmen, such as Lee Iacocca (formerly of Chrysler) and Paul Otellini (CEO of Intel). Like Marcus, their view is that regulation is stifling capital spending and any employment gains in the US. But, whereas the "Otellinis" of this world are more in touch with large corporations, Marcus - whose philosophy is: "Whatever it takes" - is cultivating relationships with a vast number of ordinary people who run their privately owned businesses and have sales of from half a million to 100 million dollars. Marcus was also very critical of the various financial bailouts (unlike the self-serving and hypocritical Charles Munger). But one point he made was particularly interesting. He said that the business people he talked to had access to credit; that banks were willing to lend them money! But they had no interest in borrowing funds given the current regulatory uncertainties. I should mention that Marcus is the antithesis of economic policy decision makers and academics who imagine themselves to be of infinite delicacy and refinement and suffer from "a narrowing of the mind" - not because they travel, but because they have never in their lives worked in a real business. But, obviously, he knows what he is talking about. (Home Depot now employs over 300,000 people.) Now, does anyone really think that, under the conditions Marcus has described, the Fed's increase in the quantity of money will flow into US employment and real wage gains? As Marcus likes to say, "You must be kidding!" The money flows will continue to boost employment in emerging economies, along with their wages and asset prices. The best way to visualize this process is to think of a huge money- printing machine in the US that produces an unlimited quantity of dollars. Most of these dollars flow to the corporate sector, financial institutions, and wealthy individuals. A large proportion of these dollars is then transferred to emerging economies through the US trade deficit and investment flows, and boosts economic activity and increases wealth in emerging economies relative to the US. Some of these dollars then find their way back to the US and support Treasury bond prices. But since fewer dollars find their way back to the US than exit the country, the dollar has a weakening tendency against emerging market currencies and, especially, against hard assets whose supply is extremely limited compared to the money that the money machine keeps spitting out. Regards, Dr. Marc Faber,
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