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• silver and gold advance/open interest continues to rise/Moody's downgrades Ireland
• Saving the Euro: Merkel's Ironic Victory in Brussels
• Big Activity in GLD, SLV and Comex Silver Stocks
• Fancy ATM skips the folding cash, spits out gold
• Richard Russell: Dreams only last the night
• Gold: Currency Wars and China
• More Year-End Review Of Key Points
• This past week in gold
• Gold Stocks in a Failing Fiat Currency
• Gold Allocation Likely to Rise "For 10 Years"…
• Why Owning Cash Is More Speculative Than Owning Gold
• Silver/Gold Ratio Reversion 4
• Gold Is In Hot Water
• Outlook for Precious Metals in 2011- Will the Rally Sustain?
• An ADI Will Fail
• Weekly Gold Update
• Expert Addresses Rare Earth Element Supply Hysteria
• Euro Resilience Fading
• Inflation Scorecard: Gold's Mixed Performance
• More Ideas For 'Contango-Free' Commodity Access
• This little-known mistake is pushing America toward collapse
• Must-see chart says the recovery could be over
• Oil and Gold Commitment of Traders Tell a Story
• Today in Commodities: Plenty of Interest
• Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week
• Gold Investors: Forget about Bond Yields
• Did The Price Of Oil Help Cause The Financial Crisis Of 2008? Will Surging Oil Prices Soon Spark Another Financial Crisis?
• COT Silver Report - December 17, 2010
• Michael Victory – Idols Of The Unaware
• How Leveraged Is JP Morgan?
• Gold Supported in 2011 by Concerns About Currencies and Government Bonds
• Abigail Doolittle – The Future of the Liquidity Rally
• Silver at $40 Will Be Best Metals Performer in 2011

silver and gold advance/open interest continues to rise/Moody's downgrades Ireland Posted: 18 Dec 2010 01:01 AM PST
Saving the Euro: Merkel's Ironic Victory in Brussels Posted: 17 Dec 2010 11:38 PM PST Link:  Saving the Euro: Merkel's Ironic Victory in Brussels Image:  The next item today is a Roy Stephens offering from the German website spiegel.de.  It's headline reads "Saving the Euro: Merkel's Ironic Victory in Brussels".  It hasn't been an easy year for the EU, or for Angela Merkel. She played chief skeptic during the euro crisis, but the role ironically led her to forge a rescue mechanism for the continent's embattled currency.  It's obvious that they're going to save the Euro the same way that Bernanke is going to 'save' the U.S. dollar... read more
Big Activity in GLD, SLV and Comex Silver Stocks Posted: 17 Dec 2010 11:38 PM PST Gold only falls $13 on a one cent rise in the dollar.  The U.S. gets its first gold vending machine.  Ron Paul says the Fed spends more money than Congress.  Richard Russell speaks... and much more. ¤ Yesterday in Gold and Silver The gold price gained a whole five bucks by 11:00 a.m. Hong Kong time on Friday morning, but the moment that trading in Hong Kong ended around 5:30 p.m. local time, the gold price headed south.  It rallied a bit going into the New York open, but then rolled over and hit its low of the day [$1,364.00 spot] at 11:00 a.m. Eastern time. From that 11:00 a.m. low, gold traded higher until precisely 1:30 p.m. when floor trading ended and electronic trading began.  That point was gold's high at $1,380.10 spot.  The gold price traded sideways from there.  Volume was very light. The fact that the gold price did as well as it did is really quite something in the face of a dollar that was up over a full percent from its lows yesterday.  More on that after my comments on silver. Silver was an entirely different animal.  It's high of the day [around $29.30 spot] was around 11:30 a.m. in Hong Kong trading... and then headed unsteadily lower to it's low of the day [around $28.67 spot] which was shortly before 1:00 p.m. in London. From that low, silver rose a bit going into the New York open... and then fluctuated 15 cents either side of $28.90 spot until shortly before 1:00 p.m. Eastern.  Silver rallied from there, right into electronic trading... before heading sideways for the rest of the New York trading session.  Volume in silver was also very light. The world's reserve currency fell all through Far East trading on Friday... about 43 basis points in total... and finally hit bottom around 10:00 a.m. in London.  Six hours later, at 11:00 a.m. in New York, the dollar was up a full cent from its low... which is a very large move in a very short period of time.  From that 11:00 a.m. high, the dollar gave back about 20 basis points by the close of Comex trading at 1:30 p.m... and then traded sideways into the close at 5:15 p.m. Eastern. While the dollar gained 100 basis points in six hours... gold lost $13.  When the dollar turned south at 11:00 a.m... losing 20 basis point by the end of Comex trading at 1:30 p.m.... gold had risen $16 in the space of those two and a half hours. It should be obvious to anyone that if the bullion banks hadn't been all over the price in New York yesterday, gold would have risen materially, right along side the dollar... but that wasn't allowed to happen.  Once the dollar rally ended, gold and silver prices popped pretty good.  It's obvious that the precious metals wanted to go higher... regardless of what the dollar was doing. The gold stocks hit their nadir shortly before 11:00 a.m. Eastern time before turning higher... and getting back into positive territory.  However, about fifteen minutes before the equity markets closed, a sudden sell-off of one of the large cap gold stocks dragged the HUI down to a small negative close... down 0.13%.  For the most part, the junior companies had a pretty good day... as did most of the silver stocks.  A lot of buyers were bottom fishing yesterday.  Here's the HUI for the week that was. The CME Delivery Report showed that 126 gold and 17 silver contracts were posted for delivery on Tuesday.  The link to the action is here. Well, the ETFs were certainly busy yesterday.  GLD reported receiving 488,124 ounces of gold.  It's been a very long time since that much gold was deposited in the GLD all at once.  But, over at SLV, they showed a huge withdrawal... 1,954,680 troy ounces of the stuff.  Someone needed a big pile of silver in a hurry... and it was obvious that they either had it stored in the SLV... or bought the units in the open market and then tendered them for immediate delivery.  It certainly wasn't a withdrawal based on the price action lately.  Since the beginning of December, the in/out movements in SLV have been almost schizophrenic. There was no sales report from the U.S. Mint yesterday. On Wednesday I reported a big silver withdrawal [around 1.9 million ounces] from the Comex-approved depositories.  Well, their Thursday report showed that a huge chunk of silver was deposited to take its place... to the tune of 1,469,413 ounces.  