Gold World News Flash |
- Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week
- Focal Point: Gold
- Idols of the unaware
- There can be no meaningful solution to the crisis, unless there is widespread “disarming of financial markets”.
- New ATM Machines: Gold
- Will the Gold Price Recover for Another Leg Up Before Entering a Lengthy Correction? I Think So
- FRIDAY Market Excerpts
- America: Lower Taxes, More Spending and Fewer Riots
- Guest Post: The Shape Of The World In 2020
- Inflation Scorecard: Gold's Mixed Performance
- John Williams Discusses The Reasons For The Upcoming Dollar Dump
- Extreme Inequality Helped Cause Both the Great Depression and the Current Economic Crisis
- Continuous Commodity Index Chart From Trader Dan
- The beginning of the End of Dollar Hegemony
- MONSTER BOX – 1000 OZ'S OF SILVER!!!!
- While on the subject of JPMorgan and HSBC USA… here's a nifty graph that Nick Laird over at sharelynx.com sent me. It shows that U.S. Banks control $145.1 billion of gold and precious metals derivatives as reported by the OCC's [Office of the Compt
- Gold Stocks in a Failing Fiat Currency U.S. Dollar
- Making Money from Nothing
- A Capital Paradox
- Overall Turk sees demand for gold remaining strong virtually everywhere
- Gold Is In Hot Water
- Oil and Gold Commitment of Traders Tell a Story
- Weekend Reading - When Money Dies: The Nightmare of the Weimar Collapse - Adam Fergusson
- Hourly Action In Gold From Trader Dan
- Gold Daily and Silver Weekly Charts
- Silver Gold Ratio Reversion to the Mean
- Outlook for Gold and Silver During 2011, Will the Rally Continue?
- “Within a few hours, the wall didn't exist.”
- Alternative Universe
- Weekly Market Round-up: Sirius Minerals leads a good AIM innings while the FTSE 100 d
- Gold Investors: Forget about Bond Yields
- Your Chance To Own A Little Piece Of Cramer
- The Effects of Central Banking on Gold and Paper Currencies
- In The News Today
- Jim?s Mailbox
- Gold Stocks in a Failing Fiat Currency
- COT Gold, Silver and US Dollar Index Report - December 17, 2010
- Michael Pento - US Headed Down a Path of Destruction
- Gold to benefit from shift by fund managers
- Silver/Gold Ratio Reversion 4
- How to Protect Your Family and Wealth from the End of America
- Gold’s Unstoppable Rise
- Dr. Bill Bird: REE Supply Hysteria
- Gold's Unstoppable Rise
- Silver at $40 Will Be Best Metals Performer in 2011
- Comex gold quiet as traders enter holiday mode
- How Leveraged Is JP Morgan?
- Gold steadies as dollar recovers lost ground
- Gold Breaks Below 20 day Average
- Gold: Chewing Thru Overbought Technicals!
| Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week Posted: 17 Dec 2010 04:00 PM PST Gold reversed modest overnight gains and fell to see a $6.50 loss at $1364.70 by late morning in New York, but it then jumped back higher in the last couple of hours of trade and ended near its last minute high of $1378.70 with a gain of 0.56%. Silver fell to as low as $28.636 by about 8AM EST before it also rallied back higher in New York and ended near its last minute high of $29.178 with a gain of 1.22%.
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| Posted: 17 Dec 2010 02:43 PM PST In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each
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| Posted: 17 Dec 2010 12:04 PM PST
Does the average person understand what central bankers globally are doing to money? Do they realize the incredibly high rate of inflation about to cause crisis in America? I suppose the answer is no, however they will likely soon feel the effects.
Francis Bacon (1561–1626) was an English philosopher, statesman, scientist, lawyer, jurist and author. Bacon developed a reliable method of questioning he believed would free people from dependence on infrequent geniuses (Ozmon & Craver, 2008). He encouraged individuals to develop alternative methods of thought. According to Ozmon &Craver (2008), Bacon believed that “knowledge is power”, and devised what he called the “inductive method.” Bacon’s inductive approach insists on confirmation of specifics before reaching conclusions. Bacon urged people to reexamine all previously accepted knowledge. He believed people should free their minds of various “idols”. Three of Bacon’s idols, according to Ozmon & Craver, (2008): 1. Idol of the Den: People believe things because of their own limited experiences. 2. Idol of the Tribe: People tend to believe things because most people believe them. 3. Idol of the Marketplace: This idol deals with language because Bacon believed that words often are used in ways that prevent understanding.
On Idol of the Den: The average person underestimates the possibility of a disaster and its effects. They believe since something has never happened before it never will. We are all guilty of this as it is human nature. On Idol of the Tribe: The idea of a currency collapse or hyperinflation is alien to the average person. They are likely unaware of such an event. If they watch a major television network, they are likely to trust an economic recovery is underway. On Idol of the Marketplace: The Consumer Price Index (CPI) is a government statistic that measures consumer goods and services prices, and is used to gauge inflation in the United States. What is interesting about CPI is that it fails to recognize rising prices of food and energy. What? The cost of food and energy are not considered by government as indicators of overall inflation? Talk about unclear language that restricts understanding.
Warning Signs Worldwide quantitative easing is flooding global money supply. This money is chasing fewer goods as more and more of the world’s population ramps up consumption. Predictably, this will lead to higher prices. It is happening now, as we are already seeing food and energy prices rise significantly with price increases of 30% or more year-over-year. Another sign of coming fiscal problems, which ultimately leads to more monetary quantitative easing, is continued uncontrolled spending of federal, state and local governments. As more money is spent, more needs to be created to monetize the debt. Quantitative easing and monetizing are trouble. Especially with a measuring stick now segmented in trillions. Monetizing will ultimately overwhelm purchasing power of everyone holding U.S. dollars, and dollar denominated assets. Inflation is set to occur at an alarming rate.
Drink Upstream Francis Bacon urged people to reexamine previously accepted knowledge, and believed people should attempt to liberate their minds of the assorted idols. Bacon encouraged individuals to develop an alternative method of thought (Ozmon & Craver, 2008). Is there a chance the prediction of extreme future inflation is inaccurate? Yes, and I genuinely hope it is. This piece isn’t really about if I’m right or wrong. It’s about preparation and identifying the possibilities, because it seems likely economic recovery will not take place anytime soon. It should be easy to see, the signs are all around us. I reckon it’s still not a bad time to pick up a few pounds of extra rice, tins of tobacco and some junk silver. It is without a doubt a time to heed Francis Bacon’s remarks, to free our minds and think independently. Ozmon, H. A. & Craver, S. M. (2008). Philosophical foundations of education (8th ed.). Upper Saddle River, NJ: Pearson/Merrill Prentice Hall.
~MV
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| Posted: 17 Dec 2010 11:41 AM PST Who are the Architects of Economic Collapse? Share this:
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| Posted: 17 Dec 2010 10:43 AM PST  A German company planned to install the machine Friday at an upscale mall in Boca Raton, a South Florida paradise of palm trees, pink buildings and wealthy retirees. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, says the majority of buyers will be walk-ups enamored by the novelty. But he says they're also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet. "Instead of buying flowers or chocolates, which is gone after two or three minutes, this will stay for the next few hundreds years," Geissler told The Associated Press in a telephone interview. The company installed its first machine at Abu Dhabi's Emirates Palace hotel in May and followed up with gold ATMs in Germany, Spain and Italy. Geissler said they plan to unroll a few hundred machines worldwide in 2011. He said the Abu Dhabi machine has been so popular it has to be restocked every two days. 
