Gold World News Flash

Eight years after repudiating Embry, Royal Bank loves gold
The Goldsmiths, Part CLXXI
High Long Bond Yield Good News for Gold Holders
The Double-Barreled Silver Issue
Crude Oil Ekes Out a Gain, Gold Rebounds as Treasury Yields Fall Slightly
Gold Seeker Closing Report: Gold and Silver Gain Almost 1% and 2%
With the right questions now, Paul really might 'End the Fed'
With the right questions now, Paul really might 'End the Fed'
Silver bullets in the head (**)
Is The Chinese Bubble About to Burst?
The Gold Price Could Drop as Low as $1,230, Must Rise Above $1,430.60 to Confirm Continued Rally
Goldman Implicated In CDS Price Manipulation Scandal
Welcome Hathor Exploration to the GGR Stable
A Report on the Tax Deal Effects
Market Recap: 12.9.2010
Gold Daily and Silver Weekly Charts
Should He Run For President? (Language)
THURSDAY Market Excerpts
Enemy of State
Kirkland Lake Gold Swings to a Profit in Q2
News from BidBullion regarding Silver Keiser's and silverkeiser.com
Eric Sprott's Double Barreled Silver Issue
Deciphering the Inflation Scorecard: Part 2
Despite central banks and jewellers, gold has remonetized itself
Hmmmm… That's nice Silver (**)
The SLV Exchange Traded Fund is NOT REAL SILVER (***)
Gold Tests 20 day SMA
Positive aura: Brett Fraser of uranium exploration group Aura Energy speaks to Stocko
PIMCO Loads Up On Even More Mortgage Backed Securities In November As El-Erian Boosts Economic Forecast
Compliments for GATA from National Inflation Association
Investors In Gold and Silver Growing Cautious Over Rising Interest Rates In U.S. and China
Africa: Open For Business
Market Commentary From Monty Guild
Emirates NBD launches gold sales
John Williams Talks To BNN About The "Great Hyperinflationary Collapse"
2011 to be another stellar year for gold — Nichols
Krugman & Hard Money: Smell the Disdain
In the News
Gold, Silver, Oil: Volatility Is the New Stability
Mexican Oil Goes from Public to Private
Worlds Apart: A Firsthand Look at Emerging Market Growth
Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight
Oil and U.S. Hyperinflation
… on The Role of Gold in the New Financial Architecture
Gold Price Capped by Surging Bond Yields
Has This Stock Gone Too High? No Way… It Can ALWAYS Go Higher
Swiss Bank Client Can't Get His Silver Back Two Months After Asking
Thursday - Living in Ben's Stock and Bond Fantasy
Precious Metals Market Report
Carbon Marts Launch Around the World... NASA Arsenic Life Paper Is Fraud?

Eight years after repudiating Embry, Royal Bank loves gold

Posted: 09 Dec 2010 06:12 PM PST

Back in 2002 the top mutual fund manager in Canada and perhaps the world was Royal Bank's John Embry, but the 150 percent return of his gold fund that year didn't stop the bank from repudiating him publicly and then welcoming his departure after he issued a report concurring with GATA's complaints of gold price manipulation.

The Goldsmiths, Part CLXXI

Posted: 09 Dec 2010 06:03 PM PST

Many news reports, as read by persons interested in gold and silver, had a strange headline several days ago which read— "Want to Crash JP Morgan Chase? Buy Silver." The backdrop for this message was a story from the London Guardian by Max Keiser which had a focus on the huge silver short positions at JP Morgan. Of course, this same idea would apply for gold and other commodities being manipulated by JP Morgan Chase and the other large Rothschild Cabal banks and institutions.

High Long Bond Yield Good News for Gold Holders

Posted: 09 Dec 2010 06:02 PM PST

The Financial Times brought up the interesting point that because bond prices are so insanely high (making bond yields so preposterously low), a one-percent change in yields would negatively impact the prices of bonds much more than a one-percent change if bond yields were higher, which I assume means in the normal 3-6% range.

The Double-Barreled Silver Issue

Posted: 09 Dec 2010 05:24 PM PST

Regular Markets at a Glance readers may have wondered why we remained so silent on the subject of silver over the last several months. Considering the significant exposure we have to silver as a firm, we can assure you that it wasn’t for lack of desire to share our views, but rather due to strict solicitation restrictions imposed on us by the cross-border listing of Sprott Physical Silver Trust (PSLV) this past October. It therefore gives us great pleasure to finally share our views on silver with you. We have included two separate articles in this issue of Markets at a Glance: the first was written back in June 2010, and contains the information we used in the prospectus for the PSLV. The second is an update article written this past month that discusses new developments in the silver market and confirms our views on the metal. We urge you to read them both in order to understand our investment thesis for silver, and we hope they compel you to take a much closer look ...

Crude Oil Ekes Out a Gain, Gold Rebounds as Treasury Yields Fall Slightly

Posted: 09 Dec 2010 04:12 PM PST

courtesy of DailyFX.com December 09, 2010 07:17 PM It was yet another day of consolidation for crude oil, but prices may advance meaningfully higher in the coming days and weeks. Has gold finally found a catalyst for sustainable declines? Commodities – Energy Crude Oil Ekes Out a Gain Crude Oil (WTI) - $88.47 // $0.10 // 0.11% Commentary: Crude oil fluctuated on Thursday, but ultimately finished the session only slightly higher, +0.14, or 0.16%, to settle at $88.51. The commodity continues to consolidate with little in the way of news flow to spur significant moves in either direction. The bottom line is that prices are digesting the recent run up that took prices from $80 two weeks ago to close to $90. We expect a break of that level in the coming days and weeks before any meaningful correction takes place. Many analysts are beginning to call for prices to surpass $100 sometime next year and we would not take the other side of that. Unless OPEC— specifically Sau...

Gold Seeker Closing Report: Gold and Silver Gain Almost 1% and 2%

Posted: 09 Dec 2010 04:00 PM PST

Gold climbed over $10 to as high as $1392.30 in Asia before it fell back to see a $0.95 loss at $1380.65 in London and then rallied to a new session high of $1394.00 at around 10AM EST ahead of another dip back to almost unchanged by late morning in New York, but it then climbed back higher in late trade and ended near its earlier high with a gain of 0.72%. Silver rose to $28.783 in Asia and fell to $28.345 in London before it also rallied back higher in New York and ended not far from its midmorning high of $28.99 with a gain of 1.91%.

With the right questions now, Paul really might 'End the Fed'

Posted: 09 Dec 2010 03:21 PM PST

But first, get that man a few bodyguards.

* * *

Ron Paul, Author of 'End the Fed,' to Lead Panel Overseeing Central Bank

By Phil Mattingly
Bloomberg News
Thursday, December 9, 2010

http://www.bloomberg.com/news/2010-12-09/ron-paul-author-of-end-the-fed-...

WASHINGTON -- Rep. Ron Paul, Texas Republican and author of "End the Fed," will take control of the House subcommittee that oversees the Federal Reserve.

House Financial Services Chairman-elect Spencer Bachus, an Alabama Republican, selected Paul, 75, to lead the panel's domestic monetary policy subcommittee when their party takes the House majority next month, the committee chairman said today.

"This is the leadership team that crafted the first comprehensive financial reform bill to put an end to the bailouts, wind down the taxpayer funding of Fannie Mae and Freddie Mac, and enforce a strong audit of the Federal Reserve," Bachus said in a statement.

Paul, in an interview last week, said he plans a slate of hearings on U.S. monetary policy and will restart his push for a full audit of the Fed's functions.

... Dispatch continues below ...

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

"We are ready to hit the ground running, and I look forward to continuing our work in the next Congress," Bachus said.

Paul, who has introduced legislation to abolish the Fed, became nationally known during his 2008 presidential campaign. His campaign to audit the Fed picked up steam as the central bank deployed trillions of dollars in emergency loans in the midst of the worst financial crisis since the Great Depression. Paul's bill gained the support of 320 of 435 members of the House and a portion of the measure ended up in the Dodd-Frank financial regulatory overhaul enacted this year.

Paul's assignment comes as the Republican Party has stepped up attacks on Fed Chairman Ben S. Bernanke and the central bank in the wake of the Nov. 3 announcement that it would buy bonds in an attempt to bring down unemployment and prevent inflation.

"Congress must act to rein in Chairman Bernanke and the Fed before they destroy our currency and permanently damage our economy and financial system," Sen. Jim Bunning, a Kentucky Republican, said in his farewell speech on the Senate floor today. "Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling."

Bunning's views are reflected throughout the country, according to a Bloomberg National Poll that reveals deep skepticism about the Fed.

Americans across the political spectrum say the central bank shouldn't retain its current structure or independence, according to the poll. Asked if the central bank should be more accountable to Congress, left independent, or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Thirty-seven percent favor the status quo.

Paul, who has been passed up twice before for the subcommittee chairmanship, may cause a problem for Republicans who have traditionally defended the central bank, Rep. Barney Frank, the outgoing chairman of the Financial Services Committee, said today in a Bloomberg Television interview.

"I think you're going to see a significant dispute within the Republican Party," said Frank, who was re-appointed by his party as the senior Democrat on the committee. "I do not believe that Ron Paul's views on the Fed represent the views of most Republicans."

Bachus will keep the senior Republicans on the panel in leadership positions. Rep. Jeb Hensarling of Texas will take over as the panel's vice chairman, replacing fellow Texas Rep. Randy Neugebauer, who moves over to lead the oversight and investigations subcommittee.

Rep. Scott Garrett of New Jersey will become chairman of the capital markets panel, which would oversee any work done on government-owned mortgage companies Fannie Mae and Freddie Mac. Reps. Shelley Moore Capito of West Virginia and Judy Biggert of Illinois will take over the financial institutions and housing subcommittees, respectively. Rep. Gary Miller of California will take over as chairman of the international monetary policy panel.

* * *

Join GATA here:

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Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Friday-Saturday, February 18-19, 2011
Glendale, Arizona

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

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Prophecy Drills 71.17 Metres of 0.52% NiEq
(0.310 % Nickel 0.466 g/t PGMs +Au and 0.223% Copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

With the right questions now, Paul really might 'End the Fed'

Posted: 09 Dec 2010 03:21 PM PST

But first, get that man a few bodyguards.

* * *

Ron Paul, Author of 'End the Fed,' to Lead Panel Overseeing Central Bank

By Phil Mattingly
Bloomberg News
Thursday, December 9, 2010

http://www.bloomberg.com/news/2010-12-09/ron-paul-author-of-end-the-fed-...