All of it was added at Scotia Mocatta... and the link to that action is here. The action in the Comex-approved depositories is also getting pretty frantic as well.  I mentioned earlier this week that there was probably a lot of 'robbing Peter to pay Paul' going on... and this sort of activity is what one would expect if that was [in actual fact] what was really happening... both there and in the SLV ETF. The Commitment of Traders report was a bit of a surprise, as the expected huge decline in silver open interest did not materialize.  Open interest was down... but only by 689 contracts net.  Ted Butler did mention, however, that the '4 or less' traders managed to reduce their short position by about 1,900 contracts during the reporting week. As of Tuesday's cut-off, the Commercial net short position [where the bullion banks are located] stood at 240.7 million ounces.  The '4 or less' traders are short 210.8 million ounces... and the '8 or less' traders [which includes the '4 or less'] are short 287.0 million ounces of silver. The big surprise in this week's COT report came from gold.  There, the open interest fell a very chunky 10,538 contracts... 1.05 million ounces.  The Commercial net short position in gold is currently down to 26.8 million ounces.  The '4 or less' bullion banks are short 21.8 million ounces... and the '8 or less' bullion banks are short 28.1 million ounces of gold. This COT report was as of the close of trading on Tuesday, December 16th... and there certainly has been more improvement in the COT structure since then, as we've had new lows in both silver and gold... and gold briefly went through its 50-day moving average on Thursday... and again yesterday.  The link to Friday's COT report is here. Although the price action is infuriating [and discouraging to some]... all this downward pressure on prices makes the COT stronger in preparation for the next rally in both metals.  According to Ted, the COT structure in both metals is looking pretty good... but JPMorgan et al still run the gold and silver show... and we never know when they will strike next, regardless of what the COT shows. Here's Ted Butler's "Days to Cover" graph, that has been updated courtesy of Nick Laird Click here to enlarge. Sponsor Advertisement Achieve global diversification with total ease Diversify in foreign currencies, while enjoying the simple convenience of an EverBank® WorldCurrency® CD or money market account. Step 1, choose your account type. Step 2, choose from our wide range of currencies, which includes all the major ones and some from emerging markets. It's that simple. You understand the value of diversifying beyond the U.S. dollar. And at EverBank, we make it easy. Learn more. Apply now. EverBank is an Equal Housing Lender and Member FDIC. EverBank, the Infinity Sphere and EverBank logo along with WorldCurrency are proprietary service marks of EverBank.   © 2009-2010 EverBank. All rights reserved. 10AGM0007 ¤ Critical Reads Subscribe Wal-Mart Raised Toy Prices in U.S. Stores This Month My first story of the day was this Bloomberg piece that I stole from yesterday's King Report. In an early Christmas present to all toy shoppers, Wal-Mart Stores Inc., the world's largest retailer, raised prices on hundreds of toys this month, squeezing more out of sales during the biggest shopping period of the year.  Merry Christmas to all.  The headline reads "Wal-Mart Raised Toy Prices in U.S. Stores This Month" and the link is here. View full GSD edition Ron Paul: The Fed Spends "More Money Than the Congress Does The next item is a Bloomberg video interview with Dr. Ron Paul... the first TV interview he's given since being appointed chair of the House Monetary Policy Subcommittee.  It's posted over at the dailyreckoning.com website... and bears the headline "Ron Paul:  The Fed Spends "More Money Than the Congress Does"... and the link is here.  I thank Washington state reader S.A. for sending it along. View full GSD edition Current Unemployment Numbers in the U.S. Washington state reader S.A. was also kind enough to send along this set of three graphs about the Current Unemployment Numbers in the U.S.  This is as ugly as it gets... and another set of charts that needs no further embellishment by me. View full GSD edition Payrolls Drop in 28 U.S. States, Joblessness Up in 21 In a parallel story to these graphs, comes this Bloomberg offering from reader Scott Pluschau.  The headline states "Payrolls Drop in 28 U.S. States, Joblessness Up in 21"... and the link is here. View full GSD edition Saving the Euro: Merkel's Ironic Victory in Brussels The next item today is a Roy Stephens offering from the German website spiegel.de.  It's headline reads "Saving the Euro: Merkel's Ironic Victory in Brussels".  It hasn't been an easy year for the EU, or for Angela Merkel. She played chief skeptic during the euro crisis, but the role ironically led her to forge a rescue mechanism for the continent's embattled currency.  It's obvious that they're going to save the Euro the same way that Bernanke is going to 'save' the U.S. dollar... by running the printing presses 24/7 in order to bail everyone out.  The link is here. View full GSD edition EU shocked by Irish debt downgrade One has to ponder how wonderful her victory really was... because moments after the summit in Brussels was adjourned... where Merkel 'saved the euro'... Moody's downgraded Ireland's debt again.  Here's a story [with thanks once again to Roy Stephens] from The Telegraph that was filed Friday evening in London... and the headline reads "EU shocked by Irish debt downgrade".  I guess that was the reason why the dollar was in rally mode yesterday.  The link to the story is here... and I highly recommend that you find the time to run through it. View full GSD edition Fancy ATM skips the folding cash, spits out gold I have a few gold-related stories for you today.  The first is from reader Scott Pluschau and it's an AP story posted over at yahoo.com that's headlined "Fancy ATM skips the folding cash, spits out gold".  Boca Raton now has the U.S.'s first gold ATM machine... and the link to the story is here. View full GSD edition Gold-dispensing ATM Debuts in South Fla. <
Fancy ATM skips the folding cash, spits out gold Posted: 17 Dec 2010 11:38 PM PST Link:  Fancy ATM skips the folding cash, spits out gold Image:  I have a few gold-related stories for you today.  The first is from reader Scott Pluschau and it's an AP story posted over at yahoo.com that's headlined "Fancy ATM skips the folding cash, spits out gold".  Boca Raton now has the U.S.'s first gold ATM machine... and the link to the story is here.