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| Will the Gold Price Recover for Another Leg Up Before Entering a Lengthy Correction? I Think So Posted: 17 Dec 2010 10:19 AM PST Gold Price Close Today : 1,378.60 Gold Price Close 9-Dec : 1,392.00 Change : -13.40 or -1.0% Silver Price Close Today : 2911.3 Silver Price Close 9-Dec : 2878.9 Change : 32.40 or 1.1% Gold Silver Ratio Today : 47.35 Gold Silver Ratio 9-Dec : 48.35 Change : -1.00 or -2.1% Silver Gold Ratio : 0.02112 Silver Gold Ratio 9-Dec : 0.02068 Change : 0.00044 or 2.1% Dow in Gold Dollars : $ 172.32 Dow in Gold Dollars 9-Dec : $ 168.85 Change : $ 3.47 or 2.1% Dow in Gold Ounces : 8.336 Dow in Gold Ounces 9-Dec : 8.168 Change : 0.17 or 2.1% Dow in Silver Ounces : 394.73 Dow in Silver Ounces 9-Dec : 394.94 Change : -0.21 or -0.1% Dow Industrial : 11,491.91 Dow Industrial 9-Dec : 11,370.06 Change : 121.85 or 1.1% S&P 500 : 1,243.91 S&P 500 9-Dec : 1,233.00 Change : 10.91 or 0.9% US Dollar Index : 80.360 US Dollar Index 9-Dec : 80.059 Change : 0.30 or 0.4% Platinum Price Close Today : 1,704.00 Platinum Price Close 9-Dec : 1,678.50 Change : 25.50 or 1.5% Palladium Price Close Today : 741.85 Palladium Price Close 9-Dec : 737.60 Change : 4.25 or 0.6% For the week the GOLD PRICE and SILVER PRICE gave contradictory results, while stocks rose 1% and platinum and palladium rose. The US dollar index rose significantly, though slightly. Silver is fighting, gold is fighting, but will they recover for another leg up before entering a lengthy correction? I think so. Today painted out another V-bottom for the day at $1,364.70. This looks like a double bottom with yesterday's $1,361.30 low. Resistance overhead lies around $1,378. Comex GOLD PRICE closed near the high at $1,378.60, up $8.20. To advance from here or hold this place, gold must not dip below $1,370. Looking up, gold's hurdles appear at $1,380, then $1,395 and $1,405. A close through $1,350 would send gold tumbling. Bear in mind that the coming Christmas holiday will dampen gold activity next week as traders flatten out positions before the holiday and stay home the following week. Mmmmm . . .That SILVER PRICE chart charms me. Yesterday silver left a V-bottom at 2829c. That appeared to have ended the correction. Today silver confirmed that by falling to 2863c. How does that confirm a bottom? Simple. On the five day chart silver trended down from Tuesday through Thursday. Draw a trendline across those tops, and you will discover that silver today proved that trendline and its new uptrend by trading back to that trendline for a final kiss good-bye, posting a double bottom around 2865c, then climbing. Comex close found silver way up, 35.6c, and over 2900c at 2911.3c. Having revisited that 20 DMA support that has held silver up since August, silver now appears ready to challenge 2940c and 2990c. Momentum indicators are mixed. RSI isn't bad but the MACD is iffy. Bottom line? It appears -- unless gainsaid by closes below 2800 and $1,350 -- that silver and gold will make one last run up before they rest for six to 18 months. It might be spectacular, and should come soon. STOCKS today pulled an odd step. Most indices rose slightly, while the Dow sank 7.34 points to close at 11,491.91. S&P500 rose 1.04 to 1,243.91. Daily charts look nothing the same. Dow plunged early in the day, rose to unchanged by 2:00, then fell again into the close. Nasdaq rose all day while the S&P500 rallied big about the time the Dow was stumbling. Generally that sort of confusion doesn't come before strength, but you ought to have long ago sold all your stocks anyway, sharply dampening your interest in whatever they do. The US DOLLAR INDEX finished its correction before New York opened for business this morning, hit a low at 79.554, lower than I expected it to fall. Nothing deterred, the dollar roared out of that low to 80.60, but fell back a little below that weighty 80.40 support/resistance. Trading now at 80.36, the dollar index netted an additional 17.9 basis points today. Today's performance, placed against the longer term backdrop, makes a persuasive argument that the Dollar bottomed back in November at 75.63 (intraday). Rally should carry the dollar at least to 82.15, the halfway mark of its fall from the June 88.71 high. But if the dollar climbs above its 200 DMA (now 81.71), it ought at least reach the last high at 83.56, not far from the 61.8% correction level at 83.71. Either way, for now 'tis enough to know that the dollar is headed up. Only a close below 78.80 would argue against that direction. The Dollar is hinting that markets are about to flip-flop. Those that for several months have been rising on dollar weakness -- stocks, silver, gold, commodities -- are about to be whipped by a rising dollar. That argues that tops are near -- within a month or so -- for those markets while the dollar will rally for some time. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com Phone: (888) 218-9226 or (931) 766-6066 © 2010, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't. 
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| Posted: 17 Dec 2010 10:09 AM PST Bargain hunting, euro-zone concerns boost gold prices The COMEX February gold futures contract closed up $8.20 Friday at $1379.20, trading between $1365.40 and $1378.50 December 17, p.m. excerpts: see full news, 24-hr newswire…
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| America: Lower Taxes, More Spending and Fewer Riots Posted: 17 Dec 2010 10:00 AM PST Is the US the "sick man" of the globe, asks a Reuters article? It's a provocative headline. And the answer is probably "yes," in many respects. "Report drunk drivers," says one sign. "Report Suspicious Activity," says another. "Report Unclaimed Bags," says a third. Americans are being trained to denounce their neighbors. There's something a little sick about so much tattling. And here's something that is not only sick, but fatal: "Tax deal cruises through Senate," said yesterday's Washington Post headline. The House is supposed to follow. Now, you take a place like Italy or Greece. The papers report that there are riots in Italy. And in Greece, anti-austerity demonstrations have turned violent. You don't see that sort of thing in the US. Nope. Because in America our public servants really serve. Some of the members of the Senate wanted the rich to pay more in taxes. Others just wanted to be sure the poor got more unemployment benefits and other giveaways. But after hours of argument, the world's greatest deliberative body thrashed out a compromise. Forget the taxes. Forget the cuts. Everybody gets something. Yes, dear reader, that's what makes America great. You might think it is reckless to extend the tax reductions, what with the nation going broke and all. Or you might think it hardhearted not to give more handouts to the little guy, what with the Great Correction underway. But it's always inspiring to see the peoples' representatives joining hands and doing something that is truly stupid. Lower taxes AND more spending too! Meanwhile, the poor Europeans just can't seem to get with the program. They're cutting services. They're working to balance budgets. They're raising taxes. And even still, investors sell their bonds! No kidding. "Spain debt yields near euro-era high," says The Financial Times. See what good it gets you? You try to do things right and investors stab you in the back. So you see, the Americans are right. Better to spend, spend, spend…until you go broke. Regards, Bill Bonner America: Lower Taxes, More Spending and Fewer Riots 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."
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| Guest Post: The Shape Of The World In 2020 Posted: 17 Dec 2010 09:46 AM PST Submitted by the Global Intelligence Report The Shape of the World in 2020
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| Inflation Scorecard: Gold's Mixed Performance Posted: 17 Dec 2010 09:44 AM PST Hard Assets Investor submits: B y Brad Zigler Real-time Monetary Inflation (Last 12 Months): -1.5% The world’s reserve currencies turned in a mixed performance against gold for the week ending Thursday. The Swiss franc was most resilient, rallying 2.7 percent against bullion, while the euro inched up 0.7 percent. Gold and the yen squared off to a standstill. Sterling lost 0.4 percent to the metal. Complete Story »
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| John Williams Discusses The Reasons For The Upcoming Dollar Dump Posted: 17 Dec 2010 09:32 AM PST Lately, anywhere we look, there seems to be a pattern emerging: those economic thinkers who actually construct and run their own macro models (not the glorified powerpoint presenter variety) and actually do independent analysis and tracing of the money flow, instead of relying on Wall Street forecasts that have as much credibility as a Moody's home price hockey stick from 2006, almost inevitably end up having a very dire outlook on the economy. One such person is and has pretty much always been Shadowstats' John Williams, whose "shadow" economic recreation puts the BLS data fudging dilettantes to shame. That said any reader of Zero Hedge who has been with us for more than a few weeks, knows all too well our eagerness to ridicule the increasingly more incoherent lies coming out of the US department of truth, so no surprise there. Yet another aspect over which there is much agreement is that no matter how one slices the data, the outcome for the US currency is a very grim one. Which is why Williams over the past several years has become a major fan of the shiny metal. Below we recreate portions of his latest observations on the upcoming currency collapse, courtesy of King World News.
Incidentally, if there is one thing we disagree with John on is that the broadest aggregate (M3 for Williams, Shadow Banking for Zero Hedge) is declining. That said, an expansion in the most critical broad money signal is merely the missing piece of the puzzle that we believe John Williams needs in order to confirm his thesis of upcoming hyperstagflation through (or rather resulting in) currency collapse. As to how this perceived volatility will impact asset classes, regulars will find nothing surprising in the following:
The full piece can be found at King World News.