WASHINGTON -- Rep. Ron Paul, Texas Republican and author of "End the Fed," will take control of the House subcommittee that oversees the Federal Reserve.

Paul, in an interview last week, said he plans a slate of hearings on U.S. monetary policy and will restart his push for a full audit of the Fed's functions.

... Dispatch continues below ...

Bunning's views are reflected throughout the country, according to a Bloomberg National Poll that reveals deep skepticism about the Fed.

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

http://www.gata.org/node/16

Silver bullets in the head (**)

Posted: 09 Dec 2010 02:30 PM PST

WikiLeaks Suggests 9/11 Preplanned

This posting includes an audio/video/photo media file: Download Now

THURSDAY Market Excerpts

Posted: 09 Dec 2010 10:12 AM PST

Gold chops higher again after Irish debt downgrade

The COMEX February gold futures contract closed up $9.60 Thursday at $1392.80, trading between $1381.10 and $1395.60

December 9, p.m. excerpts:
(from Xinhua)
Gold futures on the COMEX rebounded from a 2-day dip as concerns over the EU debt crisis intensified after Fitch Ratings downgraded the sovereign credit of Ireland. The most active gold contract, for February delivery, rose 0.7%. Fitch Ratings reduced Ireland's rating by three notches to BBB+, the third-lowest investment-grade rating, citing the costs of restructuring the country's banking system and the loss of access to affordable funding in the market…more
(from Marketwatch)
Irish debt worries A news report also said Ireland's Labour Party could vote against the €85-billion bailout. "Gold should remain in demand as a 'safe haven,' not least because of the persistent uncertainty about the debt crisis in euro zone peripheral countries," analysts at Commerzbank noted. The U.S. dollar, only mildly higher Thursday, also provided some support to prices. The dollar index was up 0.1% to 80.11 from 79.98 in late North American trading Wednesday…more
(from Bloomberg)
The euro dropped against most major currencies after Ireland's credit rating was downgraded, adding to concern that Europe's debt crisis will escalate. "If you were in Europe, you'd be buying gold to preserve your wealth," said Lannie Cohen, president of Capitol Commodity Services Inc. "The bottom line is that investors are losing faith in paper money. Gold will continue to act as the currency of choice." The price has risen 27% this year, heading for its 10th annual gain…more
(from Dow Jones)
Better-than-expected weekly jobless-claims data Thursday sparked inflation concerns and boosted gold prices. The number of U.S. workers filing new claims for unemployment benefits fell by 17,000 to 421,000 in the week ended Dec. 4, more than the 13,000 economists forecast. "We're putting people back to work and that's inflationary in the food and the energy sector," said Charles Nedoss, senior market strategist with Olympus Futures. Declining yields on Treasurys also encouraged investors back into the gold market…more
(from Reuters)
Gold reasserted its role as a safe haven after the combined effect of rising U.S. short-term interest rates and a stronger dollar prompted profit-taking in the past two days. Miguel Perez-Santalla, vice president of sales of Heraeus Precious Metals Management, noted that "if people don't have confidence in the value of the currency, it doesn't matter if Treasury yields go up. Because, if the currency is going to lose value, the yield has to go up significantly to compensate for any … declining value of the dollar."…more

see full news, 24-hr newswire…

Enemy of State

Posted: 09 Dec 2010 10:01 AM PST

The 5 min. Forecast December 09, 2010 02:02 PM by Addison Wiggin - December 9, 2010 [LIST] [*] WikiLeaks hits close to home: State Department sells a friend “down the river” [*] New catalyst for gold: Chinese can finally buy gold-backed ETF [*] Something to think about next time you hear “the taxpayer made money” on a bailout [*] Frightful housing figure: After leveling off, price decline accelerating again [*] Reader mail onslaught about Julian Assange in Vancouver. Day 2… plus the little-known link between Assange and our in-house techie… [/LIST] As we trundled off to bed last night, we had no way of knowing just how close to home the WikiLeaks “cables” were going to hit. But as we do on occasion, we checked e-mail one last time… and found a startling development in the history of Odyssey Marine, the company whose plight we’ve been documenting in our latest film project. You’ll recall we&rsqu...

Kirkland Lake Gold Swings to a Profit in Q2

Posted: 09 Dec 2010 09:05 AM PST

Proactive Investor submits:

Kirkland Lake Gold (KGLIF.PK), a gold exploration and production company based in Kirkland Lake, Ontario, announced today that it swung to a profit for the second quarter as it achieved record gold production.

During the second quarter, Kirkland produced 21.5 thousand ounces of gold as it continued its mine expansion activities.

Complete Story »

News from BidBullion regarding Silver Keiser's and silverkeiser.com

Posted: 09 Dec 2010 08:52 AM PST

Max, Over 200 more emails have come in since my last email to you being sent from NWTM. If all inquiries really lead to purchases on Saturday we will be sold out of 1 ounce, almost sold out of 1/2 ounce and maybe have 4000 5oz remaining. Very big orders from dealers inquiring. I thought [...]

Eric Sprott's Double Barreled Silver Issue

Posted: 09 Dec 2010 08:32 AM PST

Just released from Eric Sprott, Sprott Asset Management

We have included two separate articles in this issue of Markets at a Glance: the first was written back in June 2010, and contains the information we used in the prospectus for the PSLV. The second is an update article written this past month that discusses new developments in the silver market and confirms our views on the metal. We urge you to read them both in order to understand our investment thesis for silver, and we hope they compel you to take a much closer look at silver as a long-term investment. Silver’s dramatic rise over the last two months is no fluke - it’s the result of a compelling supply/demand dynamic within a unique market structure. We hope the following articles convey our enthusiasm for "the other shiny metal" as an exceptional investment opportunity.

The Silver Lining, (June 2010)

By: Eric Sprott & David Franklin

No matter how complex our financial system becomes, the economic axiom of supply and demand will still apply. If the demand for an asset outstrips supply, the price of that asset will appreciate. The challenge in finding supply and demand imbalances in today’s market often lies in judging the quality of market data available – it frequently isn’t even close to being accurate. If the numbers don’t show the imbalances, it’s tough for investors to determine if the market price accurately reflects the market dynamics. Nowhere is this more prevalent than in the market for silver.

While gold dominates the headlines, the silver market actually enjoys a superior fundamental supply/demand story than that for gold, although you’d never know it based on the silver demand statistics from the major reporting services. As students of the precious metals markets we monitor the numerous metals reporting services very closely. According to those services, the silver market has enjoyed a stable supply/demand balance for almost ten years now. If that’s the case, why has the price of silver appreciated from $5 to $19/oz over that same time period? Is the reporting services’ data on the silver market truly reflective of silver’s underlying fundamentals?

Although there are several reporting services for silver market information, GFMS Ltd. and The Silver Institute are the most often quoted sources for silver market data. While they provide statistics for both silver supply and demand, it is their neglect of the "investment" demand category that we find problematic. GFMS and The Silver Institute use a category called "implied net investment" to capture the demand for physical silver from institutional and retail investors. The definition for "net investment" as defined by GFMS is "the residual from combining all other GFMS data on silver supply/demand…As such, it captures the net physical impact of all transactions not covered by the other supply/demand variables."¹ In other words, it is not an observed figure. GFMS’s "implied net investment" number doesn’t include any observable demand for silver by ETF’s and other reporting entities such as hedge funds - it is merely a plug used to balance the supply data for GFMS’s and the Silver Institute’s reporting purposes.² As we delved deeper into the silver market, this realization prompted us to calculate our own investment demand statistic.

We present our findings in Table A. While GFMS and The Silver Institute use an implied number, we calculated a real investment demand number using a handful of ETF’s and two other large private investors, one of which is our own firm. Our demand metric is by no means complete or exhaustive - we only used seven sources of reported investment demand, and yet from our informal and incomplete survey we found that GFMS and The Silver Institute had underreported silver investment demand by at least 225 million ounces! This shortfall doesn’t consider any other investors that may have bought silver over the past year, so real demand for silver could be multiple times higher.

Given its seemingly evident market imbalances, you might wonder why silver hasn’t performed better over the last year. The answer, we believe, lies in the way silver is priced. The silver spot price is dictated by paper contracts that trade on the COMEX exchange in New York. Paper contracts can be purchased "long" or sold "short". If more participants sell "short" than purchase "long", the paper market price for silver will decline. Often these contracts have little to no relationship with actual physical silver, and yet they are the most influential contract in determining silver’s physical spot price. Go figure.

In studying the silver market we owe a great debt to the work of silver analyst, Ted Butler. Mr. Butler has been writing about the silver market for fifteen years and has done much to inform investors about the reality of silver’s physical fundamentals. Butler provides some insight into the "short" positions that exist in silver today, highlighting the fact that the eight largest silver traders currently hold a net short position of over 66,000 contracts, representing more than 330 million ounces of silver.¹¹ This means that the eight largest COMEX traders are net short the equivalent of 48.5% of the world’s total annual silver mine production of 680.9 million ounces. None of these traders are in the silver business by the way – they’re all financial institutions. In addition, the COMEX silver short position held by the eight largest traders on May 3, 2010, represented 33% of total world silver bullion inventory, estimated by Butler to be approximately one billion ounces. There is no real comparison with gold, as the 24.5 million ounce concentrated net short position held by the eight largest traders represents a mere 1.2% of the 2 billion+ ounces of world gold bullion inventory as reported by the World Gold Council.¹² So in comparison to total world bullion inventories, the concentrated short position in silver is 27 times larger than that for gold. In every comparison possible, the short position in COMEX silver contracts is off the charts, and if you think the short positions sound potentially disruptive, you’re not alone. In September 2008 the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market. This investigation is ongoing and we look forward to its resolution.¹³

Because we believe the demand for precious metals will continue to increase in this environment, we’re always interested to know the total supply available in today’s physical bullion market. According to the best estimates from the USGS and current mining statistics, approximately 46 billion ounces of silver have been mined since the dawn of civilization.¹⁴ In comparison, approximately 5 billion ounces of gold have been mined throughout history.¹⁵ Reading this, a casual observer might conclude that gold is currently justified in being worth more than silver based on its relative scarcity. But the current price discrepancy ($1,250/oz gold vs $19/oz silver) is misleading.

As mentioned above, there are only 1 billion ounces of silver left above ground in bullion form today. That is a surprisingly small number in relation to the 46 billion ounces mined throughout history. The reason is due to silver’s consumption in manufacturing. Just like other industrial minerals, silver has been consumed in various processes over the course of history. Silver’s superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications. The key point to remember with all these applications is that once the silver is consumed it is typically never recycled. Many of its industrial applications require such small amounts in each surgical tool, electronic device or clothing item that it isn’t economic to recover from garbage dumps. For comparison, there are currently approximately two billion ounces of gold above ground in bullion form compared with the 5 billion ounces of gold mined throughout history.¹⁶ So despite being more heavily mined over time, silver bullion is now the more scarce "precious" metal than gold bullion is from an investment supply perspective.