Richard Russell: Dreams only last the night Posted: 17 Dec 2010 11:38 PM PST Link:  Richard Russell: Dreams only last the night Image:  Reader U.D. has one more gold-related item for us today.  This one is a posting over at 321gold.com... and is headlined "Richard Russell: Dreams only last the night".  Richard gets up on his golden soap box and talks about his favourite subject... gold.  It's a short, but very worthwhile read... and the link is here.
Gold: Currency Wars and China Posted: 17 Dec 2010 11:38 PM PST Link:  Gold: Currency Wars and China Image:  The next gold-related story is a longish piece that's posted over at safehaven.com... and is courtesy of reader U.D.  It's written by John Ing of Maison Placements Canada in Toronto... and bears the headline "Gold: Currency Wars and China".  The part about China and their silver standard... and what Roosevelt did to it... is a must read.  The Chinese have very long memories.... read more
More Year-End Review Of Key Points Posted: 17 Dec 2010 09:37 PM PST Too Many Dollars And Too Many Bonds creates devaluation and selling pressures on American paper and credit. While Mr. Bernanke thinks all he must do is to print even more, he is beginning to understand that this is not having any effects and worse it is doing considerable damage on several fronts. Those would be (1) A less sincere belief in the viability of dollars and bonds by important allies and enemies. (2) This fact makes important people nervous and causes them to seek potentially damaging alternatives. Next, (3) eventually interconnected markets will view the bonds, bills, and notes as unworthy unlocking a selling slide. (4) China in particular is not selling any gold and encouraging domestic mine development. Further, they are off-loading US Dollars and bonds trading them for mining shares, entire mines, and any other reasonable investment to buy hard assets. For example, China and Russia have agreed to trade within their own respective currencies where formerly they used dollars. Then too, China is worried on two fronts (1) The American credit system is scary and China currently holds nearly $1 Trillion in paper and (2) a systemic breakdown could conceivably do extensive damage to Chinese exports. Even Japan and Australia have considered what the world would be like with broken USA credit in bonds bill and notes as well as our currency. Ninety percent of Wal-Mart stuff exports from China. What happens if Wal-Mart sales tank with China's exports. It's already begun. The Beginning Of The End started years ago with Lynden Johnson's Great Society in the 1960's. Work ethic diminished and welfare got a strong foot-hold. Since that time, America's Congress has embarked upon an escalation of higher taxes, more takings and more control. Central government has grown larger and more powerful. Now entitlement programs have run over the ability to raise enough credit. The final straw was when greedy banks of all stripes begin trading derivatives, swaps, and various other kinds of paper nonsense. This blew-up the banks and they had to steal from the taxpayers to remain liquid not insolvent. This final stretch for more credit and over-reaching into a rabid printing of valueless, dilutive paper has long since passed the point of no return. The end is in sight and will not be denied. It can be delayed but we know the conclusion. At this juncture, we have to endure the final death throes of public-private debt elimination and begin anew from ground zero. It's getting through the middle part that is so rough. We envision 3-5 years of adventurous upsets and a world war before the economic dust settles. Personally, with families and jobs, change is inevitable. Much of what it is is not what is desired or, anything permitting easy adjustment. Too many are stuck in old paradigms that were outdated years ago. The world has changed to the degree we view the next transition as something as significant as the advent of the American Industrial Revolution. The Iceland Repudiation Of Insolvent Banks has proven the way to go. Their toxic banks ate their bad loans and the good banks continue on in business. Iceland's government refused to cover bad banker loans and the bad banks are stuck with them. Their European creditors must bite the bullet. The result is that Iceland has come out of this in better condition than expected. This is the rule of pure capitalism. If you over-reach and mess-up, you must fail and pay the price. This erases the bad ones as the good ones go on in business. Europe and the USA must do this to regain footing and begin to grow once again. Both continents are fighting this idea to the finish as if they're made to fail, the following will fail too: IMF, World Bank, US Federal Reserve, large global investment and private banks, Fannie & Freddie, numerous mortgage companies, and whole American states, counties, cities, towns, villages and municipalities. Along with them government unions and benefits will be destroyed as free market capitalism would emerge to blossom. To get from here to there will take a lot of pain and several years as the majority refuses to give-up all their free stuff. In the end they must. We are all broke. Others that could vanish causing no tears among many would be Medicare, Medicaid, the new federal health plan, cap n trade, card check, and a hard-case adjustment in Social Security. A flat tax of 10% on all personal and corporations would change the tax code to simplicity and in time draw in more taxes for governments from a booming economy. Almost all entitlements should be abolished. States should not have any income tax but might have a fixed 5% sales tax. Estate taxes and taxes on Social Security should be abolished. A simple tax system would create plenty of revenue and a wonderfully free and prosperous society. The Free Stuff Syndrome Is Over. It can last, then diminish and finally fail but it will fail for sure. As individuals, employees and family members we had better embrace the change or pay the consequences. A new era of individual responsibility would regain and grow the American dream. If other nations copied this style of government free-trade could flourish world-wide. This posting includes an audio/video/photo media file: Download Now
This past week in gold Posted: 17 Dec 2010 08:52 PM PST By Jack Chan at www.simplyprofits.org 12/18/2010 GLD – sell signal this week. SLV – on buy signal. GDX – on buy signal. XGD.TO – sell signal this week. Summary Long term – on major buy signal. Short term – on mixed signals. We continue to hold our core positions with a hedge in place to lock in profits until the next cycle bottom. Disclosure We do not offer predictions or forecasts for the markets. What you see here is our simple trading model which provides us the signals and set ups to be either long, short, or in cash at any given time. Entry points and stops are provided in real time to subscribers, therefore, this update may not reflect our current positions in the markets. Trade at your own discretion. We also provide coverage to the major indexes and oil sector. End of update
Gold Stocks in a Failing Fiat Currency Posted: 17 Dec 2010 05:36 PM PST
Gold Allocation Likely to Rise "For 10 Years"… Posted: 17 Dec 2010 05:30 PM PST
Why Owning Cash Is More Speculative Than Owning Gold Posted: 17 Dec 2010 05:27 PM PST Introduction by Gold in Mind 60+ years of the relative stability of the dollar, the pound and some other major currencies have taught generations of people that cash was, is, and always will be safe.