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| Extreme Inequality Helped Cause Both the Great Depression and the Current Economic Crisis Posted: 17 Dec 2010 09:29 AM PST
Most mainstream economists dismiss the idea that wealth inequality causes economic crises. Of course, some ideologues will argue that even discussing inequality is waging class warfare, and smacks of an attack on capitalism. However, the father of modern economics - Adam Smith - disagreed. And as Warren Buffet, one of America's most successful capitalists and defenders of capitalism, points out:
(And as I have previously noted, radical concentration of wealth actually destroys capitalism.) More to the point, most mainstream economists do not believe there is a causal connection between inequality and severe downturns. But recent studies by Emmanuel Saez and Thomas Piketty are waking up more and more economists to the possibility that there may be a connection. Specifically, economics professors Saez (UC Berkeley) and Piketty (Paris School of Economics) show that the percentage of wealth held by the richest 1% of Americans peaked in 1928 and 2007 - right before each crash: As the Washington Post's Ezra Klein wrote in June:
Robert Reich has theorized for some time that there are 3 causal connections between inequality and crashes: First, the rich spend a smaller proportion of their wealth than the less-affluent, and so when more and more wealth becomes concentrated in the hands of the wealth, there is less overall spending and less overall manufacturing to meet consumer needs. Second, in both the Roaring 20s and 2000-2007 period, the middle class incurred a lot of debt to pay for the things they wanted, as their real wages were stagnating and they were getting a smaller and smaller piece of the pie. In other words, they had less and less wealth, and so they borrowed more and more to make up the difference. As Reich notes:
And third, since the wealthy accumulated more, they wanted to invest more, so a lot of money poured into speculative investments, leading to huge bubbles, which eventually burst. Reich points out:
But I believe there may be a fourth causal connection between inequality and crashes. Specifically, when enough wealth gets concentrated in a few hands, it becomes easy for the wealthiest to buy off the politicians, to repeal regulations, and to directly or indirectly bribe regulators to look the other way when banks were speculating with depositors money, selling Ponzi schemes or doing other shady things which end up undermining the financial system and the economy. For example, as John Kenneth Galbraith noted in The Great Crash, 1929, Laissez-faire deregulation was the order of the day under the Coolidge and Hoover administrations, and the possibility of a financial meltdown had never been seriously contemplated. Professor Irving Fisher of Yale University - the Alan Greenspan, Robert Rubin or Larry Summers of his day - had stated authoritatively in 1928 that "nothing resembling a crash can occur". Indeed, when enough money is concentrated in a couple of hands, the affluent can lobby to appoint to government positions, pay to endow prominent university chairs, and create think tanks and other opportunities for economics professors who spout the dogmas "everything will always remain stable because we've got if figured out this time" and "don't worry about fraud" to gain prominence. For example, Bill Black has written about The Olin Foundation's promotion over the last couple of decades of these dogmas. I believe that the fourth factor exacerbates the first three. Specifically, when the wealthy have enough money to drown out other voices who might otherwise be heeded by legislators and regulators, they can:
(Admittedly, there might not always be a direct connection, but all of the factors are at least intertwined.) Reuters wrote an excellent piece on the issue of inequality and crashes (discussing the first three factors) last month:
For further background, see this, this and this. Note: The graphics above are slightly misleading, as Saez notes that inequality is actually worse now than it's been since 1917.
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| Continuous Commodity Index Chart From Trader Dan Posted: 17 Dec 2010 09:28 AM PST Dear CIGAs, Based on a few emails that I am receiving that are related to my comments on the CCI chart, I thought it best to respond here so as not to have to field so many individual answers as my time is limited. Some are misinterpreting my comments about the commodity sector being in a bubble as if I am saying gold is in a bubble. It is not. What I am saying is that I believe, based on what I can see of the normal fundamental supply/demand situation, that hedge fund buying in the commodity sector has pushed several of these individual commodity markets into bubbles. Let's start with what my view of a bubble is. It is an event created by an infusion of SPECULATIVE money that is not tied directly to actual changes in the real physical supply/demand equation of a commodity or asset. Bubbles are very difficult to recognize for just about all of us until after the fact but one thing is common to them all – they are all the result of a huge inflow of hot money chasing the "investment du jour"; one that has been hyped as a "no lose investment". The result is that buyers pay ever higher and higher prices for a product or asset with little if no concern what its fair value might actually be. In the process a sort of mania develops in which there is no fear of prices ever moving lower. The only direction that the bulk of people think the market is going to move is higher. Caution is lost in such a situation with greed taking over as those on the long side of the market become extremely confident that prices will work in only one direction – higher. Without citing any of the commodity markets specifically because I do not want to have some blindly selling, let me just say that when commodity type funds or hedge funds buy commodities as an investment, they generally do not pick and choose markets. They buy an ENTIRE BASKET OF COMMODITIES based on the composition of the particular commodity index that they are tracking. What this translates to in an example might be a firm looking to invest $50 million of client money, will spread that $50 million across every commodity futures market that comprise the index they are using as a benchmark. SOME of these commodity markets will indeed justify the buys; others, whose fundamentals are not overly bullish, will nonetheless also move higher as this speculative investment flows into them as well. Granted, investment demand is part of the supply/demand equation in any commodity and must be factored in when price discovery is occurring, but the nature of these flows is that they are extremely fickle, and can evaporate almost instantaneously should any sort of external development occur which might be viewed as hostile to the environment which is leading to the surge in demand from this particular corner. Do you recall how sharply many of the commodity markets dropped when news came out that China was hiking interest rates a piddly ¼% in an attempt to get inflation under control? One would have thought that Armageddon had been unleashed on the commodity sector judging from the speed at which money flew out of the complex. Of course, those slides in price have been erased but the fact is these flows are very, very transient at times. In those markets in which demand for the underlying commodity is based mainly on these investment flows, price can collapse in a hurry once the support coming from such flows is gone or evaporates. This brings us back to what Jim has been warning about for some time now, as has Monty and myself – namely – currency induced cost push inflation is going to occur. The Fact that the CCI is soaring and is within a whisker of taking out its all time high made back in the summer of 2008 when the sector was in a bubble just prior to the unfolding of the credit crisis, is evidence that this currency related event is indeed occurring precisely as Jim said it would. Hedge funds are buying hard assets as protection against a general global trend of currency devaluation. Regardless of whether or not the fundamentals justify these high prices for some commodities, they are all generally rising as these hot money flows rush into the sector. It is my contention that SOME OF THESE commodities are now in bubble territory as a result. Does that imply that prices are now going to collapse? Hardly! No one can predict with any degree of certainty WHEN a bubble might pop and prices drop. The market will follow the path of least resistance, which is higher, until some external event triggers a sell off that then feeds on itself as the hot money flees the investment altogether. That can take price to levels unheard of and certainly not supported by any real world supply/demand equation. All I am saying with today's comments on the CCI chart is that I would prefer to see the bubble pop and prices drop rather than have to live through an event which some seem to be hastening, if only to see the price of their gold and silver move higher, namely hyperinflation. I am on then record here as saying I do not want to have to live through such a thing. It is more horrific than many can imagine and if given the choice would prefer to see a sound currency, a sound economy and a sound fiscal structure for our nation's government. Given the fact that there seems to be little chance for two of these and maybe, truth be told, all three, prudence dictates that we prepare for the worst and hope for the best. While some commodities are in a bubble, gold is not. It is a currency. Behind the price of the soaring commodity complex is the story of the debauchment of fiat currencies. That is why gold is shining and will continue to shine. The Fed wanted to create inflation – they have gotten their wish. Hopefully, this clarifies things a bit. Click chart to enlarge today's Monthly CCI chart in PDF format with commentary from Trader Dan Norcini