This is where the silver story gets interesting for us. At today’s prices you have $19 billion dollars of silver ($19 x 1 billion ounces) and $2.5 trillion dollars of gold ($1250 x 2 billion ounces) above ground in bullion form. The size of the investment market for gold is therefore 131 times larger than that for silver. And yet, on a market relative dollar basis, investors are actually buying more silver than they are gold today. At today’s metals prices, in dollar terms, the US mint has sold approximately three times more value in gold than in silver thus far in 2010 coin sales. But there should be 131 times more gold sold than silver for the market to stay in balance. None of the largest gold and silver investment vehicles reflect the 131:1 ratio, suggesting that investors have a disproportionately large interest in owning physical silver.

For example, the largest gold ETF today, the SPDR Gold Trust ("GLD"), is currently ten times the dollar value of the largest silver ETF, the iShares Silver Trust (SLV). Since the SLV began trading in April 2006, the GLD has increased by $8 for every $1 increase in SLV’s NAV. Again, given the choice, investors are voting with their dollars and putting disproportionately more dollars into silver than gold from a relative market size perspective. It appears that no investors are anywhere close to buying 131 times more gold than silver, which market metrics would suggest if the demand for gold and silver were relatively equal – all of which brings us to silver’s ‘supply conundrum’: If on the supply side, as Ted Butler calculates, there are only one billion ounces of silver left in bullion form available for investment; and if, on the demand side, we were able to identify the holders of 500 million ounces spread across a mere seven investors - it implies that there is only 500 million ounces of silver left for everyone else to invest in! As large holders of silver bullion ourselves, we can tell you that 500 million ounces is not that much from a global perspective, and certainly won’t be enough to satiate the world’s investment demand for silver going forward. Also let us not forget the large silver short position on the COMEX that will almost undoubtedly require the purchase of 330 million ounces of silver to eventually cover. Assuming that happens, most of the silver available for investment will essentially already have been spoken for.

It also serves to mention that there will be no government silver stocks capable of covering this impending supply shortfall. According to the latest audit, the US treasury currently has 7,075,171 oz of silver in storage, which is about enough to handle two months of silver eagle coin production. If the COMEX silver short sellers are ever forced to cover, they won’t be able to lean on the government for a physical bailout.¹⁷

Judging by the numbers above, if hedge funds or any other large investor ever decided to invest in the physical silver market with the same voracity as they did with gold, the silver price could potentially explode. The existing silver inventory at COMEX is currently worth a little more than $2 billion at today’s silver price. We already know that high-profile hedge fund managers like Soros, Paulson and Einhorn have gold holdings with a total value of over $5 billion.¹⁸ If that same purchasing power was ever applied to the silver market, we could potentially witness a dramatic rise in the silver price and an effective clearing of all the physical silver in the COMEX inventory. It deserves mention that the SPDR Gold Trust ("GLD") added almost $5 billion dollars worth of gold in the last month alone, and it would take less than half of that GLD gold investment to wipe out the entire silver COMEX inventory.

The bottom line for us is that silver appears to be a fantastic investment today. Limited supply, strong demand and a potential buyer of almost half of one year’s global mining silver output make a great case for owning silver in physical form. Based on our calculations, it appears that the silver investment demand statistics published by GFMS and The Silver Institute are highly misleading at best. We believe the investment demand for silver is multiple times higher than that published, and given the outrageous short position in silver on the COMEX, coupled with the unsustainable buying ratios relative to gold, the case for physical silver is simply outstanding. As the expression goes, "every cloud has a silver lining". Notice it isn’t a gold lining or a platinum lining. In the silver market, the cloud has been duly represented by poor estimations of investment demand coupled with large outstanding short positions. That cloud will soon lift, revealing a "silver lining" that is far more valuable than it is today.

Click here for footnotes

All that Glitters is Silver (November 2010)

By Eric Sprott & David Franklin:

In the four months since we filed the prospectus for the Sprott Physical Silver Trust on July 9, 2010, the silver price has rocketed up 54%, bringing its year-to-date return up to a stunning 68% (!!). Silver has now outperformed all of the other eighteen commodity components that comprise the CRB Commodity Price Index on a year-to-date basis. Silver has been the indisputable star of 2010, and we have been very long the physical metal in many of our mutual funds and hedge funds.
Silver’s performance since June has been influenced by a number of factors. The first and arguably most significant development took place on October 26, 2010 when comments were released by Bart Chilton of the Commodity Futures and Trading Commission (CFTC). The CFTC is the US government agency that supposedly regulates the US futures and options markets. While the CFTC has technically been "investigating" the silver market since 2008, it had revealed nothing about its findings for over two years. Everything suddenly changed when Mr. Chilton, a CFTC Commissioner no less, publicly stated that, "I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted (emphasis ours)."¹ These comments quickly triggered a flurry of lawsuits against the purported manipulators and set the silver market on fire. There are now no less than four lawsuits seeking class action status. They all allege that JP Morgan Chase & Co. and HSBC Securities Inc. colluded to manipulate the silver futures market beginning in the first half of 2008. The suits claim that the two banks amassed massive short positions in silver futures contracts that they had no intent to fill in order to force silver prices down for their furtive benefit.

The suits also describe two ‘crash’ events that were set in motion by JP Morgan and HSBC, one in March 2008, and the other in February 2010, after the defendants had amassed large short positions. The suits allege that COMEX silver futures prices subsequently collapsed to the benefit of both banks in the wake of these events.² The fallout from these accusations has undoubtedly increased the investment demand for silver, and it serves to remember, as we highlighted in the previous article, that investment demand was already understated by at least half by the major silver reporting agencies. It will be hard for them to downplay the recent demand increase, as the volume of silver contracts traded on the COMEX market on November 10th set a new record, surpassing the previous record set in December 1976 by 57%!³ This increase actually forced the CME Group to increase the margin requirements for COMEX silver futures twice in one week in order to maintain some semblance of market order.⁴

Silver coin sales as reported by the world’s major mints have also been exploding since Chilton’s comments were made. The US Mint, The Royal Canadian Mint, The Austrian Mint and The Perth Mint are all reporting record or near record sales of silver coins.⁵ The silver Eagle produced by the US Mint set three new records at various points in November: best annual sales, best silver Eagle mintage, and best ever month.⁶ Money is pouring into silver in all forms, and due to silver’s relatively small market size, this capital inflow is having a huge impact on the silver spot price.

As we outlined in our Sprott Physical Silver Trust prospectus and our June MAAG article, the physical silver market is surprisingly small in US dollar terms. The CPM Group estimates that above ground stocks of physical silver total 1.184 billion ounces in bar and coin form, implying a total silver market size of a mere US$33.15 billion dollars.⁷ At the end of 2009, approximately 500 million ounces of that 1.184 billion were already accounted for by the silver ETF’s and other large holders. This left approximately 684 million ounces of silver available for sale in 2010. That is hardly enough, in our opinion, to satiate demand.

The money flows into silver in November 2010 have been staggering. Consider the investment demand generated from only two sources: the iShares Silver Trust ETF (SLV) and US Mint coin sales. The SLV added approximately 18 million ounces of silver in November alone; the US Mint sold 4.2 million ounces of silver coins. If you multiply these amounts against today’s silver price of $28, money is flowing into the silver market at an annualized rate of $7.5 billion dollars! At that rate of demand, it won’t take long before all the remaining above ground silver is spoken for.

Silver’s demand profile may also benefit from the outrageous short position that exists in the silver COMEX market. The current ‘open interest’ in silver COMEX contracts totals an approximate 871 million ounces (!!!).⁸ This means there are paper contracts for over 871 million ounces of silver that have someone betting ‘long’ and someone else betting ‘short’. In the event that the ‘longs’ choose to take physical delivery, there will not be enough silver to supply each buyer. It’s simple math - with only 684 million ounces of silver available above ground, there won’t be enough silver to go around. And considering the rate with which people have been purchasing coins and silver bars this past month, there may not even be enough physical to satiate regular spot buyers, let alone futures market participants.

Considering all the recent developments in the silver market, it seems unlikely that the silver price will stay under $30/oz for long. The large quantity of money flowing into silver from investors, combined with the potential demand from those who are ‘short’ silver that they do not own, will likely end up swamping the physical silver market entirely.

As our dear friend, Marc Faber, espouses in his book "Tomorrow’s Gold", an investor can do very well by only making a few good investment decisions over his or her career. The trick is to make one good investment decision every decade or so, based on trends that will last a number of years.⁹ In our view, owning physical silver and the associated stocks represents that type of investment opportunity today. If that seems too simplistic, consider that in October 2001 we wrote an article that identified the investment of the last decade. It too was just a simple metal. The article was entitled "All that Glitters is Gold", and it was written when gold was still considered a relic in financial circles. We believe silver will be this decade’s gold, and judging by the recent price action, it’s already off to a great start.

Click here for footnotes

Deciphering the Inflation Scorecard: Part 2

Posted: 09 Dec 2010 08:17 AM PST

Hard Assets Investor submits:

By Brad Zigler

Earlier this week, in Part 1 of "Deciphering The Inflation Scorecard," we dug into some of the gold-based metrics used in each Friday's edition of Brad's Desktop to gauge the strength of monetary inflation.

Complete Story »

Despite central banks and jewellers, gold has remonetized itself

Posted: 09 Dec 2010 08:09 AM PST

Gold Jewellery Loses Glister as Prices Surge

By Jack Farchey
Financial Times, London
Thursday, December 9, 2010

http://www.ft.com/cms/s/0/b52d834c-03bd-11e0-8c3f-00144feabdc0.html

The UK's Royal Mint is as busy as it has ever been in its 1,000-year history.

Sales of the popular gold sovereign coin have surged 400 per cent from last year, and November was "the biggest single month we've ever had in our entire history," says Dave Knight, head of commemorative coins.

The world's oldest coin maker is tooling up, buying a set of new hydraulic presses for its workshop near Cardiff in an attempt to keep pace with soaring demand.

About 100 miles east in Hatton Garden, the traditional centre of London's jewellery industry, R. Holt & Co. is also investing in new technology, but with the opposite purpose: to reduce the amount of gold it is using.

... Dispatch continues below ...