Silver/Gold Ratio Reversion 4 Posted: 17 Dec 2010 05:24 PM PST
Gold Is In Hot Water Posted: 17 Dec 2010 01:16 PM 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. I immediately realized that I was in over my head and made arrangements to have a repair man come and fix my hot water heater. He arrived first thing this morning and I asked if I could watch not only out of curiosity, but to understand how my hot water heater worked and to learn about the man that was fixing it. He was gracious and took the time to explain my issue thoroughly and as I am writing this he is replacing my heating elements. The interesting thing about this whole chain of events is that he brought up investments with me. Not because he wanted to talk to me or thought I knew anything, but simply because he knew I worked in that field. When you live in a relatively small town and people knew what you do for a living, they are generally quick to ask questions. He told me what he was doing with his retirement accounts and his plans for retirement in great detail. I immediately respected him for his general knowledge and it was apparent he had done his own homework. He had made wise decisions, saved money, and invested wisely. Clearly the man working on my hot water heater was planning for a quality retirement lifestyle and it sounded as though his planning was going to pay off. He brought up that he had purchased the copper ETF $JJC when he noticed that copper pipe was becoming more difficult to acquire and he was paying more for it. Then the conversation changed dramatically as he explained to me that he had recently bought gold coins and the gold ETF GLD. Immediately my ears perked up as I follow gold and oil quite closely as regular readers are aware. He wanted to know if I thought he should buy more on dips and if he had purchased gold at a good price. He told me he thought he had bought around the $1,200 an ounce price level. I replied that I was not qualified to offer investment advice, but that I expected gold was likely going to go through a mild pullback in coming days and weeks. He did not really ask any questions, but he said he was planning on adding to his position in GLD as he indicated that acquiring physical gold today is quite difficult. I told him that longer term I think gold will be an outstanding asset class to own, but I would be patient and wait to buy when the weakest gold bulls bow out. This conversation went on for about 15 or 20 minutes and eventually he got back to his work and I got back to my screens. I immediately looked at the GLD chart and this is what I saw this morning: My previous article, A Correction in Gold is an Option discussed the overwhelming bullishness that gold and silver were garnering with the retail crowd. After publishing that article last week I received more than a dozen emails that I would classify as hate mail. I was called names, I was sent a poorly written manifesto of the future collapse of fiat currency, and finally my favorite email which was just two words in the subject line, mother ($#$@# – I'll let your imagination try to figure out that one). I have written about a variety of asset classes and none of them have the near vigilante bullishness associated with gold. Gold bugs believe that the world as we know it is going to collapse. They believe that in a few months they will be bartering their gold for food, land, and valuables. Some of them believe the central bankers are working together to create a giant world order. The emails that I have received speak for themselves. There is a growing fear among the retail / middle class investor and the war often discussed between the haves and the have-nots wages on. When sentiment is running this high and the repair man working on my hot water heater is discussing with me his gold ownership and his desire to own more, it would seem bearish. I have heard and read countless stories about taxi cab drivers talking about the stocks they were trading during the dot-com bubble. I vividly remember having coworkers who had no experience in real estate buying multiple homes to "flip" during the housing boom. Today the man working on my hot water heater is telling me about his gold ownership and how he plans on buying more. I do not need to remind readers what happened after the technology bubble or the housing bubble, but what if commodities are in bubble? Some have argued they are, others say they are only beginning to rise as hyperinflation is on the way. It seems the real argument in this discussion is more about inflation versus deflation. I for one am not an expert in this field or any other based on my experience last night with my hot water heater, but financial markets tend to operate in the opposite of the herd's expectations. The gold trade is full, physical gold is hard to purchase, and the dollar has declined significantly in the past 10 years. There are many expert economists that are screaming inflation is coming and that commodity prices such as precious metals, grains, and energy prices are going to skyrocket. It seems that is the rally cry coming from economists and the herd's investment habits seemingly back up this notion. I am a contrarian trader and investor as I have struggled to make money following the herd. Is the herd leaning toward inflation right now? Gold can hold its value during a deflationary period so long as that period of time is relatively short. However, a long term deflationary period could be troublesome for gold bulls. Again, I am not an expert in these matters, but it sure seems as though there is a growing battle between the deflationists and inflationsists and the herd appears to back the inflationists. While that does not necessarily mean that inflation will not rear its head, it just might mean a period of deflation will occur prior to that move. It would appear to me that a mild correction in gold is possible and I intend to use that correction as a buying opportunity. The U.S. Dollar Index futures chart is listed below: With sentiment running this high, retail investors crowding into precious metals, and the dollar receiving no love – this is a perfect contrarian storm. This situation is the very reason that gold could correct deeper and longer than what many investors might expect causing the retail crowd who was buying around the $1,425-$1,450 price level to get nervous and sell, just when price is about to change direction. This seems to be an ongoing situation that inevitably happens in almost every asset class at some point or another. While I do expect lower prices in gold in the short run, I still remain bullish in the long term. At the end of the day, I have always made more money trading against the herd than trading with it. If my hot water repair man is discussing buying gold, it would make sense that the smart money would be selling into the retail investors and traders during price peaks and buying from them near the intermediate lows. Interestingly enough, the chart below illustrates the heavy volume selloffs that have been taking place in gold. In closing, I'm sure this article will arouse more gold bugs from their slumber and fill my email inbox with more hate mail. I will shrug it off as I always do, but the real question I have is am I going to have hot water tonight? If you would like to receive my Free Options Strategy Guide & Trade Ideas join my free newsletter: www.OptionsTradingSignals.com/profitable-options-solutions.php J.W Jones