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| The beginning of the End of Dollar Hegemony Posted: 17 Dec 2010 09:23 AM PST by Randall Forsyth … This year, the idea of reform was advanced by World Bank President Robert Zoellick, who proposed in a widely read and commented-upon Financial Times op-ed piece "a cooperative monetary system that reflects emerging economic conditions." That would include the dollar, the euro, the yen, the pound and the renminbi — plus gold "as an international reference point of market expectations about inflation, deflation and future currency values." Zoellick's November commentary followed the outbreak of the so-called "currency wars," as Brazil's finance minster dubbed the tensions in the foreign-exchange markets resulting from Fed's liquidity expansion through the purchase of $600 billion of Treasury securities, dubbed QE2, for the second phase of quantitative easing. The downward pressure on the dollar from the surfeit of greenbacks was viewed by finance officials abroad from Asia to Europe as well as Latin America as tantamount to a competitive devaluation to boost the U.S. economy while beggaring its neighbors. … Dissatisfied with the options of the dollar or the euro, the ascendant economic powers are essentially cutting out these middlemen. Just Wednesday, Micex, Russia's largest securities exchange, began trading in the ruble vs. the Chinese renminbi. It was largely symbolic given the volume traded was equal to about $700,000. More importantly, Russia and China have agreed to settle their bilateral trade of about $50 billion in their respective currencies. That means Chinese importers don't need to obtain dollars to buy oil from Russia. Nor does Russia need greenbacks to buy Chinese goods. [RS Note: Think about this for a good long while...] … Because the rest of the world uses the dollar for transactions and a store of value, the U.S. has been able to take advantage of that. Indeed, the greenback is America's most successful export. So, Americans get the goods, allowing us to consume more than we produce, simply because the rest of the world wants our paper. …… American ingenuity produced triple-A mortgage-backed out of subprime loans, which dollar holders around the globe eagerly scooped up. These foreign dollar holders are funneling their funds into Treasury securities, effectively funding the U.S. budget deficit. But they're not doing it as willingly as before. … None of this suggests that the dollar is about to be toppled from its perch as the premier global currency in 2011. Strains in the original Bretton Woods system were evident long before President Nixon abrogated the promise to redeem dollars for gold at $35 an ounce for foreign monetary authorities on Aug. 15, 1971. Even then, the floating exchange-rate system didn't come into being fully until 1973. … How long this process goes on depends on the availability of alternatives to the dollar. … The demand for dollars from the rest of the world has been of inestimable benefit to the U.S. economy. It quite simply allows Americans to consume more than they produce and save less than they invest; in other words, to live beyond our means. The dollar's dominance will not be toppled in 2011 but will wane over the coming decade and beyond. And America will have to start picking up the tab for what had been a free lunch. [source] RS View: For the wealth-preservation minded individual, the important question centers upon this comment made in the article: "How long this process goes on depends on the availability of alternatives to the dollar." Frankly, it the answer is surprisingly simple, and the preparatory timeline is surprisingly short. As evidenced in the commentary about the new trade arrangements between Russia and China, it should be obvious and intuitive that bilateral trade between any two given countries could be similarly invoiced in their respective currencies. The timeline is effectively zero given that these currencies already exist and are in local use. At issue, mostly, is the simple matter of breaking with mere tradition — the habit of invoicing/contracting in this third party currency, the dollar. Given the suitable functionality of most national currencies for the invoicing/payment of their bilateral trade, there is no need for the world to spend time and effort conjuring up a new supra-national currency unit to replace the dollar as a universal invoicing agent. With invoicing/payment alternatives ready and waiting, the only other aspect of usage in the dollar's international role is that as a reserve currency — that is, as a store of value. Store of value is a significant element because at the end of any given trade cycle (monthly or annually for example) a nation actively trading with its international peers as described above will inevitably end up with a net position in various foreign currencies. It becomes a matter of national importance to consolidate those paper positions into a more reliable form that is not dependent upon the fiscal policies and monetary management skills of your international trading partners. It is the form of asset chosen for this consolidation of the net position that embodies the "store of value" function from one trade cycle to the next and beyond. But as this article points out [see the article link to read more than the few excerpts above], "Since 1973, the dollar has been unanchored and has been anything but a stable store of value." Gold, on the other hand, serves this role uniquely well because it resists the degrees of artificial inflation and depreciation commonly afflicting national currencies driven by naturally self-centric national management. The central banks of the world, throughout their long history, have more or less developed the requisite infrastructure and ample experience in the fine art and science of gold storage and allocation transfer. Therefore, not only is an alternative to the dollar available for the store of value role, it is readily available with no significant timeline to accommodate the practice. To be sure, many central banks have already in place the mark-to-market accounting structure to accommodate (and benefit from) the significant upward revaluation of gold reserves as would be expected to occur through the dollar-to-gold transition. Various policy signs over the past several years had indeed pointed toward 2010 to be the watershed point in the international monetary transition, but the depth of the current commercial banking crisis likely argued strongly for a delay under the thought that calmer waters would facilitate a better transition. As such, the existing infrastructure and policy is largely in place at the present time, so a timeline for this store of value transition can be every bit as short as that for invoicing — essentially, no time needed for flipping the switch. But in light of the current crisis and some of the policy efforts underway to restore calm to the commercial markets, it looks to me that the new timeline for significant transitions is mid-2013 consistent with the current policy talks driving the permanent European Stability Mechanism to that timeframe, but with that said, it could be set into motion at any given moment between now and then, and between your breakfast one day and breakfast the next. Hence, it is best that you work to actively establish your desired gold position without undue delay, and then with peace of mind you can turn your full attention to the business of living your life as it was meant to be. Spending significantly further time obsessing over currencies and investments is a fool's errand. R.
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| MONSTER BOX – 1000 OZ'S OF SILVER!!!! Posted: 17 Dec 2010 09:16 AM PST Hi Max and Stacy, Just got another 1000 oz. of Eagles and Maples in. Love what you do! I do state at the end of the vid; "Crash JP Morgan, Buy Silver" and I do mention you buddy! Thanks for everything you all do! Ed in North Carolina. Share this:
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| Posted: 17 Dec 2010 09:02 AM PST Silver at $40 Will Be Best Metals Performer in 2011 Share this:
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| Gold Stocks in a Failing Fiat Currency U.S. Dollar Posted: 17 Dec 2010 09:02 AM PST David Galland, Managing Director, Casey Research writes: As the U.S. dollar takes a nosedive and precious metals gain more and more attention from individual investors, the number of questions and concerns is increasing as well. The following reader email addressed to Casey Research is representative of so many inquiries that we decided to provide an in-depth response that may prove instructional to others as well.
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| Posted: 17 Dec 2010 09:00 AM PST We are in a Cowardly Lion market, whose occasional bursts of bravery are ultimately overrun by fear that leads to a subsequent decline. For the US stock market, the past ten years have earned the title "the lost decade." The next ten years probably will not be much different: The market will likely set record highs and multiyear lows, but index investors and buy-and-hold stock collectors will find themselves not far from where they started. Every long-lasting bull market of the past two centuries (and we had a supersized one from 1982 to 2000) was followed by a sideways market that lasted about 15 years. The Great Depression was the only exception. Despite common perception, secular markets spend a lot of time in bull or sideways phases, and roughly an equal amount in each. They visit the bear cage only on very rare occasions. This doesn't happen because the market gods want to play a practical joke but because stock prices are driven in the long run by two factors: earnings growth (or decline) and price-earnings expansion (or contraction). Though economic fluctuations are responsible for short-term market volatility, long-term market cycles are either bull or sideways if the economy is growing at a close to average rate. Prolonged bull markets start with below-average P/Es and end with above-average ones. This vibrant combination of P/E expansion and earnings growth – which doesn't have to be spectacular, just more or less average – brings terrific returns to investors. Sideways markets follow bull markets. As cleanup guys, they rid us of the high P/Es caused by the bulls, taking them down to and actually below the mean. P/E compression – a staple of sideways markets – and earnings growth work against each other, resulting in zero (or near-zero) price appreciation plus dividends, though this is achieved with plenty of cyclical volatility along the way. Bear markets are the cousins of sideways markets, sharing half of their DNA: high starting valuations. But whereas in sideways markets economic growth softens the blow caused by P/E compression, during secular bear markets the economy is not there to help. The US, however, has never had a true, long-lasting bear market like the one investors have experienced in Japan, where stocks have fallen more than 80 percent from the late 1980s to today. If the US economy fails to stage a comeback with at least some nominal earnings growth over the next decade, what started sideways in 2000 will turn into a bear market, as high valuations are already in place. I should mention the role interest rates and inflation play in market cycles. They are secondary to psychological drivers, but important. They don't cause the cycles, but help shape their magnitude and duration. For instance, if interest rates and inflation had not been scraping low single digits in the late '90s, the bull market would have ended sooner and at lower P/Es. The higher inflation and interest rates that are around the corner will take their toll on the duration and P/E of this market too. In sideways markets you as an investor need to adjust your strategies:
What if a sideways market isn't in the cards? If a bull market develops, active value investing should do at least as well as buy-and-hold strategies or passive indexing. In the case of a bear market, your portfolio should decline a lot less. Regards, Vitaliy N. Katsenelson Making Money from Nothing 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."