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The contrasting behaviour of mint and jewellery maker shows how the 450 per cent rally in gold prices since 2001 has reshaped supply and demand for the yellow metal. While rising prices have drawn speculative investors to bullion, driving prices even higher, to a fresh nominal record of $1,430.95 a troy ounce on Tuesday, the jewellery industry has been searching for ways to cut its gold consumption.

Last year, investment demand overtook jewellery as the biggest source of gold buying for the first time in three decades. Nervousness in financial markets, economic uncertainty and fears that paper currencies could tumble in value have all drawn investors to gold coins, bars, and exchange-traded funds backed by gold.

But the sharp decline in gold jewellery consumption over the past 10 years raises an important question: if this demand for the precious metal is slowing, has the traditional physical backbone of the gold market been lost?

"You've got to be a bit concerned [about the gold price] if investment demand unwinds," says Walter de Wet, head of commodities research at Standard Bank. "That jewellery demand is just not there at the moment."

Pockets of strong gold jewellery demand remain, such as the market for wedding rings, or in some Asian and Middle Eastern countries where buying gold jewellery is seen as a form of investment.

"Some of the main jewellery manufacturers have turned into collectors," says Scott Morrison, chief executive of Metalor, a Switzerland-based precious metals refiner.

At the cheap end of the market, pure gold jewellery has simply become unaffordable for consumers, especially in the wake of the financial crisis, prompting a switch to alternatives. Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy, says: "There has been a move to silver and non-precious metals."

Fashion has driven jewellers away from gold too. At the mid-market UK jewellery chain Ernest Jones, some of the best-selling items contain little or no gold: a silver bracelet which can be accessorised with charms, many of which are made of stone rather than precious metals, or a leather necklace with a pendant made of silver.

"Jewellery buying is changing. Commodity price increases are just one of the factors in terms of what customers do with jewellery." says Colin Wagstaffe, marketing director of Signet, which owns the Ernest Jones chain.

In future, he says, jewellery consumption "is going to be much more influenced by brands, by the look, and by alternative materials."

At the same time, smaller jewellers are focusing their efforts on the resurgent luxury end of the market, making fewer pieces with higher value and so using less gold.

"Rather than selling 10 products per two hours, we'll sell one. There is a reduced volume but a higher turnover," says Jason Holt, managing director of R. Holt & Co.

Moreover, rising gold prices mean jewellers need more money to buy inventory, at a time when credit has been hard to come by for small businesses. R. Holt & Co. has recently bought a machine to make casts for its pieces of jewellery in order to minimise gold wastage.

Jewellery is not the only traditional area of gold demand to be hit by high prices. The watch industry is struggling: Metalor has closed its business supplying gold to watchmakers because it "crashed," Mr Morrison says.

Less gold is being used in dentistry as well. In a sign of how much gold teeth have fallen out of fashion, when Kanye West, the US rap musician, recently decided to add some sparkle to his smile, he chose to replace his bottom teeth with diamonds.

For some, all this is a warning signal for prices. Mr Klapwijk, of GFMS, says: "If we use usual metrics to look at the gold market and we look at the scale of investor buying relative to the bread-and-butter demand from jewellery, we can see a market that is at some extremes."

That does not rule out further price increases. Mr Klapwijk believes investment demand for gold will drive prices to a record between $1,600 and $1,650 an ounce next year.

But gold, more than ever, will depend on investor sentiment rather than supply and demand. And, says Mr Morrison, jewellery is not going to pick up the slack if investment falters.

* * *

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Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
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Glendale, Arizona
Friday-Saturday, February 18-19, 2011

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Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

Hmmmm… That's nice Silver (**)

Posted: 09 Dec 2010 08:08 AM PST

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Gold Tests 20 day SMA

Posted: 09 Dec 2010 08:00 AM PST

courtesy of DailyFX.com December 09, 2010 07:41 AM Daily Candles Prepared by Jamie Saettele I wrote yesterday that “gold has registered a fresh all-time high but the incredibly extreme divergence with momentum remains in place. At this point, coming under 1384 would signal bearish potential.” Just after that high, gold reversed violently to form a key reversal and bearish engulfing pattern and the yellow metal is already testing 1384. The divergence and reversal patterns should not be dismissed....

Positive aura: Brett Fraser of uranium exploration group Aura Energy speaks to Stocko

Posted: 09 Dec 2010 08:00 AM PST

View the original article at Stockopedia December 09, 2010 06:33 AM Australian mining group Aura Energy (ASX: AEE) has been toying with a move to London's Alternative Investment Market for several months but chairman Brett Fraser is in no rush. Instead, he is content to spend time driving forward the company's uranium projects, one of which could eventually prove to be the second largest deposit in the world. For a company with a market cap of A$25m, the future looks exciting. Serial entrepreneur Fraser has been behind a string of Australian start-ups and currently chairs three other mining outfits besides Aura, including Drake Resources (ASX: DRK), Doray Minerals (ASX: DRM) and Blina Diamonds (ASX: BDI). After floating gold and base metals business Drake back in 2005 and subsequently securing well-known geologist Dr Bob Beeson as MD, the group "ran into" some uranium properties in Western Australia. The resultant spin-off was Aura Energy, which went on to list in 2006 before acq...

PIMCO Loads Up On Even More Mortgage Backed Securities In November As El-Erian Boosts Economic Forecast

Posted: 09 Dec 2010 07:55 AM PST

First the bad news: in November the AUM of Pimco's flagship TRF fund did something it hasn't done since the Lehman collapse: it declined. After hitting an all time high of $255.9 billion in October, the fund's net assets dropped by $6 billion to "just" quarter of a trillion. Now the good news: Bill Gross is long ever longer duration positions, with his holdings of sub-3 Year paper the lowest since November 2008. The fund raised its Treasury holdings from 28% to 30%, and continues to accumulate ever more paper in the belly of the curve- between 3 and 10 years, which this month amounted to a total of 67% of all exposure. This is also the area that over the past month has gotten hit the worst, and is one part of the reason why the various publicly traded PIMCO indices have gotten whacked. But another far more important reason is that for the 6th month in a row the TRF's MBS holdings continue to scream higher, and have now are at 43% (with 10% margin cash): the highest since July 2009 when PIMCO was actively selling its MBS holdings to the Fed in anticipation of the end of QE1. With such a jump in duration, PIMCO better hope that inflation concerns don't pick up, as their part of curve exposure will be the first to be impacted.

The distribution of the various asset class holdings is below:

The Duration distribution is below.

And very ironically, and surprisingly, we are hearing that just released is Mohamed El-Erian's revised forecast to the 2011 economy, which he now sees growing substantially faster, and hitting 3-3.5% in Q4 2011, on the "massive stimulus"... but don't call it that in front of Larry Summers. Nonetheless, he still claims The New Normal is here. Too bad that this will mean increasing weakness for precisely those assets in which the TRF is most invested.

It can now safely be said that complacency is the New Normal (look at VIX), and a complete economic golidlocks is priced in by everyone, the same way it was in early 2007, despite a bankrupt Europe, insolvent municipals, and 9.8% unemployment. But don't worry, the Fed is in charge of the world: after all, what can possibly go wrong?

Compliments for GATA from National Inflation Association

Posted: 09 Dec 2010 07:37 AM PST

3:35p ET Thursday, December 9, 2010

Dear Friend of GATA and Gold (and Silver):

The National Inflation Association today complimented GATA and its chairman, Bill Murphy, in commentary headlined "NIA Discusses WikiLeaks, Bernanke, and Hyperinflation," which you can find at the group's Internet site here:

http://inflation.us/wikileaks.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

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Sunday-Monday, January 23-24, 2011

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Investors In Gold and Silver Growing Cautious Over Rising Interest Rates In U.S. and China

Posted: 09 Dec 2010 07:35 AM PST

Africa: Open For Business

Posted: 09 Dec 2010 07:30 AM PST

Markets make opinions, the old saying goes. So it is hard to maintain old views on Africa as a place to avoid in the face of so much evidence to the contrary. A few snapshot images from the past few weeks should help you think differently about the continent.

There has already been a record $54 billion in buyouts in Africa this year – not including Wal-Mart's initial $4 billion offer for Massmart, an African retailer. There have also been a number of Africa-focused funds gathering money of late.

These investments are not fool's errands. The people behind them are not stupid. They see something: growth and opportunity.

The IMF recently upped its estimate for economic growth in sub-Saharan Africa to 5% for the year and 5.5% for next year. Africa is riding a boom of trade with resource-hungry China, but also with developing economies throughout Asia and Latin America. Money goes where it can get the best return. So far, African investments have offered higher returns. And prices remain far cheaper than developed markets, for similar assets.

Of course, Africa is an enormous continent of 54 countries – a diverse group, to say the least. It hardly makes sense, really, to talk about Africa as if it were a set of similar countries. It isn't. But there are pockets and regions and broad similarities of experience.

In any event, the opportunity in this vast area of 900 million people is hard to ignore.

Recently, I attended Grant's Fall Investment Conference in New York. One of the more interesting presenters was Francis Daniels, co-founder of the Africa Opportunity Fund, who delivered a talk titled Reflections of a Value Investor in Africa.

Afterward, we had lunch together and I got to chat with him a bit more about investing in Africa. Daniels is a soft-spoken, modest Ghanaian who left his home country in 1982 to study in Canada. By that time, he had witnessed six coups. The first was in 1966. "It had the tremendous benefit of giving me an unexpected school holiday," he said. But by the sixth attempt in 1982, he had a different view. "I was tired of coups and exhausted by Africa's seemingly perennial coups, corruption and mediocre leaders."

Over his 15-year career, he's invested in every region in Africa. His reflections included many super-cheap stocks that later delivered some multiple of his initial investment. For a Graham-and-Dodd investor, Africa was a carnival of riches. Price-to-earnings ratios of 2 or 3 times with 20% growth rates. Yields of 30% on convertible debt. All kinds of hidden treasures – such as free real estate or unrealized portfolio gains – lurked in the folds of African balance sheets. Africa, too, was rich in untapped natural resources that the world craved.

Africa, though, is famous for its resources, and a value investor has to figure out a way to apply these principles to natural resources or miss out on a big piece of the pie. Daniels made them work, and some of his best investments came from mining stocks. (Uramin, for example, was a uranium explorer in Namibia and South Africa. It delivered 1,000% returns in two years.)

Here is one of Daniels' favorite holdings… The stock is Zimplats, a platinum and palladium producer on the Great Dyke in Zimbabwe. It lists on the Aussie exchange under the ticker ZIM.