Outlook for Precious Metals in 2011- Will the Rally Sustain? Posted: 17 Dec 2010 12:08 PM PST   This essay is based on the Premium Update posted on December 17th, 2010 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. Euro-zone concerns dominated the gold trade in the first half of the year. For the astonishing second half, dollar weakness was the major story with the yellow metal reaching more than a dozen record highs. It got a boost in late August after Federal Reserve Chairman Ben Bernanke proposed expanding the Fed's bond-buying efforts with a second round of quantitative easing. For the most part, only modest retracements punctuated the winning streaks. Let's take a look at the fundamentals that have been driving the prices of precious metals higher this past year as well as some of the pitfalls that may lie ahead. All the factors that have driven gold higher – fear, uncertainties, the Fed's printing press, lack of confidence in the dollar, gold as the ultimate currency, buying by newly wealthy Chinese families, sovereign troubles in the euro zone, central bank purchases, high unemployment in the U.S. – are still in place and we don't see any of those factors changing significantly in the coming year. Several analysts and gold pundits support a continuing bullish time for gold in 2011. Several forecasts predict gold has $100 to $400 more to gain this coming year. The timing of the peak may depend on interest rates. Analysts at Goldman Sachs say gold prices are likely to continue their upward trajectory next year, but likely peak in 2012 on rising interest rates at $1,750 an ounce in 2012. Peter Schiff is on the record as predicting that gold will go up to $2,000. Jim Rogers said in an interview recently gold is going to go a lot higher over the next decade. If adjust for inflation it should be over $2000. There have also been predictions about gold's "crazy little brother," silver, the leading performer in the metals this year. Will it repeat its success in 2011? Standard Bank Plc said that they see silver at over $40/oz due to new applications and increased industrial demand. As far as we're concerned, we would guesstimate gold's high for 2011 at $1,800 and $45 silver. Our very-long-term charts suggest even higher targets for the following rallies, but since it is 2011 that we are talking about in this guesstimate, we will stick with the abovementioned levels. So what are the pitfalls for precious metals? The first is that the economy will heal (which may not be a bearish factor at all in case of silver because of the number of its industrial applications), the Fed will stop printing money, the euro will stabilize and the Chinese will stop buying gold. The chances of that happening are nil. Instead that we see in our crystal ball are bankruptcies looming at the state, county and municipal level throughout the U.S. The U.S. Federal Reserve is forced to buy T-bills from the Treasury department just so the government can continue to stay operational. Or, what is even more likely that the bankruptcies will be prevented by printing more money, thus fueling inflation and precious metals' rally. A more realistic drag on gold could be the possibility of surging interest rates in Europe and the U.S. Higher interest rates would push investors away from gold, which bears no interest, pays no dividends and thus carries an opportunity cost. However, higher long-term yields reflect rising inflation expectations and diminishing confidence in the U.S. dollar and those are bullish for gold. Speaking of the economy, let's take a look at the indications coming from Euro and USD Indices. Let's begin with the Euro Index chart (charts courtesy of http://stockcharts.com). On the above chart we clearly see that the resistance levels continue to be retested. Note that a previous support level is now providing resistance and has held for a second time. At this point, further declines could very well continue here and this would likely lead to a corresponding rally in the USD Index. The head-and-shoulders pattern, which was appeared to be under development in recent weeks, may not be completed given the abovementioned action or it may not be completed in a classic manner meaning that price would simply trade sideways below the rising resistance line re-testing it over and over again after finally declining. Either way, further consolidation is possible but it seems more likely that declines will be seen with an eventual break below the 200-day moving average support level. Again, since the euro is the biggest factor determining the USD Index, what's bearish for Euro is bullish for the USD Index. The very long-term USD Index chart, which spans nearly 20 years allows us to truly put 2010 in perspective. When viewing a short-term chart, the USD Index appears to have rallied to a much greater extent than is seen when compared to prior years. Simply put, the very long-term declining resistance line has not been surpassed in the past 12-months and is still likely to provide strong resistance once it is approached. What this means is that any rally ahead in the USD Index may not surpass the 83 level, which is where this resistance line currently resides. This is a very probable upper limit for the foreseeable future and is therefore a significant bit of valuable information. Summing up, if the USD Index continues to rally, it likely to be stopped somewhere around the 83 level. Gold, silver and mining stocks, which are priced in US Dollars, move in the opposite direction of the USD Index – unless we see a strong demand from the non-USD Investors. Although the dollar can rally alone, if non-USD demand remains strong, precious metals prices could hold or even increase. To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time. Thank you for reading. Have a great and profitable week! P. Radomski Editor www.SunshineProfits.com * * * * * Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio? Sunshine Profits provides professional support for precious metals Investors and Traders. Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free weekly trial to see if the Premium Service meets your expectations. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. 