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| Posted: 17 Dec 2010 09:00 AM PST What, exactly, is economic capital? It is the productive potential of the economy, the ability to make things that people need and want to consume. But unlike paper, capital does not grow on trees. Capital itself must first be produced, in the form of capital goods. Let's start from the beginning: We all need to consume food. Few of us produce our own. So we need to purchase food with our earnings. When we go to the supermarket and purchase a trolley of food, we are purchasing the output of a mind-bogglingly complex productive process. To highlight just a few aspects of this, consider:
Now why would someone go to the trouble of manufacturing suitable equipment for making suitable equipment for maintaining a factory which is full of suitable equipment for producing fertilizer, which is then packaged and transported using suitable logistical equipment requiring regular maintenance using suitable equipment to a farm when it is loaded on to a tractor (requiring regular maintenance using suitable equipment), which was manufactured in a factory full of suitable equipment which was itself manufactured in another factory full of suitable equipment… ? Well, as with all economic activity, someone must believe that they will make a fair profit by engaging in some aspect of this process above, or else they wouldn't do so. But do you see the complexity? How on earth can anyone just sit back, survey all these various stages of production and possibly know how each and every step should work, much less what sort of profit should be expected? Well, no one can. (This is one intuitive way of understanding why command economies are horribly inefficient, even assuming that everyone is competent, is trying their best and no one is corrupt, three assumptions that are at odds with historical experience and, as such, highly suspect.) But if no one understands how this process works, then how does it work at all? Simple: The division of labor. At every stage of every productive process, either within a firm or between firms, there is always someone to perform each specific task. As long as those participating continue to believe that they receive fair compensation for their contribution, they will continue to work accordingly, doing their part to make a highly complex productive process a sustainable reality. Now that we understand how complicated economic production is in a modern economy, even for something as basic as foodstuffs, let's consider how the capital stock comes into existence in the first place. Even though no one can conceive of each and every detail in a highly complex production chain as that described above, nevertheless there are people who are willing to step up where they think they see an opportunity and invest their savings in capital goods of some kind, from which they are reasonably confident they will earn a respectable return. So the capital stock originates in savings. No savings, no growth in the capital stock. Once created, however, the capital stock needs to be maintained. All real capital depreciates, be it buildings, factories, machines, roads, vehicles, refineries, electrical grids and power plants, even, as in our example above, arable land. Without maintenance, the capital stock will eventually depreciate to the point where it is no longer able to perform the functions for which it was originally intended. Beyond that point, it is a write off, either to be abandoned, sold for scrap or otherwise recycled. Now why is this important? Consider: The larger the capital stock, the higher the productive capacity of the economy. As such, we should all have an interest in growing the capital stock over time. Yet the larger the capital stock, the greater the potential depreciation and therefore the greater the maintenance required to prevent it. Who is going to provide this maintenance? In much the same way as capital comes into existence in the first place, someone is going to come along who believes that they can make a reasonable profit by using their savings to provide maintenance on the existing capital stock. So the maintenance also originates in savings, without which the capital stock will depreciate, eventually to the point of becoming unproductive. Intuitively, of course, we know this is correct. Building a home costs money. Maintaining the home once built costs money. If we spend all our income on day-to-day consumption of food and clothing, rather than saving up for occasional home maintenance, the home will depreciate to the point of being rendered uninhabitable. Returning to the economy, both creating and maintaining a capital stock requires savings. Now what happens if there IS no savings? What if, for example, the financial assets which are claims on the present and future productive value of the capital stock–net of depreciation of course– rise in value to the point that the holders thereof feel themselves "richer" and neglect to save? What if, for whatever reason, the central bank holds interest rates artificially low, such that there is little incentive to save? What if, in response to an unusually prolonged slump in economic activity, the central bank starts directly and artificially propping up asset prices by buying securities, thereby making it even less attractive to save? Well, guess what? Amidst artificial disincentives to save and asset price distortions that make people feel "richer", what, exactly, is going to happen to the capital stock? IT IS GOING TO DEPRECIATE, LOWERING THE POTENTIAL ECONOMIC GROWTH RATE! What if this state of affairs lasts for years? THE CAPITAL STOCK IS GOING TO DEPRECIATE DRAMATICALLY, TO THE POINT WHERE MUCH OF IT BECOMES A WRITE-OFF, LOWERING THE STANDARD OF LIVING! Don't be fooled into thinking that the capital stock is unlimited. It is anything but. It is the most highly leveraged, most sensitive, most easily distorted part of the economy. The slightest changes in interest rates, in taxes, in regulations, in perceptions and confidence can have a huge impact, over time, on the size, structure and health of the capital stock. And as it is strictly limited to functioning, economically viable capital goods, the more these are used by the government, the less they are available for private sector uses. So-called "crowding out" of capital is not just a financial theory; it is a harsh economic reality. For each dollar in savings that the government takes for itself to fund its deficit it is taking one dollar away–at present prices–from private savings. And if the government then uses that dollar to bail out insolvent financial enterprises or to fund consumption–say to provide entitlement benefits of some kind–rather than for investment, then the government is contributing directly, not just indirectly, to the depreciation of the capital stock. Don't be surprised when you look around and see the crumbling infrastructure. With asset prices artificially high, discouraging investment, and the return on savings artificially low, discouraging savings, there is naturally little in the way of resources available to maintain the existing capital stock, much less expand it. And don't be fooled into thinking that somehow higher taxes would help. Is the private sector going to save more, or less, if the tax burden rises? The answer to that is obvious. No, there are only two ways in which the existing capital stock can be properly maintained: With either a higher private savings rate, presumably a result of higher after-tax interest rates; or, alternatively, for the government to redirect existing entitlement spending–consumption–toward infrastructure instead. Finally, although asset prices can rise indefinitely and infinitely in nominal terms–for example if the purchasing power of the currency is constantly and exponentially declining–they can only rise sustainably in real terms if the underlying economic value of the capital stock continues to grow. In a great paradox, the policies which the Fed has implemented to artificially prop up asset prices and stimulate economic activity are, in fact, contributing directly to a reduction in savings; to an accelerating depreciation of the capital stock; to a decline in the potential growth rate; and, ultimately, to a reduction in the standard of living. That is the unseen "cost" of propping up failed financial institutions and preventing a natural, salutary reorganization and rebuilding of the capital stock. The Fed has not merely demonstrated that it is incompetent as the chief financial regulator and that it is increasingly pathological in its pursuit of inflation at all costs. It is destroying, by stealth, the nation's capital stock, its real wealth. When the smoke clears, the pile of rubble which once was arguably the greatest ever accumulation of capital in world history will be reflected in crumbling real financial asset values. Now, do you want to be holding those assets, or something else entirely? Regards, John Butler, [Editor's Note: The above essay is excerpted from The Amphora Report, which is dedicated to providing the defensive investor with practical ideas for protecting wealth and maintaining liquidity in a world in which currencies are no longer reliable stores of value.] A Capital Paradox 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."
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| Overall Turk sees demand for gold remaining strong virtually everywhere Posted: 17 Dec 2010 08:56 AM PST Gold to reach $1800 – probably in Q1 2011 – James Turk Share this:
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| Posted: 17 Dec 2010 08:52 AM PST Life has a funny way of reminding a person that he is not really in control of what is going on around him. While he may be proficient in a few specific areas, his overall knowledge is limited. Last night my hot water heater decided to go on vacation and I thought I'd try to be a real man and fix it. I have a general knowledge of how a hot water heater works, but it dawned on me that knowing how it works and fixing it are two totally separate things.
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| Oil and Gold Commitment of Traders Tell a Story Posted: 17 Dec 2010 08:48 AM PST Carlos X. Alexandre submits:c I just received the CFTC Commitments of Traders Reports, and the crude oil numbers among the vast plethora of information jumped off the page. I know that this piece hardly qualifies as an article, but the data speaks far better than I could articulate. No bias, no emotion, just numbers!
It appears that "Managed Money" is betting against the "Producers." Now here is a game that I want to watch! Complete Story »
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| Weekend Reading - When Money Dies: The Nightmare of the Weimar Collapse - Adam Fergusson Posted: 17 Dec 2010 08:48 AM PST
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| Hourly Action In Gold From Trader Dan Posted: 17 Dec 2010 08:47 AM PST Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini
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| Gold Daily and Silver Weekly Charts Posted: 17 Dec 2010 08:46 AM PST | |||||||||||||||||
| Silver Gold Ratio Reversion to the Mean Posted: 17 Dec 2010 08:43 AM PST Silver has been a rock-star in recent months, rocketing higher to dazzling gains. After such a blistering near-vertical ascent, technicians understandably fear this metal has become wildly overbought. Nevertheless, an alternative perspective on silver’s recent levels counters its extreme technicals. Compared to gold, its primary driver, silver actually looks reasonably-priced today.
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| Outlook for Gold and Silver During 2011, Will the Rally Continue? Posted: 17 Dec 2010 08:38 AM PST Gold has gained 26% this year, putting it on track for its third double-digit gain of the last four years. To chart gold’s price movements since 2000 take a piece of paper and draw an outline of an imaginary mountain slope (think Everest) with a few footholds to rest on the steep way up. There is still a long way up before you can plant the flag at the top.
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| “Within a few hours, the wall didn't exist.” Posted: 17 Dec 2010 08:35 AM PST Exclusive: US empire could collapse at any time, Pulitzer winner tells Raw Story Share this:
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| Posted: 17 Dec 2010 08:30 AM PST The 5 min. Forecast December 17, 2010 12:43 PM by Addison Wiggin - December 17, 2010 [LIST] [*] An investment model for an alternative universe... and the real-world consequences for you [*] A universe where "inflation protection" means real estate and gold does not exist [*] Uranium zooms up 50% in a matter of months... One guess why, and it starts with the letter "C" [*] 18 months in the making... Gold ATM makes its American debut today [*] "Airhead?" A 5 first: Reader says we're just too darned optimistic [/LIST] Somewhere… in an alternative universe… stocks always go up, real estate is a surefire inflation hedge and commodities are far too risky to merit more than a token portion of your portfolio. Unfortunately for all of us, that alternative universe exists on Q Street in Sacramento, Calif. And it’s not bad news just for Californians… as you’re about to see. The nation’s biggest government-employee retirement plan...