Zimplats does not produce refined platinum and palladium. Rather, it makes an intermediate product called matte, which it sells to refiners in South Africa. Impala Platinum of South Africa is the second largest producer of platinum in the world and has offtake agreements with Zimplats. It also owns 87% of the shares.

Daniels has owned Zimplats since 2003 and paid an average price of $2.25. Today, it is $12, but Daniels feels it is still too cheap. The stock trades for a price-to-earnings ratio of 10 times. Its enterprise value is $57 per ounce of reserves, compared to $193 for the industry.

Zimplats is also the lowest-cost producer in the world. Costs are $325 per ounce, versus the industry average of $948 per ounce. Zimplats mines from shallow depths at 50 meters below the surface, whereas South Africans have to go at least twice as deep.

Zimplats mines 350,000 ounces a year and plans to reach a million ounces. Its proved and probable reserves will last 67 years at current production. It has about six centuries of resource – yes, six centuries.

Let me finish with a few of Daniels' lessons from 15 years of investing in Africa, as I think these are applicable to investors everywhere:

"Macro-time is slower than micro-time. It took a few years for the hyperinflationary logic of Zimbabwe's fiscal and monetary policies to end in actual hyperinflation." I think we are seeing the same thing happen in the US. While it's clear where deficits and money printing ultimately lead (i.e., high rates of inflation), the market has been slow to realize it, as shown by a 10-year Treasury rate still smaller than my hat size.

"Government paper is riskier than private paper." This one sounds less surprising than it might have three years ago. But a slew of sovereign debt defaults (i.e., Greece, et al.) shows that, as Daniels says, "Fantastic promises prove to be just that in the long run."

"The best way to preserve real wealth in Zimbabwe was to own the equity securities of companies that earned non-Zimbabwean dollars." Applied to the US, it would be to own the stocks of companies that earn their bread in stronger currencies.

These are just a few. I think Daniels shows a smart value investor can do very well in Africa. Of course, you could just buy his fund, which as I write trades for a 27% discount to underlying NAV. I also think Daniels' lessons in Africa are worth thinking about, even if you never invest in Africa.

Regards,

Chris Mayer
for The Daily Reckoning

Africa: Open For Business originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Market Commentary From Monty Guild

Posted: 09 Dec 2010 07:25 AM PST

U.S. Tax Cuts Extended – This Is Bullish For Stocks, And It Means More QE From The U.S. And Europe

After the news broke of an agreement between U.S. lawmakers to extend the Bush tax breaks, some people concluded that the fiscal stimulus could reduce the pressure on the Fed from needing to do more QE. We disagree. We believe the tax breaks will mean even more QE…and the bond market seems to agree with us. This weeks' poorly bid U.S. Treasury auctions says that while investors agree that tax breaks are good for encouraging economic growth, they also drive government deficits higher. Bond offerings from the U.S. Treasury are going to go up, and the Fed had better buy the Treasury's bonds, because it is apparent investors don't want them. QE is here to stay.

Ripping Off The Band-Aid In Iceland

Our good friend, Larry Jeddeloh of The Institutional Strategist recently brought to light the differences in the way Iceland dealt with its financial crisis and the way the rest of the Western World has chosen to deal with theirs. In 2006, Iceland's central bankers miscalculated and thought everything was 'stable'. Larry points out that highly educated, capable central bankers may believe they have things under control, yet they can still make mistakes. In his Market Intelligence Report, Larry goes on to discuss Iceland's response to their financial crisis; they took some bitter medicine, let banks fail, let depositors lose money, and let their currency fall.

In the large Western democracies, there is no political will to make the hard decisions needed to fix their ailing financial system, and policymakers appear to be opting for the Japanese method of prolonging the agony. Larry writes,

"bailout fever…has a firm grip on the U.S. and is spreading quickly in Europe, evidence is emerging that our monetary policy chiefs are…wrong…again. Take Iceland. The country let its banks fail, it didn't use taxpayer money to bail them out, and the country and its currency have paid a heavy price. However, Iceland's budget deficit just a couple years past the crash will be 6.3% this year, and 0% next year. Contrast this with Ireland, which will have a 32% deficit, as estimated by the EC. How long will this debt burden the economy? How long will banks be frozen up, leading to stagnation? If Japan is any guide, it could be decades."

U.S. State Finances Are Going To Have To Be Addressed

We have discussed the risks to the so-called 'conservative' municipal bond market in recent months. Nothing has been done to address the fiscal crisis in many states, counties, and municipalities across the U.S. who owe trillions of dollars to bondholders…and are seeing their tax receipts shrink rapidly. This is another reason we believe that QE is going to continue for a long time.

Much has been written and reported about the European debt crisis, but if you look at the chart below, the capital markets are starting to anticipate defaults among some over-levered U.S. states.

The Federal Reserve's work is far from being done. To combat deflationary psychology, QE is the best policy response that the Fed has come up with. Municipal bondholders must be hoping for a continued expansion of the Federal Reserve's balance sheet (printing money), so that it can include many of these states' loans.

What does this mean for investors?

Continued QE by developed countries' central banks means that stocks (especially in countries and industries that can grow faster than the rate of inflation) and investments in commodity related assets will continue to be attractive.

Our Recommendations

Investors should continue to hold gold for long-term investment. We have been bullish on gold since June 25, 2002 when it was selling at about $325 per ounce. In our opinion, it will move to $1,500 and then higher. Traders should sell spikes and buy dips. Gold closed today at $1,382.60 an ounce, an increase of 325% in almost 8 ½ years.

Investors should continue to hold oil-related investments. We have been bullish on oil since February 11, 2009, at which time oil was trading at $35.94 per barrel. After the recent pullback, oil is trading at $88.52 per barrel, which is up about 146%.

Currencies: For long-term investment, we do not like the U.S. dollar, Japanese yen, British pound, or the euro. As we mentioned in our September 14th letter, we like the Singapore, Thai, Canadian, Swiss, Brazilian, Chinese, and Australian currencies. We would use the current pull-backs in these currencies as an opportunity to establish long-term positions. Since September 14, 2010, these currencies have appreciated or depreciated versus the U.S. dollar by the following percentage: Singapore dollar +1.6%, Thai baht +7.4%, Canadian dollar +1.6%, Swiss franc +2.1%, Brazilian Real +1.2%, Chinese Yuan +1.3%, and Australian dollar +4.7%.

Investors should continue to hold shares of growing companies in India, China, Singapore, Malaysia, Thailand, Indonesia, Colombia, Chile, and Peru. We have been recommending these markets in these commentaries since September 14, 2010, and we would use any pullbacks as an opportunity to add or initiate positions for long-term investors. Stocks in these countries have appreciated in U.S. dollar terms by the following percentages since September 14, 2010:

Country	Stock Index Appreciation/Depreciation in USD
Singapore	6.6%
Malaysia	2.0%
India	5.9%
China	7.7%
Indonesia	15.9%
Thailand	11.5%
Colombia	5.4%
Chile	7.2%
Peru	31.5%

We believe long-term investors should continue to hold food-related shares such as grains, wheat, corn, soybeans, and farm suppliers. Since we stated the grains bottomed on December 31, 2008, these have all appreciated substantially. We see more price rises ahead. Since December 31, 2008 the price of corn is up about 41.3%, wheat is up about 28.5%, and soybeans are up about 32.2%.

We believe U.S. stocks can rally further. Our reason for becoming more bullish on U.S. stocks on September 9, 2010 is that over the longer-term, liquidity formation through QE will create demand for many assets, including U.S. stocks. Since September 9^th, the S&P 500 is up about 11.2%.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Emirates NBD launches gold sales

Posted: 09 Dec 2010 07:19 AM PST

By Derek Baldwin
12/10/2010 (GulfNews) DUBAI — Emirates NBD has launched a new service for customers looking to invest in the soaring gold market. The new Gold Business service will enable customers to purchase gold instantly at spot prices at any of the 110 branches in the UAE.

… Investors will be issued a gold certificate "issued in lieu of physical gold at international market rates prevailing at the time of purchase," the bank said.

Gold buyers can also opt to take the physical gold home with them rather than leave the precious metal with certified security firms Brinks and Transguard. The key to the new programme is offering customers a choice.

[source]

RS View: Some choices are profoundly better than others.

John Williams Talks To BNN About The "Great Hyperinflationary Collapse"

Posted: 09 Dec 2010 07:03 AM PST

Any interview that starts off with John Williams saying "Eventually it is going to be a hyperdeflationary great depression" is sure to be controversial. While not necessarily news to those who subscribe to the Shadowstats.com editor's newsletter, sometime we wish that Blackhawk Ben was among them, because despite his 100% confidence that rates will never do the kind of move that they exhibited in the past two days, they, well, did. To quote Williamss, who actually keeps track of the US economy as if it were a GAAP audited corporation: "The annual deficit is running $4-5 trillion a year, that includes the Y/Y change in the NPV of unfunded liabilities... There is no political will to deal with this." The catalyst is well-known: "When you see panic selling of the US dollar, that's when you have to be really careful. But what's already been done with the dollar has spiked oil prices, and other commodity prices." On the question of why Bernanke would not be able to pull off what Volcker did in the early 1980s, Williams' explanation for why this time it is different, mostly focuses on the size of the US trade and budget deficits, which are not even remotely comparable on both an absolute and relative basis. Most specifically what consumers should do in the post-apocalypse world, Williams is not too optimistic. Ironically, he notes that Zimbabwe in its hyperinflation may have been lucky in that it had the dollar to fall back on in the black market, and now every market. However the US does not have that facility, and this "will get very difficult when food starts disappearing from shelves." Having goods for storage and barter would be critical. However, there may be a snag...

It appears that Mountain House, which is one of the better purveyors of freeze dried food and holds over 30 servings and last for 20 years because they are packed with nitrogen rather than oxygen, is now sold out of all #10 cans -link.

And for those who go to NitroPak, which sells these products, they have the following message:

***CURRENT INVENTORY UPDATE*** There is currently EXTREMELY high demand for all of our Mountain House foods nationwide due to current economic uncertainty and inflation fears. With this increase in demand, our food order processing times have increased also. As Mountain House’s leading distributor, we are receiving huge shipments weekly to fill our customer orders. We are shipping as quickly as we can. Your charge card will not be charged-up until we are ready to process your order. Thank you for your understanding and patience! Harry R Weyandt President

It appears that the battle lines have already been drawn, and the cheap optionality is gradually being eliminated. At this point the best the world can do is hope that Williams is wrong.