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An ADI Will Fail Posted: 17 Dec 2010 11:55 AM PST Ironic, oxymoronic and ... News that Yahoo! is laying off a large part of its workforce shouldn't come as a surprise. Their website for financial news (finance.yahoo.com) recently featured the following: Followed by: Ok, so maybe it was message board morons who got their story wrong. (Bailouts usually come before bankruptcy is declared, so the news is bad for GAP, not good.) But that's a metaphor for what's going on in the economy. You just don't know what news is bad and what news is good. Companies struggling could mean more bailouts. ompanies doing well could mean special taxes. Unemployment rising could mean more money printing. Unemployment falling could mean inflation. Avoiding tax increases means a rising budget deficit. The solution to too big to fail is to force mergers and acquisitions. Attempting to deal with too much debt, the world has taken on more. Free trade agreements have turned out to be barriers to trade. Bank competition policies benefit the big four. It seems like all the noteworthy action of the past few years has been ironic, oxymoronic or plain moronic. Politicians must feel like their two armed economists have put on boxing gloves. Let's start with the news that free trade agreements are barriers to trade. Sounds strange. But it's just a prime example of the unavoidable contradiction in having government action associated with the free market. They are diametric opposites. So, when you have government actively promoting free trade, you actually get "reduced trade by introducing complex rules..." It shouldn't take a year long study by the Productivity Commission to figure that out. Free trade is the absence of governments and their "agreements". But some people just have to learn things from experience. Like the US government. It is intent on running its own finances into the ground (or stratosphere, if you prefer). And it's really starting to cost them. Even a deer with no eyes and no legs can see that deficits aren't sustainable. Moodys had no eye deer leading up to 2007, but is rattling its sabre now. Yes, the beratings agency has stepped up to the plate and declared the Aaa rating of US Treasury debt is at risk if the President gets his tax and unemployment benefit package to become law. (It since has.) Moody's statements could be mere attention seeking from the formerly revered bond ratings agency. Or it could be a political move against the new legal requirements being put on ratings agencies by the government. Either way, having the world's "risk-free" asset downgraded would be quite an eye opener. Fund manager Jim Leaviss has an entire list of nations he says will be losing their AAA ratings. France is next and the US will follow after 2011. Closer to home So far, Australia hasn't made the headlines like its distant cousins in the US and Europe. Well, not for the bad reasons anyway. But thinking that the Land of Oz will be spared an economic rout is wishful thinking. After all, we also strayed from the yellow brick road known as the gold standard. Yes, if you take part in the boom, you must take part in the bust. One sector to struggle, according to Jonathan Mott from UBS, will be the banks: "Eventually an ADI (authorised deposit-taking institution) in Australia will fail. It is inevitable at some stage. This will happen." The reason is affordability of housing. That probably means Mr Mott expects a housing crash. Enter the latest doomed government policy. Actually, an entire collection of them. It turns out that the Aussie banking industry's costs do not run parallel to the RBA's targeted cash rate (the one you hear about on the news). NAB's CEO confused everyone with his explanation, but it seems to imply that when the RBA raises rates, banks do to. And when overseas borrowing costs rise, banks raise their rates too. Win-win is the business model. You just pick and choose the most beneficial rate for you... if you're a banker. Because the RBA was one of the first central banks to raise rates after 2008, banks here followed them up. That gave the perception that Aussie banks mirror the RBA's rate. Now that foreign borrowings are getting expensive, the rates continue rising beyond the RBA's. Of course, such "super profits" don't go unnoticed. So the government has set out to introduce more competition. The resulting legislation was described as "a major win for the major banks" by a Credit Suisse broker. Oops. Not deterred by their failure, politicians' sentiment is now turning towards taxing the banks in a similar scheme to the one that proved so popular previously. Super Profits Tax 2 could be in the making. The bank shares are getting slapped around by the market, which no longer knows if profits are a good or bad thing. Another story to add to the Australian banking confusion is the introduction of covered bonds. These could lower the cost of capital for banks by 40%. Sounds good, but what are they? Have a look at Dan Denning's Monday article for an explanation. The point being that this is not good for depositors. Especially if Leaviss is right about the failure of an ADI. Then again, there is deposit insurance now too. And the definition of "banks" is being widened, which is a crucial change in terms of regulatory and policy implications. This whole banking thing is getting very complicated. Some government policies are fighting banks, some are rigging the game in their favour, and nobody is quite sure which does which. Bungling bonuses What does it look like when governments stand up to big bonus bankers? Funny and scary at the same time. John Foy, formerly from Allied Irish Bank, won a case against his employer, which attempted to suspend his 2008 performance bonus. "However, [the bank] reconsidered its position following a letter from the Irish finance minister Brian Lenihan." That's right, the Irish government can now not only decide how much people get paid, but do so retrospectively. Fed-funds-gate Here is a rather odd thought for you: What if the Federal Reserve goes bankrupt? It sounds rather stupid, but think the process through. Tyler Durden at Zerohedge.com calculated the Federal Reserve's loss in one day to be $8 billion due to falling bond prices. (The losses were unrealised.) If rates continue to rise and bond prices continue to plunge, whether out of economic growth or inflation, the Fed is in a pickle. If the Fed realises its losses in an attempt to reverse its inflationary policies of the past, it will amount to one hell of a loss. And the Fed is supposed to fund itself, so as not to be subject to Congress's budgetary restraints. To deal with such a situation, the Fed could of course print more money. But that leads to more inflation. Which exacerbates the initial problem. Unemployment and Employment As Christmas cheer fills your homes, don't forget to think of those less fortunate. The