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| Weekly Market Round-up: Sirius Minerals leads a good AIM innings while the FTSE 100 d Posted: 17 Dec 2010 08:30 AM PST View the original article at Stockopedia December 17, 2010 05:32 AM While a collapse on the scale of England's batsmen was never on the cards this week for London markets, the FTSE 100 continued its sideways drift approaching the end of the year, frustrating bulls that are still eyeing a 6000 Christmas present. Scant corporate news other than the BP lawsuit offered little stimulation, with traders hoping that strong performances in the US overnight and the right sounds coming out of the EU summit in Brussels would propel the index over 5900 and beyond. Angus Campbell, the head of sales at trading firm London Capital Group noted that "the failure now on four separate occasions for the market to get over and remain above the 5900 level is not very encouraging for the bulls but there's a feeling that since we've been grinding higher and flirting with that level that at some point before the year end there might just be enough of a bear squeeze to pop us above and on towards 6000." ...
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| Gold Investors: Forget about Bond Yields Posted: 17 Dec 2010 08:12 AM PST Kevin McElroy submits: I’m going to try to blow some of the motes of distracting hype about bond yield rates clear out of your eyes today. Right now, we’re in the eye of the hurricane of the bond yield news cycle, and it’s a potentially dangerous place. I know, it’s exciting that bond yields are frantically rising. The as-seen-on-TV inflationary event is starting to unwind, right? Well... not entirely. Complete Story »
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| Your Chance To Own A Little Piece Of Cramer Posted: 17 Dec 2010 08:10 AM PST It is no secret that Zero Hedge's favorite contemporary painter since what now seems time immemorial is none other than the unbeatably original Geoffrey Raymond. While his art has not made Sotheby's yet, it will eventually: after all who would not rather bet on the upside appreciation of an annotated painting of Dick Fuld, capturing the bipolar euphoria of a just insolvent Lehman Brothers for $30K than a diamond skull by Damien Hurst for a hundred million, with guaranteed downside? That said, $30K may be a little steep for a population which still has to feel the impact of inflation on its paycheck. Which is why we are delighted to once again offer Zero Hedge readers the chance to get what Raymond calls The Perfect Gift for the Person who has (Almost) Everything... and at a discount. Geoffrey is offering signed and numbered prints of five of his favorite paintings with guaranteed delivery by the 24th. They are "The Annotated Fuld", "The Annotated Fed", "The American Investor", "Big Lloyd 3 (The Root)" and one of my all-time favorites, "Cramer: Naked Short". Taken together, they are an amazing visual document of the American financial meltdown. All these can be found at www.annotatedpaintings.blogspot.com. After all what better inflation hedge than acquiring a print of the unbridled genius presented below. Considering the subject's most recent Nielsen ratings, it may be archival very, very soon.
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| The Effects of Central Banking on Gold and Paper Currencies Posted: 17 Dec 2010 07:54 AM PST "When will the gold bubble burst?" CNBC's Larry Kudlow wondered aloud this morning. A question to which your California editor would reply, "We know what gold is and we know what a financial bubble is, but we don't see any gold bubbles." Perhaps Kudlow is referring to the fact that the gold price is rising…in response to the Central Banking Bubble. On its face, the idea is ludicrous that one man can steer an entire economy, simply by adjusting one little interest rate. The idea is a doubly ludicrous that one institution can nurture economic growth, simply by printing money. And yet, a nation of investors places its faith in the Cult of Central Banking, as folks like Larry Kudlow pay homage to Ben Bernanke every business day. So far, the true believers have profited from their faith. It has paid well to embrace this cult and to trust the Delphic utterances of its high priests like Alan Greenspan and Ben Bernanke. But this whole central bank thing is getting a little out of hand. The early central bankers admitted their fallibility. They would adjust interest rates up or down, depending on the prevailing economic circumstances, then hope for the best. But the more that the central bankers' tinkering and meddling appeared to succeed, the more they tinkered and meddled, and the more they believed in the power of their tinkering and meddling. Eventually, the central bankers not only believed in the power of their intrusions and manipulations, but also in the wisdom of them. Before long, the central bankers considered their activities to be not merely a responsibility, but an imperative, a social duty; perhaps even a "calling" – a kind of Divine Right of Central Banking. Armed with these potent delusions, central bankers around the world continue to meddle, day by day, month by month. And the investor-flock continues to trust in their mystical powers. This nearly universal faith in a priesthood of monetary medicine men is an extreme idea…taken to an extreme. It is a bubble – the effects of which are as varied as they are non-quantifiable. But one effect is very clear: currency values are perpetually in decline. The more the medicine men prescribe their remedies and elixirs, the faster the purchasing power of their paper currencies erodes. Observing this trend, rational, forward-looking investors scout around for assets the central bankers are not trying to protect – assets that require no protection whatsoever. Gold is an obvious choice. It is the timeless choice of all investors who reject the Cult of Central Banking and who, therefore, distrust paper currencies as a store of value. Gold is rising because Central Banking is in a bubble. But the gold bubble, itself, will not arrive until the Central Banking Bubble bursts – the moment when investors universally spurn the cult of Central banking as heresy, and rebuke central bankers, themselves, as agents of wealth destruction. At that moment, when gold is trading north of $10,000 an ounce…or $20,000…or $100,000, the gold bubble will have arrived. And when it does, we will be there to issue a "sell" recommendation. Speaking of "sell" recommendations, Jay Shartsis, a seasoned options pro at R.F. Lafferty in Lower Manhattan, warned his clients on Wednesday, "A big stock market decline is coming." To support his bearish call, Shartsis has highlighted a variety of market signals and sentiment indicators. Late last week, for example, Shartsis noted that the "CBOE equity put/call ratio hit .27 – the lowest in my memory. And now 8 days in a row, this ratio has been sitting below .60 – that's a sell signal." Then earlier this week, Shartsis observed, "With the stock market near the highs for this move, there are only 127 new highs on the NYSE and 88 new lows. The new lows number is way above where it would be if this market was in good underlying shape. Yesterday saw 3% of all NYSE stocks at new lows – a condition that has happened only 36 times in the past. Two months afterwards, the S&P 500 was lower on 32 of those 36 instances."
Lastly, Shartsis called attention to the nearby chart, as he remarked, "The chart displays the Options Speculation Index. It is a measure of total call buys plus put sales (those are bullish transactions), divided by total put buys plus call sales (bearish transactions). So this is a very comprehensive gauge and it now reflects the most bullish option trader sentiment probably ever recorded. No fear at all. Note that the index is considerably higher than it was before the flash crash last May. A big market decline is coming!" Shartsis has been wrong before, of course. But he has also been right. We predict he will be one of the two this time around. Eric Fry The Effects of Central Banking on Gold and Paper Currencies 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."
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| Posted: 17 Dec 2010 07:40 AM PST View the original post at jsmineset.com... December 17, 2010 09:41 AM Jim Sinclair’s Commentary The Green Hornet says that the Cabal is working hard, but not making that much headway on the short of the euro play. That is the market saying the Wall Street Cabal covering as they now put their dollar short back on. It is free money when you control communications. Moody’s Downgrades Ireland’s Debt DECEMBER 17, 2010, 10:30 A.M. ET BY ART PATNAUDE LONDON—Moody’s Investors Service Inc. downgraded Ireland’s debt to Baa1 from Aa2 Friday, warning the government’s financial strength could deteriorate further if economic growth were to miss its projections. The five-notch downgrade was made as "Ireland’s sovereign creditworthiness has suffered from the repeated crystallization of bank-related contingent liabilities on the government’s balance sheet," said Dietmar Hornung, vice president, senior credit officer at Moody’s. Th...
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| Posted: 17 Dec 2010 07:40 AM PST View the original post at jsmineset.com... December 17, 2010 09:10 AM Little Has Changed with The Execution of Controlled Operations Over Time CIGA Eric The Green Hornet says that the Cabal is working hard, but not making that much headway on the short of the euro play. That is the market saying the Wall Street Cabal covering as they now put their dollar short back on. It is free money when you control communications. Jim Jim, Other than the names pulling the strings, technology used to communicate, very little has changed with the execution of controlled operations over time. Jesse Livermoore often discussed how bear pools controlled or plunged the tape in the days of the ticker tape. Independent thinking remains the only way to ID and defeat controlled operations and trade in sympathy with the secular trends. This is illustrated by the absolute flushing of the "marks" by the sharks. The operation will weaken and terminate with the consumption of the paper fuel and adaptati...
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| Gold Stocks in a Failing Fiat Currency Posted: 17 Dec 2010 07:40 AM PST As the U.S. dollar takes a nosedive and precious metals gain more and more attention from individual investors, the number of questions and concerns is increasing as well. The following reader email addressed to Casey Research ... Read More...