Full BNN interview with John Williams (after the jump):

h/t Robert

2011 to be another stellar year for gold — Nichols

Posted: 09 Dec 2010 06:52 AM PST

by Lawrence Williams
Thursday, 09 Dec 2010 (Mineweb) — Specialist gold commentator Jeff Nichols remains perhaps even more bullish on gold than he has been in the past, despite the recent price surges and pullbacks which have been the features of the past few weeks. He describes the recent market movements over the past month as "base building"….

Nichols reckons that in reality, gold is on the move again, heading to $1500 an ounce, if not by year end then very likely during the early months of 2011. … "Indeed, we expect gold will easily reach $2,000 an ounce in the next year or two … and, longer term, $3,000 or higher seems quite likely" he continues.

… the Quantitative Easing (QE) policies of both the U.S. Fed and the European Central Bank [has] some key big investors seeing this as a sign of inflation ahead and also likely currency value depreciation and who regard gold as a better risk in terms of maintaining wealth. Nichols sees it as important that even a small shift in preference away from the Euro and dollar financial markets into gold will hardly have any impact at all on the normal financial markets but can lead to a significant upwards jump in gold.

… Meanwhile, Nichols notes, physical demand in significant markets has remained firm even despite the recent shortlived peaks in the gold price, and this is particularly so in China, India and in other Asian nations in particular where there is a strong propensity to hold gold as a store of wealth and as a hedge against future financial eventualities. The recent reports about the huge rise in Chinese gold imports are particularly significant in this respect.

… "If physical buying remains fairly firm — as I believe it will — we can expect that gold will soon be soaring to new all-time highs."

As with all commentators, only time will prove if Nichols is right in his assessment of the path of the gold market, but his forecasts in the recent past have been sufficiently close to what has actually occurred to make them worth taking into account.

[source]

Krugman & Hard Money: Smell the Disdain

Posted: 09 Dec 2010 06:50 AM PST

So, big surprise here, uber-Keynsian Paul Krugman doesn't think much of anything having to do with hard money (i.e., money that can't be created with a simple touch of a computer key) as he details in this item at his New York Times blog the other day:

There's a widespread impression that Keynesian fiscal policy has failed. I would argue that this impression is wrong — that the truth is that it was never tried. But surely one clear lesson of recent events is the macroeconomic value of currency flexibility: Poland, Iceland, Sweden have all benefited from currency depreciation during the worst times.
…
Oh, and this:

Pence said he supports comments made by World Bank President Robert Zoellick last month that global leaders should reconsider gold's place in the global monetary system.

"The time has come to have a debate on the role of gold," Pence said.

In other news, Republicans have demanded that doctors consider reintroducing the practice of treating illness by bleeding their patients.

While the comments about gold shouldn't come as too big of a surprise, we are once again reminded of the beauty of defending Keynesian economics – you can always say that some outrageous (and quite impossible) amount of deficit spending and/or money printing is required to heal the economy and, then, after that amount is not offered up, you can say that policymakers just didn't try hard enough.

In the News

Posted: 09 Dec 2010 06:29 AM PST

Dear Jim,

And here they go boosting their foreign reserve holdings of gold to help shield their billions of dollars

CIGA LAS, Lisbon

GCC urged to boost gold reserves

Tom Arnold

Last Updated: Dec 9, 2010

GCC states should boost their foreign reserve holdings of gold to help shield their billions of dollars of assets from turbulence in global currency markets, say economists at the Dubai International Financial Centre Authority (DIFCA).

Diversifying more of their reserves from US dollars to the yellow metal would help to offer central banks in the region higher investment returns, said Dr Nasser Saidi, the chief economist of DIFCA, and Dr Fabio Scacciavillani, the director of macroeconomics and statistics at the authority.

"When you have a great deal of economic uncertainty, going into paper assets, whatever they may be – stocks, bonds, other types of equity – is not attractive," said Dr Saidi. "That makes gold more attractive."

Declines in the dollar during recent months have dented the value of GCC oil revenues, which are predominantly weighted in the greenback.

Gold prices rose to a record high before falling back this week as the dollar strengthened.

Longer term, gold could play a more important role in the global monetary system as the shift from developed world to emerging markets intensified, the two DIFCA economists said in a report published yesterday.

The dollar's position as the leading reserve currency was likely to diminish as US dominance of the world economy dwindled

More…

Dear Jim,

The "fat lady" is singing sir.

Joe

Dear Joe,

You are right. Here's a little advice:

Sell the rallies short using a French Curve short term.

Buy to cover using the same tool.

This could be an occupation for the next 10 years minimum.

Be professional and wait for the trade to come to you.

Regards,

Jim

30-Year Bond Gets Surprise Demand; Treasurys Rally

Published: Thursday, 9 Dec 2010 | 1:09 PM ET

By: Reuters and CNBC.com

Investors showed surprisingly heavy demand for 30-year bonds Thursday, despite fears that Treasury yields were ready to take off as the market tired of the barrage of supply.

The $13 billion sale drew a high yield of 4.41 percent, about 0.05 percentage points below expectations. The bid-to-cover ration, which measures how much is bid for each dollar auctioned, came in at 2.71, above the recent average of 2.66.

Treasury prices rallied after the results were released, sending the 30-year yield to 4.39 percent after a rally that marked the biggest since the fall of Lehman Brothers in September 2008.

The benchmark 10-year Treasury note spiked up 20/32 higher in price to yield 3.19 percent, down from 3.27 percent late Wednesday, while the 30-year bond was 29/32 higher after trading around even just prior to the auction.

Thursday's auction is the last part of this week's $66 billion in coupon-bearing supply.

More….

Jin Sinclair's Commentary

Because of the extension of the Bush Tax Cut? You have to be kidding.

This is the final pillar on gold as the debt rating of the currency of the US dollar becomes devalued by market forces.

Market forces beat any rating agency.

This is a market readjustment of the credit rating on the USA Inc.

If the 35 year uptrend line of the US long bond bull market dies, so does the dollar.

When gold ran into 1980, the yield on the 10 years was 14 7/8%.

Gold will trade at $1650 without any doubt.

US Treasuries hit by biggest sell-off in two years

By Richard Milne in London and Michael Mackenzie in New York

Published: December 8 2010 20:23 | Last updated: December 8 2010 22:18

US Treasuries suffered their biggest two-day sell-off since the collapse of Lehman Brothers, following a torrid month that has seen borrowing costs for western governments soar.

Germany, Japan and the US have all seen their benchmark market interest rates rise by more than a quarter in the past month while the UK's has risen by nearly a fifth.

"You could argue that we are at a new stage where the global cost of capital goes higher and higher," said Steven Major, global head of fixed income research at HSBC.

The yield on 10-year US Treasuries hit a six-month high of 3.33 per cent on Wednesday, up 0.39 percentage points from Monday and 1 percentage point higher than its October low. Japanese five-year yields also rose the most in two years, while Germany's benchmark borrowing costs hit 3 per cent. "People are getting out of the market and moving to the sidelines, feeling shellshocked at the speed of the rise in yields," said David Ader, strategist at CRT Capital.

US 10-year yields have risen by about 0.76 percentage points since November 8, those of Germany by 0.62 percentage points, the UK by 0.53 percentage points and Japan by 0.29 percentage points as the prices of the bonds has fallen.

Yields are still relatively low compared with long-term trends but investors are starting to fret that they could continue to move sharply higher. "Yields at this level are clearly unsustainable," said Paul Marson, chief investment officer at Lombard Odier, the Swiss private bank.

More…

Gold, Silver, Oil: Volatility Is the New Stability

Posted: 09 Dec 2010 06:15 AM PST

James West submits:

In the last 30-day period, the price of gold has swung up and down like a yo-yo between $1,340-1,420 an ounce, giving it a volatility ratio of 5.6 percent. Silver during the same period traded between $25.38-30.50, which gives it a 16% volatility ratio. Oil’s volatility range over 30 days lies between $80.28-90.87, or 11.65 percent.

For a 30-day period, those trading ranges are extremely high. For example, the volatility ratio in the price of gold in the same 30-day window 10 years ago was between $264-272, or 2.9 percent.

Complete Story »

Mexican Oil Goes from Public to Private

Posted: 09 Dec 2010 06:15 AM PST

We arrived in Charm City late last night, after a lengthy layover in Houston. To say the air here is fresh, or crisp, would be an understatement. It's colder than a central banker's heart. Well, that may be a slight exaggeration. A fierce wind lashes off the Inner Harbor. Steam pours from the manholes lining the streets and billows into the night sky. The few brave – or destitute – souls who venture outside are bundled up in their winter woolies. It's a far cry from the balmy, Pacific Coast weather we'd been enjoying in Mexico of late. Speaking of our southern neighbor, here's a headline for you, Fellow Reckoner:

"In Major Shift, Mexico Allows Oil Drilling by Outsiders," says one of the newswires.

What's this? Has the Mexican government been thumbing through the virtual pages of our "fringy," "doom and gloom" publication? Earlier this week, as you may recall, we wrote an entire article ("The Gross Mismanagement of Mexico's Oil Industry") outlining how needless pressure from Mexico's bureaucracy has, over the years, inhibited the full development of the nation's vast oil reserves.

"With heaven and earth conspiring to deliver such a bounty to the Mexican people," we wrote of the geologically freakish Cantarell Field deposit, "one is tempted, perhaps beyond better judgment, to ask: What could possibly go wrong? Enter Pemex, the nation's state-owned petroleum company. Again, it seems there is no privilege so vast as to render it beyond the destruction of the 'people's' government."

Mexico's crude production, under the "stewardship" of the state-owned Pemex, has traversed a steep, seemingly inexorable decline for the better part of the past decade.

"Despite annual revenues in excess of $75 billion dollars, Pemex is only able to survive today through its immense borrowing," we wrote. "Pemex pays out over 60% of its revenues in taxes and royalties. Those receipts, in turn, account for around 40% of the federal government's entire budget. As such, the state-owned dinosaur is now over $40 billion in the hole (so to speak) and, to make matters worse, is facing inexorable production decline in many of its fields, including that giant asteroid baby, Cantarell."

All this amounts to falling revenue for the Mexican government and, as a side non-benefit, imperiled US energy security. (The US is the Central American nation's largest customer – declining production there translates to more pressure on the US to "fill the tank" from other, relatively unfriendly nations abroad.)

But that all changed on Tuesday, when Mexico's supreme court decided to invite private companies – both domestic and foreign – into the marketplace for the first time in 70 years. Juan Jose Suarez Coppel, the CEO of Pemex, said he hopes the liberalization of the sector will help Mexico work toward production of 3 million barrels per day within ten years. There's plenty of room to go wrong, of course, but this seems like an uncharacteristically rational step in the right direction by the Mexican government. We'll see where the chips fall in due time.