Americans. More specifically, the un and underemployed Americans. Here are the figures of the number of employed Americans over time: 2007 - 146.0m 2008 - 145.5m 2009 - 139.9m 2010 - 138.9m Did you pick up on the trend? Seriously Constitutional Can the government force you to buy something? It can tax you, so why not? That's probably what the gaff proned Nancy Pelosi, speaker of the US house of Reps, thought when she answered this question: CNSNews.com: "Madam Speaker, where specifically does the Constitution grant Congress the authority to enact an individual health insurance mandate?" Pelosi: "Are you serious? Are you serious?" CNSNews.com: "Yes, yes I am." So now a judge has shown the constitution is serious too and declared the key part of the legislation as unconstitutional. The implication of this is a little bit problematic. Health insurers can't turn people down based on pre-existing conditions, but people don't have to have healthcare. So now people will simply get healthcare the day they get sick. And the insurance companies the bill was intended to help (ahem) are now in a spot of bother. Of course, two judges have previously held the provision to be fine, so the Supreme Court is expected to confirm it too. Inflation The acceptable version of inflation for classrooms contends that all prices rise simultaneously, so that inflation doesn't harm anyone. As ridiculous as this sounds, many still believe it. The Austrian School of Economics has long contended that inflation spreads through an economy like a ripple in a pond. And it begins where it would logically begin - where the money flows to when the Fed prints it. Of course, those who receive that money get to spend it at the full purchasing power, while those who receive it last experience the adjusted higher prices. Wikipedia lists the following as primary dealers, which means they receive the Fed's freshly created money first. Goldman, Sachs & Co. Bank of America Securities LLC J. P. Morgan Securities Inc. Morgan Stanley & Co. Incorporated Citigroup Global Markets Inc. Barclays Capital Inc. Credit Suisse Securities (USA) LLC Deutsche Bank Securities Inc. HSBC Securities (USA) Inc. RBS Securities Inc. UBS Securities LLC. & more Oh, sorry, a bit of a glitch. That is the list of banks who received Treasury bailouts and/or assistance from the Federal Reserve. No, wait, it is the right list. It just includes the very same banks. What a coincidence! Yes, it's the bonus binging, self destructive, too fat to fail bankers who get the money at unadjusted prices. And the last to receive the new money are of course the poor. As mentioned, by this time, prices have risen. Now bankers can pay themselves what they like and it's the shareholder's and customer's responsibility to hold them accountable. But a hidden transfer of wealth that is inherent in the system is morally wrong. And it's a very powerful one. The bankers not only avoid higher prices, they also get to invest the funds they borrow at prices that will increase as an inherent cause of the money being created. To put it simply, they are the casino and not a gambler in it, as they would have you believe. The central bank is the institution that rigs the game. But, not content with their institutionalised advantage, banks use their subsidised clout to manipulate markets as well. The conspiracy theory about JP Morgan and the silver market has turned out to be based on several truths. You can read about the fallout here and here. End the Fed A point we missed last week: The one and only politician we want to see staying a politician has been appointed to head the Domestic Monetary Policy Subcommittee, which means he will be overseeing the Federal Reserve. It was best described by Darryl Schoon of www.drschoon.com: "Ron Paul's appointment to oversee the Federal Reserve is tantamount to King George III appointing George Washington to oversee England's colonial affairs in 1775." Heh. Anyway, a big congratulations from us here in Australia. We look forward to watching Dr. Paul tear into Bernanke in the more frequent hearings he plans to hold. If you don't know much about Dr. Paul, simply search for him on Google, Youtube or click here. Similar Posts: Keynesian Economists Bluff in Global Economic Gamble George Bush Speech Sounded Like an Edition of the Daily Reckoning Gold Market Was Looking for an Excuse for a Breather Warren Buffett Says American Economy is a Shambles RBA Buys $780 Million in Residential Mortgage-Backed Securities
Weekly Gold Update Posted: 17 Dec 2010 11:16 AM PST Super Force Signals A Leading Market Timing Service We Take Every Trade Ourselves! Email: trading@superforcesignals.com trading@superforce60.com Weekly Market Update Excerpt Dec. 17, 2010 Gold and Precious Metals US Dollar Chart US Dollar Analysis: The Dollar rally has just begun.  Distribution is already occurring! Fiat currency is the crown jewel of socialism. The Dollar is socialism.  That is the structure of the beast. I am active in my community.  Help those fighting fiat. Gold Bullion.  6 Month Price Chart Gold Bullion Analysis: Gold has a solid Super Force Buy Signal from me on Friday Nov. 12th. Gold is experiencing a sideways correction. My intermediate target is 1260. We should see Gold rise 100% in the coming 12 months. Own a lot of gold now.  Own more at 1260. Gold Bullion.  One Year Price Chart: I continue to be impressed with volume.  Gold Bullish! Price seems to need to come down harder yet is not doing so. That fact is bullish for your gold positions! Gold Juniors Chart Super Force Gold Juniors Analysis. I issued a Sell on Friday Dec 3rd to you.  Now I am buying and signalling you to do the same. From the lows of summer to recent highs, gold is up 23%. The GDX is up over 38%. GDXJ is up 78% ! Junior Miners are where your future bullion will be found. Invest in real assets.  Book profits on a portion  regularly. GDX 9 Month Chart. GDX.  Massive Breakout On 3 Year Chart Super Force Gold Stocks Analysis: I issued a GDX sell  to you at $62.73. Gold bullion bounced quickly from 2008 because it is a currency. Gold companies went through a rebuilding process. Gold is up (last three years) approximately 70%.  GDX is up 40%.  These are not normal times, so the GDX to bullion non-confirmation that occurred earlier was not abnormal. GDX should outperform Gold by approximately 60% from here.  If Gold goes to $2000 per ounce GDX should be trading at $100. Silver Chart Super Force Silver Bullion Analysis I issued a sell to you at $29.15. I added to positions of physical silver at the spot price of exactly $25.00, which is the low of the correction. Silver also seems to need to correct, yet has not done so to date. Like the gold market, the volume patterns in silver indicate this could  be a short lived correction. You must be a buyer of weakness. There seem to be lines being drawn in gold community amongst those saying sell now and those saying prepare now for vastly higher prices.  