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| COT Gold, Silver and US Dollar Index Report - December 17, 2010 Posted: 17 Dec 2010 07:32 AM PST COT Gold, Silver and US Dollar Index Report - December 17, 2010
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| Michael Pento - US Headed Down a Path of Destruction Posted: 17 Dec 2010 07:30 AM PST  With gold consolidating and tremendous volatility in bonds King World News interviewed Michael Pento, Senior Economist at Europac. Regarding the US situation Pento stated, "We had a chance in 2008 to de-leverage as a country, but we chose the easy path which was more debt and more inflation. The idea that we will ever be able to unwind this leverage without disastrous consequences is completely ridiculous. I wish I had better news, but unfortunately the central planners on the US side have sent this country down a path of destruction."
This posting includes an audio/video/photo media file: Download Now | |||||||||||||||||
| Gold to benefit from shift by fund managers Posted: 17 Dec 2010 06:55 AM PST by Chris Flood "A shift in the behaviour of asset allocators could have a material impact on gold markets," said Fredrik Nerbrand, global head of asset allocation at HSBC. "Only a marginal increase in the propensity to hold gold as an investment could have a dramatic effect on the gold price." Mr Nerbrand estimated there was around $200bn invested in gold currently through exchange traded funds, bars and coins (but excluding jewellery) — just 0.14 per cent, of the investable universe of global equity and bond markets. (HSBC excluded real estate markets as insufficiently liquid). Mr Nerbrand said although many portfolios were not invested in gold or had only very small weightings, investors had started to look at gold as protection against the risks of paper assets. "The creation of paper money is evidently less complicated than alchemy," said Mr Nerbrand. "This is particularly important as the foundation for the pricing of all risk assets rests on sovereign bonds, which have now lost much of their 'risk-free' attributes." … HSBC has a 15 per cent weighting for gold within its global asset allocation portfolio. Mr Nerbrand said although this might seem large, it did not add to the volatility of the portfolio overall and that a smaller weighting for gold would be insufficient to hedge against tail risks. [source] RS View: In the the so-called bullish scenario, HSBC's economic model projected that gold prices could reach $6,424 an ounce by 2020. Frankly, the "bullish" parameters they used struck me as too conservatively anemic — with the proportion of portfolios gold weightings representing only a small shift from the current 0.14 percent to 0.5 percent. It implies that investors either fail to take notice of gold's attractive price performance or otherwise defy human nature and resist the urge to significantly bulk up on the winning asset.
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| Posted: 17 Dec 2010 06:50 AM PST Silver has been a rock-star in recent months, rocketing higher to dazzling gains. After such a blistering near-vertical ascent, technicians understandably fear this metal has become wildly overbought. Nevertheless, an alternative ... Read More...
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| How to Protect Your Family and Wealth from the End of America Posted: 17 Dec 2010 06:44 AM PST Steve's note: As you've seen in our special series this week, my friend and colleague Porter Stansberry is deeply concerned about the problems developing in our country and around the world. And today, he's showing readers how to prepare for the crisis he sees happening. Read on for the final installment of our "End of America" series… By Porter Stansberry with Braden Copeland Friday, December 17, 2010 The International Monetary Fund estimates the 20 largest industrial nations (known as the G20) are on course to see their combined government debt exceed 100% of their combined GDP within three years. Debts of this size simply cannot be financed, let alone repaid. The first step in this great unraveling is underway – the collapse of the euro. In March 2010, I wrote: Like dominoes, the highly indebted economies of Europe are going to topple. Greece was first. But plenty more problems are coming. Italy has no way to meet its obligations. Nor...
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| Posted: 17 Dec 2010 06:41 AM PST The fundamentals behind the gold trade are generally understood on a very superficial level. $3000 gold will have very little to do with inflation. It will have little to do with the economy being "bad"- we have had recessions with collapsing gold prices. In many ways we are talking about something far more menacing. We are talking about capital running for cover. We are talking about unprecedented skepticism towards government. We are talking about the long overdue self-destruction of a system that magnifies the folly of man. In essence, we are talking about a profound paradigm shift.
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| Dr. Bill Bird: REE Supply Hysteria Posted: 17 Dec 2010 06:34 AM PST Source: Sally Lowder of The Gold Report 12/17/2010 China's domination of the rare earth industry has led to very real fears about the future supply of these strategic metals that are used in all things technological—from electric car batteries, laptops and cell phones all the way to smart bombs. As one of the foremost experts in rare earth elements (REEs), Bill understands the implications of future supply shortfalls. In this exclusive interview with The Gold Report, the head of Vancouver-based Medallion Resources Ltd., explains the supply bottleneck and how his company is working to solve it. The Gold Report: Dr. Bird, I'd like to start our conversation with a review of recent developments in the rare earth element space. In 2010, we've seen enormous interest from investors, politicians and pundits; however, up until about 18 months ago, "rare earths" was a relatively unknown term. There's been huge growth in some of the junior companies exploring for rare earth...
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| Posted: 17 Dec 2010 06:32 AM PST
The fundamentals behind the gold trade are generally understood on a very superficial level. $3000 gold will have very little to do with inflation. It will have little to do with the economy being "bad"- we have had recessions with collapsing gold prices. In many ways we are talking about something far more menacing. We are talking about capital running for cover. We are talking about unprecedented skepticism towards government. We are talking about the long overdue self-destruction of a system that magnifies the folly of man. In essence, we are talking about a profound paradigm shift. There are a lot of things in investing that are "obvious", but for whatever reason, aren't generally accepted. Just think about the question: "What is the best approach to investing?" As far as I am concerned, there is only one approach that makes sense, and that is the value approach. To consistently make profits, you must buy assets at below intrinsic value. If this isn't instantly obvious to you, I advise you to stay away from investing. Investors are led astray not only by emotions, but by theories taught in business school, such as the efficient market theory and the Capital asset pricing model, that I can tell you, no serious investor should believe. These theories fail on a number of levels, but I'll focus on one aspect. The CAPM assumes that the risk premium in a stock changes in direct proportion with beta, or the stock's relative returns against the market. If you base your investing on this model, you are not mentally prepared to profit from the coming explosion in gold. After all, if gold corrects 30%, CAPM evangelists will tell you to run for cover because gold just became a riskier trade. The smart money believes the exact opposite; they are huge buyers on large corrections. The failure of the larger investment community to recognize such obvious flaws is a big reason why the same people outperform the market over and over again. It is no coincidence. As an investor, I thrive on panic selling and fear since my mind is always fixed on value. I can't say the same about gold permabears, who are undoubtedly among the most amusing species on earth. They try to paint a picture of gold bugs as irrational and extreme. The ironic thing is, when arguments get to the level of hard data and facts, its is the gold bears who are exposed as irrational. I have some homework for gold permabears. Over the past 30 years, how does gold's rise compare to the rise in stocks? How about the national debt? How about the money supply? At the end of the day, gold is a data-driven investment. I don't care how many people tell me otherwise; they are the ones who are too lazy to test the data for themselves. Fed Stupidity Now that a majority of Americans are officially against the Federal Reserve, I don't feel as motivated to criticize them. But honestly, they are so inept I feel morally inclined to expose their shortcomings. The Fed is myopically focused on maintaining an arbitrary rate of inflation. OK great. But while these geniuses are focused on a manipulated government statistic, Rome is burning around them. Sure core inflation rates are holding steady, but food and energy costs are up, interest rates are flying, the national debt is rising, and gold is shooting to the moon. The supposed cures to our disease are creating even bigger problems. Someone wake they guys up before it's too late. Stocks There is a large contingent of bears that think the stock market is going to collapse. One thing these people miss is that the Fed's mandate is constantly in flux. The Fed of the 1930's didn't go around buying government paper, and its sole purpose wasn't to prop up the stock market. We live in different times- the Fed has much more leeway to collapse the economy with their stupidity. I remember quite clearly when the Fed cut interest rates 75 basis points over a weekend in September of 2008 because of unusual weakness in foreign markets that was creating havoc in the U.S. futures markets. Did they have any idea about what caused the drop in stocks? No. They were simply propping up stocks. If the Fed is that focused on stock prices, then trust me, stock are going higher. Don't argue with me on this point and instead try to focus on what the unintended consequences of an easy money policy will be. At this stage in the game debt begets more debt. Lower stock prices beget more liquidity infusions and higher stock prices. Gold There are two scenarios I see for gold, both of which can be characterized as "extreme." One is a steep sell-off to about $1000-$1200, followed by a very healthy rally. The other scenario is a monster rally to about $1600-$1800, followed by a healthy correction. As a proponent of the value approach to investing, take a wild guess as to which of the two aforementioned scenarios I prefer. At $1000, I will be shouting from the rooftops to buy gold. One of the reasons I believe extreme moves are coming is because gold is an asset where the passions of man are very evident. After all, fluctuations in gold represent perceived changes in the underpinnings of our entire monetary system. When gold truly lifts off into the stratosphere, it won't give people the chance to hop on board. Believe it or not, at $1370, we are still in accumulation mode.