Alas, where the tide of state strangulation recedes from one shore, it rises to wash away whole villages on another. Back here in the United States of 'merica, we see evidence of government involvement all around us. There are rules and laws against all sorts of things, all, we suppose, designed to help protect us from our infant-minded selves. "No loitering"… "No running"… "No standing on one's head."

And nowhere is the feeling of Big Brother more oppressive than in the sphere of economics. It's a government-sponsored recovery, we are told (though we hear little mention of the government-sponsored recession that preceded it…nor the government-sponsored depression that will likely follow).

For the most part, the media tends to view Obama/Bernanke policy like it's handed down from Mount Sinai: "Thou shall have thy cake and thou shall eat thy cake," seems to be the general gist of the story. More tax cuts…and more benefits. More spending…more credit for crooks…more deals and handshakes for deviants and shysters.

As far as we can tell, all this circus activity is doing little to inspire confidence in the markets. Yesterday, last we checked, major indexes were neither up enough to raise an eyebrow nor down enough to raise a smile. Gold, however, had taken a $30 nosedive by lunchtime…enough to remind us not to check the daily charts so…uh…daily. The precious metal, a very natural bet against the world's very unnatural fiat money, is in a decade-long bull market. A $30 single day move may be sufficient to entice some traders to take profits, but it's probably not enough to entice most investors to sell. And, with central bankers at the pump from the Potomac to the Thames to the Rhine and beyond, that's not likely to end any time soon.

Joel Bowman
for The Daily Reckoning

Mexican Oil Goes from Public to Private originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Worlds Apart: A Firsthand Look at Emerging Market Growth

Posted: 09 Dec 2010 05:40 AM PST

Yes, we're back at home, after flying around the world. It was a good trip. No problems. No hassles. Everything went well.

What was the point?

"You know, my friends and relatives in the states still believe that the US is the greatest place in the world," explained an American in Melbourne, Australia. "They think the rest of the world is full of poor people who can't wait to emigrate to the US. They need to get out more."

So we get out. We open our eyes. We look around.

And what do we see?

We see a whole world full of people who are hustling and bustling…schlepping and bussing…each trying to gain an advantage…each looking for a way to get richer, faster.

The motivations all over the world are about the same. People generally want wealth, power and status. And they want to get it in the easiest possible way. But it can mean different things to different people…and they go about it differently too. In the mature economies, they look for subsidies and angles. Tax breaks. Bailouts. Boondoggles. Sinecures.

"We have plenty of corruption here in India, too," a colleague noted. "But most people know they can't get much from the government. They have no choice. They have to start a business or get a job."

Nothing stands still. A few years ago, the Russkies, the Indians and the Chinese were all very helpfully sitting on the sidelines. With their goofy theories and their counterproductive policies, they posed no competition. Americans found it easy to feel superior. Half the world had tied its hands behind its back.

But in the '70s and '80s, things began to change. "To get rich is glorious," said Deng Xiaoping. "Perestroika," said Gorbachev. And now they're all at it. Indians, Brazilians, Turks, Indonesians – they all have faster growth rates and much less debt than the developed countries. China and Turkey are both growing about 5 times faster than the US. India, Brazil and a dozen other countries aren't far behind.

The latest test scores show Chinese math students in Shanghai far ahead of Americans. And the latest reports tell us Chinese trains are setting records – at 300 mph.

Nothing is off limits. No industry is safe. Nobody can expect a free lunch forever.

In India, we rode in a Nano, the car Tata Motors is selling for $2,500. It was a little loud…but surprisingly spacious and comfortable. For getting around town, it seems perfectly adequate. And soon it will be available in the US. How will Detroit compete with these guys on the low end? And on the high end, there's plenty of competition too – from Japan and Germany.

"But wait…Germany is a mature economy too."

Well, yes…and no. Germany's factories and infrastructure were flattened in WWII. It had to rebuild from the bottom up. Its post-war government was completely new. Its currency just came out less than 10 years ago.

Besides that, a large piece of present-day Germany lived under the heel of the Soviets for 45 years. They had a close-hand look at what central planning can do to an economy.

America's government, meanwhile, has been in business since 1776. Its economy has been the biggest in the world for the last 110 years. It was the only major combatant in WWII to come out the other end with its wartime plant and equipment intact. It has had the world's richest people and the most gold for many years.

"Nothing fails like success," is one of our Daily Reckoning dicta. Will it fail now, or later? We don't know. But readers are urged to get out more…and draw their own conclusions.

Bill Bonner
for The Daily Reckoning

Worlds Apart: A Firsthand Look at Emerging Market Growth originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight

Posted: 09 Dec 2010 05:27 AM PST

Today it's been announced that Congressman Dr. Ron Paul (R-TX) will become Chairman of the Domestic Monetary Policy House Subcommittee in 2011. If ever the US could benefit from a turning point in monetary policy it's now. This is one of Congress' most relevant entities for supervising that work, as a component of the overall House Financial Services Committee, the Domestic Monetary Policy and Technology Subcommittee oversees:

the Federal Reserve's efforts to carry on its regular responsibilities, including bank examinations, consumer protection and data collection

the testimony of the Chairman of the Board of Governors of the Federal Reserve

Emergency Authority, including the Fed's efforts to withdraw the extraordinary monetary stimulus it provided and reduce its balance sheet

the state of US coins and currency, including examining the roles of the Bureau of Engraving and Printing, US Mint, Federal Reserve, and Secret Service

audits of the Federal Reserve, or whatever is left of that possibility, based on the final version of the signed Dodd-Frank Act

Perhaps no congressman is more actively — or famously — engaged in the task of changing the current trends in monetary policy than Dr. Ron Paul, author of "End the Fed," and a studied critic of how the US manages its money supply. He sees monetary reform as an eventual necessity and the dollar as unable to indefinitely operate as the reserve standard for the world.

As of today, it looks like he's going to get his best chance to date.

This past Tuesday, the House of Representatives' Republican leadership chose Congressman Spencer Bachus (R-AL) to serve as head of the House Financial Services Committee. Today, Bachus announced his appointments for the 112th Congress' financial services committee leadership, including Dr. Paul.

It's expected that Dr. Paul will make increased efforts to examine the Fed's monetary policy decisions, open up more of the Fed's interest rates and monetary easing deliberations to congressional scrutiny, and take a closer look at the US role in global economic coordination, especially the sort that takes place through the International Monetary Fund.

In his official statement, Bachus says:

For better or worse, we'll keep you posted on where Bachus, Paul, and the rest of the new Financial Services Committee leadership takes it from here.

Best,

Rocky Vega,
The Daily Reckoning

Dr. Ron Paul Takes Over Chair of Domestic Monetary Policy, Including Fed Oversight originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Oil and U.S. Hyperinflation

Posted: 09 Dec 2010 05:23 AM PST

As precious metals investors, it can often seem to us that the U.S. government (and the banking cabal which pulls its strings) is exclusively focused on suppressing gold and silver prices – given the historic role of precious metals as a "barometer" of economic conditions, especially inflation. However, there is a different commodity that this group obsesses about to a far greater degree than precious metals: oil.

The United State's enormous dependency on imported oil translates directly to enormous economic vulnerability. Indeed, U.S. paranoia about "securing" oil supplies for itself has been the driving force behind most (if not all) of the wars it has instigated in the Middle East.

The U.S. dependence on petroleum goes well beyond simply the massive amounts that is spent each year by the U.S. to satisfy its oil-gluttony. Cheap oil is the essential input needed to operate the "levers" of U.S. military/economic imperialism, as well as the foundation upon which the entire U.S. domestic economy is built.

Let me summarize this dependence briefly. By itself, the U.S. military is one of the ten largest oil-consuming entities on the planet. In other words, operating the U.S. war machine by itself consumes more oil each year than all but a handful of nations. Thus, the death, destruction, and misery that the U.S. military has inflicted upon its victims over recent decades is accompanied by the horrendous waste of countless billions of barrels of our most precious natural resource.

In this respect, high oil prices are a "blessing" to much of the world, as the hopelessly insolvent U.S. government is totally incapable of financing any more "military adventures", now that the era of cheap oil is gone forever. Indeed, we can only assume that Iranian defiance to the U.S. regarding its nuclear program is based upon their firm conviction that any military harm which the U.S. could inflict upon Iran would pale in comparison to the economic harm it would inflict upon itself from such an attack. Thus, we know the #1 reason why the U.S. is vainly attempting to keep a lid on oil prices: having a "big stick" is of little use if you're never able to use it.

The U.S. military is but one facet of the U.S. empire totally dependent upon cheap oil. Of near-equal importance is the need for cheap oil in order to pursue its agricultural imperialism. Roughly two decades ago, the U.S. government made a conscious decision to abandon most manufacturing activity – with the exception of the industrial and hi-tech sectors which service the U.S. war-machine.

Replacing manufacturing as the foundation for the U.S. economy is agriculture. The "World's Only Superpower" has chosen to become a "banana republic". Indeed, on the last major, U.S. trade mission to India, the big "success" of that endeavour was being able to increase U.S. soya bean exports to India.

Around the world, the story is the same. Where U.S. consumer manufactured goods used to flood the markets of countries all over the Earth, agricultural products now take their place – heavily subsidized agricultural products.

U.S. agricultural imperialism is based upon first injecting massive subsidies (in excess of $100 billion per year) into its crop production. These heavily subsidized food items are then dumped into markets in every continent on the planet. For the other, wealthier economies, this extreme U.S. subsidization is met with competing subsidies. Indeed, for many years the U.S. and Europe have been locked in an endless exchange of dueling subsidies.

For the less-wealthy nations, however, matching U.S. subsidies for its agricultural products is economically impossible. These nations have been forced to watch helplessly as the massive quantities of subsidized U.S. agricultural products bankrupted millions of small farmers all over the world – and severely depressed agricultural production. Thus, at the same time that rising per capita incomes in developing economies is spurring an enormous increase in demand for agricultural products, we have the U.S. government engaged in a predatory campaign which has crippled numerous economies, in addition to creating crop-shortages through depressing global production.

… on The Role of Gold in the New Financial Architecture

Posted: 09 Dec 2010 05:11 AM PST

09 December 2010 (DIFC Press Centre) —

… In short, the size of the dollar liquidity necessary to finance global trade and capital movements will, in the near future, outweigh the size and the capability of the of the US economy to sustain it. Hence in a multipolar world where the economies of China and Euroland have a size on par with that of the US, the international role of the dollar would come increasingly under strain. Furthermore, the significant role played by other countries, such as Brazil, the GCC, Korea, South Africa, on the world stage will lead to a more decentralized network of financial centers unlikely to be revolving only around the US dollar.