No matter how firm I am in telling you the likely events of the future, very few of you will believe, and even fewer of you will take action. My genuine wish is for our leaders to figure things out and stop this crazy Ponzi scheme financing before it's too late. But until then, I must do what I can to protect myself in an intelligent manner. I hope you are all doing the same.
Expected Returns is a finance and economics blog focused on gold investing.
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| Silver at $40 Will Be Best Metals Performer in 2011 Posted: 17 Dec 2010 06:30 AM PST "Comex silver inventories drop 1.8 million ounces on Wednesday. U.S. Commodity Regulator Delays Speculation Caps Plan. Belgium has no future as a single country... and much more. " Yesterday in Gold and Silver The gold price didn't do a heck of a lot in early trading in the Far East on Thursday. But starting around 1:00 p.m. Hong Kong time, gold spent the next four hours gaining a whole five bucks... and gold's high price of the day was printed about 9:00 a.m. in London around $1,386 spot. From that high, the gold price began a slow decline that gathered steam starting around 11:30 a.m. local time in London. Over the next couple of hours, the gold price declined ten bucks... and then really fell out of bed to the tune of twelve dollars between 9:40 a.m... and the London p.m. gold fix, which came minutes after 10:00 a.m. in New York. This was gold's low of the day, which was $1,360.40 spot. This price decline in New York punctured gold's 50-day moving aver...
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| Comex gold quiet as traders enter holiday mode Posted: 17 Dec 2010 06:20 AM PST 17/12/2010 (FXstreet) — Gold trade on the Comex division of the New York Mercantile Exchange was calm Friday as a dollar rally led the yellow metal to pare earlier gains. "With the holidays fast approaching, traders aren't going to be as aggressive in establishing new positions and that's probably keeping a lid on the gold market. We're probably going to see choppy and muted trade through the end of the year," Sterling Smith, a analyst with Country Hedging, said. Overnight, lower prices encouraged some bargain hunters to buy the dip and that, along with a weaker dollar, led gold to its morning high of $1,378.50. "The precious metals are likely to yo-yo modestly, following currency movements, through the end of the year. It would take some sort of unexpected news, such as a major flare up on the Korean peninsula, to cause some sort of knee-jerk move in prices," a US-based gold broker said. [source]
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| Posted: 17 Dec 2010 06:02 AM PST As investor enthusiasm soars in the silver sector, and more and more writers offer their views on this sector, we are now seeing a down-side to the increased "buzz": we are seeing the over-zealous and/or under-informed begin to make wild assertions about this market – which seriously impairs the ability of more sober voices to make themselves heard. As is often the case in such scenarios, we start with a piece of concrete information, and then pile atop that fact some sloppy arithmetic, and highly dubious "logic". The result is nothing but outrageous rhetoric, rhetoric which the anti-precious metals cabal of bankers can use (and has used) to discredit the serious commentators in the sector. What I refer to in particular are the "reports" from several commentators that JP Morgan is "short 3.3 billion ounces of silver". Were this true, it would indeed be major "news" – given that best estimates are that the total, global stockpile of silver is roughly one billion ounces. Sadly, this "3.3 billion" number has no more relevance than the numbers released by the U.S. government which it calls "economic statistics". To illustrate the absurdity of this claim, we must see how that number was produced. As I said earlier, we started with a fact: that JP Morgan is short more than 300 million ounces in the Comex futures market. While this has never officially been announced, it is a conclusion which is the process of simple, straightforward deductions (and known CFTC data). Taking that number, the zealots then added another fact: the claim by Jeffrey Christian that the world's bullion markets were leveraged by approximately 100:1. Here is where their analysis totally falls apart. To begin with, the "100:1" number itself is not a "fact". It is treated as such because (to use some legal terminology) it is "an admission made against one's own interests", and as I have explained before, our legal system (justifiably) attaches a high degree of credibility to such admissions. However, two points must be made immediately. First, this was just a rough estimate, not a precise statistic. Any reputable commentator utilizing such a number must account for the fact that it is only an approximation. In this respect, a number of commentators failed miserably. The "3.3 billion ounce short position" which some commentators were practically shouting from the rooftops was arrived at by taking JP Morgan's (known) short position, multiplying that by 100 (i.e. the 100:1 leverage) – and (after some creative arithmetic) arriving at a total of 3.3 billion ounces. It's hard to know where to start in criticizing this figure. To begin with, given Christian's crude estimate, there is no way that the calculation could (justifiably) be expressed as "3.3 billion". This implies a degree of precision here which simply doesn't exist. I should also point out if we opt for a similar (but simpler) calculation, and merely multiply the (known) 300+ million ounces which JP Morgan is short by 100 (100:1 leverage), then that calculation produces the number "30 billion ounces". The same "logic" is being used, merely a slightly different calculation. Obviously if anyone would have claimed that JP Morgan was short 30 billion ounces of silver, the author of such an estimate would have been greeted with laughter. Simply playing-around with these numbers to produce a slightly more plausible number doesn't change the entirely faulty premise on which this calculation is built. The "leverage" in the derivatives market is "paper leverage". Indeed, the very definition of a "derivative" is that it is a paper proxy for something which exists in "the real world". Thus, the entire premise of multiplying a known, real short position by the paper leverage of the derivatives market – and then expressing that result as a measurement of silver is simply ludicrous. In other words, when we multiply JP Morgan's (real) short-position by its leverage in the derivatives market, the "answer" is not a measurement of silver, but a measurement of leverage. It is in this respect that some commentators have turned into a flock of Don Quixotes – tilting at windmills. | |||||||||||||||||
| Gold steadies as dollar recovers lost ground Posted: 17 Dec 2010 06:01 AM PST 17 Dec 2010 (Reuters) — Gold steadied on Friday as the dollar moved higher versus the euro, with the single currency hit by concerns over euro zone sovereign debt levels after Moody's cut Ireland's credit rating. Spot gold was bid at $1371.90 an ounce at 1526 GMT… "We are into a typical end-of-year scenario now, where order flow more than fundamentals drives the market," said Saxo Bank senior manager Ole Hansen. "It will be choppy for the rest of the year but unless we see any dramatic news, investors are happy with their positions based on expectations for further price increases into 2011." … The precious metal is moving closely in line with fluctuations in the euro-dollar exchange rate as the financial markets wind down for Christmas. "Risk aversion is not high enough for gold to decouple," VTB Capital analyst Andrey Kryuchenkov said. The single currency remains vulnerable after the Moody's cut and as an agreement by European Union leaders on Thursday to set up a permanent crisis management mechanism failed to calm fears about the region's debt crisis. EU leaders agreed at the summit to make minor changes to the group's governing treaty to establish a permanent mechanism from mid-2013 to resolve sovereign debt problems. [source]
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| Gold Breaks Below 20 day Average Posted: 17 Dec 2010 05:50 AM PST courtesy of DailyFX.com December 17, 2010 07:41 AM Daily Bars Prepared by Jamie Saettele There are signs that this gold reversal is ‘for real’. For one, each successive peak since October sports divergence with RSI. The latest top was also accompanied by several bearish candle patterns (doji and bearish engulfing). After several false starts, gold is again below its 20 day average and focus is now on the multi month low of 1317.10....
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| Gold: Chewing Thru Overbought Technicals! Posted: 17 Dec 2010 05:25 AM PST Super Force Signals A Leading Market Timing Service We Take Every Trade Ourselves! Email: [EMAIL="trading@superforcesignals.com"]trading@superforcesignals.com[/EMAIL] [EMAIL="trading@superforce60.com"]trading@superforce60.com[/EMAIL] Weekly Market Update Excerpt Dec. 17, 2010 Gold and Precious Metals US Dollar Chart US Dollar Analysis: [LIST] [*]The Dollar rally has just begun. Distribution is already occurring! [/LIST] [LIST] [*]Fiat currency is the crown jewel of socialism. [/LIST] [LIST] [*]The Dollar is socialism. That is the structure of the beast. [/LIST] [LIST] [*]I am active in my community. Help those fighting fiat. [/LIST] Gold Bullion. 6 Month Price Chart Gold Bullion Analysis: Gold has a solid Super Force Buy Signal from me on Friday Nov. 12th. [LIST] [*]Gold is experiencing a sideways correction. [/LIST] [LIST] [*]My intermediate target is 1260. [/LIST] [LIST] [*]We should see Gold rise 100% in the coming 12 mont...
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The IMF warned on Friday that Ireland faced significant risks that could affect its ability to repay an aid loan. The EU is giving Ireland until 2015 to get its budget deficit below a bloc limit of 3% of GDP, but the IMF said it forecast the deficit to reach 5.1% of GDP by 2014 and 4.8% by 2015, without further fiscal measures. The IMF's sobering assessment came on the same day Moody's rating agency downgraded Ireland's credit rating to Baa1 — three notches above junk status — with a negative outlook. Particularly worrying was the IMF's assessment that the contagion threat from Ireland is "significant"…
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