The note argues that this situation needs to be addressed by considering an alternative source of international liquidity. Specifically it suggests creating a "Hard SDR". The SDR is issued by the IMF and used in transactions among central banks. Currently it is linked to a basket of major currencies but its supply is not sufficient to provide a viable alternative as an international reserve asset. The Hard SDR, especially in these testing times when investors' confidence in paper assets is irremediably dented, should be pegged to a basket with a significant weight attributed to gold. Gold has represented historically a hedge against traumatic events such as inflation outbursts or major financial breakdown.

In particular, Dr Nasser Saidi suggests: "International liquidity should be supplied on a large scale by an international currency such as the SDR, whose value should be tied to a basket of major currencies and gold, with the weight of the latter set at 20-25%."

[source]

RS View: Economists tend to be theoreticians and mathematicians first and foremost, and next they tend to be political policy wonks, and only much much further down on the list do they ever exhibit any true problem solving sense such as, for example, a professional engineer maintains in the topmost drawer of his own tool chest.

Thus, the ongoing obsession with some form of SDR as part of the solution remains on display in these various economists' policy papers when, in fact, there is no rational justification for inclusion of the bureaucratic SDR component in a viable restructuring of the international monetary architecture. Floating MTM gold is sufficient to provide the desired foundational stability — the 'hard' core — of the central banks' international reserves, and these solid reserves would be gently and judiciously padded out with only a thin additional layer of foreign currency reserves for the convenient facilitation of month-by-month international trade. With this solid core of reserves to give weight and credibility to the larger portion of politically appropriate domestic assets that comprise the asset side of a central bank's balance sheet, the structure is thus in place for the independent conduct of stable and efficient monetary policy on a nation-by-nation basis without all the geopolitical jibing and intrigue that the current dollar-centric structure tends to engender. And so shall it be because on a majority vote there are enough right-minded central bankers who know when it is time to kick the geeky head-in-the-clouds economists to the curb and let the more practical solution-oriented engineers prevail in the final assessment and implementation.

Gold Price Capped by Surging Bond Yields

Posted: 09 Dec 2010 05:02 AM PST

THE PRICE OF GOLD bar prices moved sideways vs. the Dollar but recovered against a falling Euro in London trade on Thursday morning, doubling a 0.5% rise in Eurozone stock markets. “We believe a short-term top is now in place off $1430,” says technical analysis from market-maker Scotia Mocatta, pointing to “key support” at $1353.

Has This Stock Gone Too High? No Way… It Can ALWAYS Go Higher

Posted: 09 Dec 2010 04:59 AM PST

By Dr. Steve Sjuggerud Wednesday, December 8, 2010 "The lesson is, it can always go higher…" I was struggling. I was on deadline for my monthly True Wealth newsletter. And I had what I thought was a fantastic idea for my readers… But I had one problem: The darn stock had already soared 900% in the last two years. With returns like that already, how could it possibly go higher? I was reluctant. But it really was a great opportunity. My readers needed to know about it. The only thing that was holding me back was the historical price performance. If I simply ignored its historical performance and evaluated it on its merits today, it was a buy. So I went ahead and recommended it. Here's what happened… The story of this stock – Silver Wheaton – is simple and great. Here's what I wrote to my True Wealth readers: Silver Wheaton (NYSE: SLW) has one of the best business models I have ever seen… It could make over $800 million in profi...

Swiss Bank Client Can't Get His Silver Back Two Months After Asking

Posted: 09 Dec 2010 04:53 AM PST

"Silver eagles outselling gold eagles 81 ounces to 1 in December so far. India's silver imports may jump 20% in 2010. Inflation and hyperinflation coming: John Williams. German 2-year bond auction fails... and much more. " Yesterday in Gold and Silver The gold price came under selling pressure about three hours after Wednesday trading began in the Far East... and was down over ten bucks by lunchtime in Hong Kong. That was its interim low for the day... and once London opened for trading, the gold price began to inch higher. Then, shortly before lunch in London, gold got hit for $15. This decline lasted until New York opened at 8:20 a.m. Eastern time, when gold finally caught a bid... only to get sold off $25 by a not-for-profit seller of some sort between 9:40 a.m and 10:25 a.m... probably JPMorgan et al. The 10:25 a.m. Eastern low tick for gold was reported as $1,370.40 spot. After that low, gold rose a bit, but every tiny rally attempt got sold off, but ...

Thursday - Living in Ben's Stock and Bond Fantasy

Posted: 09 Dec 2010 04:52 AM PST

Thursday - Living in Ben's Stock and Bond Fantasy

By Phil of Phil's Stock World

Ben's at it again, it's inflation times ten

It's the only thing that gets him by

His balance sheet grows, the economy slows

While the middle class is starting to die

Oh, but now we all are seeing

That everything he says is a lie

Don't want to spend our lives, living in Ben's stock and bond fantasy

Don't want to spend our lives, living on the edge of reality

Don't want to waste our cash, following sheep to the slaughter

Don't want to spend our lives, living in Ben's stock and bond fantasy

All kidding aside, what does it mean when our leaders lie to us? Is it because we are children, who simply can't handle the truth or is it because, if we were to know the truth, then perhaps we would begin to see the flaws in their leadership? Fortunately for us, Tom Cruise isn't the only person who's able to dig out the truth - let men of power get comfortable and keep talking long enough and you can get to the truth on your own.

Sadly, it is not 60 Minutes who is able to call the our Fed Chief out on his BS blathering on Sunday - it's Jon Stewart, who has to have his staff go through 60 Minutes' archives in order to uncover the very obvious double-talk coming from the guy who tells us how great things are going:

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Aren't leaders supposed to inspire confidence in their people or is that just some old-fashioned thing I learned in grade-school? When you are running the World's largest fiat currency system, trust is pretty much all you do have going for you - unless you plan to resort to force, of course. Meanwhile, our friends at Zero Hedge are pointing out that Fed Doublespeak isn't just centered on printing money - just 30 days apart, we have The Bernank saying the following:

Rates began rising a few weeks ago as data began to suggest a somewhat stronger recovery than previously anticipated (stronger, not strong — we’re still looking at years of very high unemployment).They rose again in the past couple of days on the belief that the stimulus part of the tax deal would actually lift the economy to some extent.

Just a month ago Bernanke said precisely the opposite:

For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

As Zero Hedge says: "There you have it: lower rates are good for the economy and stocks, and higher rates are, wait for it, even gooder for the economy and stocks." It would have been "even gooder" if Jon Stewart had asked (I won't even pretend to expect 60 Minutes would ask a tough question) the Chairman: "Is it normal for the Treasury to print a fresh batch of 1Bn $100 bills?" I guess that's a question we can ask Timmy Geithner over at his blog.

Is it any wonder then, that money is POURING out of the markets at a terrifying pace, even as the PRICE (not value) of stocks continues to increase. At the moment, that money is not flowing back into bonds - it's flowing back into CASH, the cash I've been calling for for the past month and that's $85Bn out of the market so I don't think it's just PSW Members that are cashing in their chips here.

Be careful, Be Careful, BE CAREFUL is all I am saying. If you can find 3 crises in history where the people holding cash were sorry then please go ahead and keep buying but, if not, then really consider the advantages of getting back to cash and having a nice, relaxing holiday. Last week I put up 2 trade ideas that you can do with a very small cash commitment (using instead the spare margin of your sidelined cash) that can return up to 3,233% by April expirations if the market stays strong. If you can be mainly in cash and make a few small bets like that - you're not going to miss much on a rally, are you?

I realize that EVERYONE is telling you that now is the time to jump on the bandwagon and we are in a MSM spin cycle that is set to 11 on the positive scale but think about where we are in the year. Yes we expect a "Santa Clause Rally" - it will be tragic if we don't get one but we have options expiration next Friday (17th) and the following Friday is Christmas Eve (markets closed) and the next Friday is New Year's Eve, which will be dog slow so we're looking at a volatile week followed by 2 consecutive low volume weeks punctuated by long weekends - this is going to be very dangerous to trade under the best conditions and these are NOT the best conditions.

I listed some general concerns in yesterday's post and this morning I reviewed our "$10,000 to $50,000 Portfolio" for Members in an early Alert and I was LOOKING - REALLY HARD - for reasons to be bullish and I'm just not finding them yet. Are we heading up because of the extension of the tax cuts? We weren't heading down before they were extended and nobody is getting more money - just the same no money they couldn't live on before. How is that going to cause a mad rush by consumers to the silver, gold and oil store?

Extending unemployment insurance for 2M jobless people may delay the bankruptcy for a few more months but that too is not really a reason for our unemployed friends to rush out to Tiffany's, is it? Today we got in-line Unemployment Claims with "only" 421,000 jobs lost last week, which means we're still flat-lining on job growth. Zillow tells us that US homes have lost $1.7Tn in value this year but, as with the market, I will point out that value should not be confused with price as no one is buying these 37% discounted homes - even at these "values."

My Alert to Members already went out at 7:26 this morning so we're short and staying short regardless of this morning's pop. We should get another chance to short the oil futures off the $89 line and those QIDs should make for a nice double down in out $10K Portfolio into the weekend - it's going to be a wild week ahead - watch yourself!

Precious Metals Market Report

Posted: 09 Dec 2010 04:43 AM PST

I am in Philadelphia, so Franklin and I are conspiring by phone this month! As usual, we have plenty to cover, including December highs and swapping action on the gold-silver ratio. We will be addressing historical price patterns in the first quarter of the year. If December and the fourth quarter are a period of high [...]

Carbon Marts Launch Around the World... NASA Arsenic Life Paper Is Fraud?

Posted: 09 Dec 2010 04:25 AM PST

Carbon Marts Launch Around the World Thursday, December 09, 2010 – by Staff Report World Bank chief to launch carbon market fund ... World Bank President Robert Zoellick is set to launch a new multi-million dollar fund in Mexico on Wednesday to help emerging market countries set up their own carbon markets, the bank said on Tuesday. While the list of participating countries is still being finalized, they are expected to include China, Mexico, Chile and Indonesia. Zoellick will launch the fund in Cancun on Wednesday where countries are involved in global climate negotiations to toughen existing pledges to cut carbon emissions. – Reuters Dominant Social Theme: We, the deciders, need to help countries combat global warming as much as possible. Free-Market Analysis: Colonialism is alive and well. The World Bank is to encourage carbon trading in developing countries. Too bad. This will make it even harder for developing nations to grow up; a...