So be it. I want you in the prepare now for higher prices camp! Unique Introduction for Web Readers: If you send me an email to alerts@superforcesignals.com I'll send you 3 of my Super Force Surge Signals, as I send them to paid subscribers, to you for free!  Serious investors of size are taking notice of Super Force, and joining the party.  I have now added a daily video summary for the gold markets to both the websites.  I run a substantial manufacturing company so I take improvement (and making money) seriously.  Notice the new crystal clear format of my written updates to save you time.   Send me your email address to: alerts@superforcesignals.com and I'll be sure you are on my free signals hotlist!   The SuperForce Proprietary SURGE index SIGNALS: 25 Surge Index Buy or 25 Surge Index Sell: Solid Power. 50 Surge Index Buy or 50 Surge Index Sell: Stronger Power. 75 Surge Index Buy or 75 Surge Index Sell: Maximum Power. 100 Surge Index Buy or 100 Surge Index Sell: "Over The Top" Power. Stay alert for our surge signals, sent by email to subscribers, for both the daily charts on Super Force Signals at www.superforcesignals.com and for the 60 minute charts at www.superforce60.com About Super Force Signals: Our Surge Index Signals are created thru our proprietary blend of the highest quality technical analysis and many years of successful business building.  We are two business owners with excellent synergy.  We understand risk and reward.   Our subscribers are generally successful business owners, people like yourself with speculative funds, looking for serious management of your risk and reward in the market.   Frank Johnson: Executive Editor, Macro Risk Manager. Morris Hubbartt: Chief Market Analyst, Trading Risk Specialist. Email:   trading@superforcesignals.com trading@superforce60.com
Expert Addresses Rare Earth Element Supply Hysteria Posted: 17 Dec 2010 08:51 AM PST The Gold Report submits: 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), Dr. Bill Bird 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 earths, with new companies popping up almost weekly. Why has supply dominated REE conversations among resource investors in the past year? Complete Story »
Euro Resilience Fading Posted: 17 Dec 2010 08:50 AM PST Marc Chandler submits: The EU Summit may have ended, but the European debt crisis has most certainly not. What does it really matter to current investors, under mark-to-market pressure that the European officials have agreed to some wording changes in their Treaty to allow for a permanent crisis facility at the end of 2013? Even the aid packages for Greece and Ireland have not stabilized their situations as Moody's 5-notch cut in Ireland's debt rating to Baa1 and a negative outlook today illustrates. Recently Moody's also put Greece (and Spain) on credit watch for a possible downgrade. European officials do not appear to have taken any fresh initiatives to address the current pressures. It is disappointing and there is a price to pay for that disappointment. In the first instance the high debtors in the union will pay higher yields and all the ramifications in terms of debt serving costs and growth retardant. It also would seem to increase the likelihood that investors judge Portugal as ill-positioned to stand alone. While the data is far from transparent, it appears that Portugal has about 11 bln euros of maturing sovereign debt in Q1 11. The ECB's efforts may be helping to keep rates from rising too much, but there are limits on its ability as rise in Irish and Greek bond yields indicate. Other euro zone countries, including Spain, Italy and Belgium, have relatively large sums to fund in Q1 11 as well. In about a month's time, a newer bond issuer will appear on the stage. Reports indicate that the EFSF is preparing a 5 bln euro offering in the second half of next month. More immediately, on Monday the market will learn the size of the ECB's recent bond purchases. The market has been generally disappointed with the size of the the recent bond purchases even though they increased from a low base, but impressed the impact. Next Wednesday the ECB will offer an unlimited amount of 3-month money. This could catch some market participants who don't follow the minutia unaware because the next day the are around 200 bln euros or repos expiring, including the last of the 12-month funds. Interpolating from prices in the forward market, there is increasing concern about dollar liquidity, where non-U.S. banks are swapping euros for dollars. The euro has been quite resilient to developments today. It is true that the German IFO is at record highs. But this was already largely hinted at by the robust manufacturing PMI earlier in the week and the strength of the German economy is well known and appreciated. Moreover, the ECB's monetary policy setting may be too easy for Germany. Liquidity and year-end thin markets and position squaring may dominate until the new year. I suspect the euro bounce in Asia and Europe will be short-lived and look for the North American market to sell into the euro's gains today. The dollar is stronger than the euro's performance would suggest. It is slightly firmer against the dollar-bloc and sterling, and essentially flat against the yen. Disclosure: No positions. Complete Story »
Inflation Scorecard: Gold's Mixed Performance Posted: 17 Dec 2010 08:44 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 »
More Ideas For 'Contango-Free' Commodity Access Posted: 17 Dec 2010 08:33 AM PST Michael Johnston submits: With the finish line in sight, 2010 has been a generally solid year for commodities as an asset class; strong demand from emerging markets, a shaky dollar, fears about inflation, and a number of supply issues have conspired to send prices of everything from corn to gold to sugar skyward. Despite the impressive performance from a number of different commodities, inflows into commodity ETFs have been light in 2010. After more than $30 billion flowed into commodity ETPs in 2009, inflows through the first 10 months totaled only about $10 billion – almost all of which was attributable to physically-backed gold products. Part of the explanation for the relatively slow weak inflows may be related to frustrations with the performance of certain futures-based products. The underlying holdings of most commodity ETFs are not the actual commodity, but rather futures contracts written on the specified resource (currently, all physically-backed U.S. commodity ETFs hold precious metals: Gold, silver, platinum, and palladium). As such, the returns on these products depend not only on changes in the spot price of the commodity, but also on the slope of the futures curve. When markets are in contango, longer-dated contracts are more expensive than those approaching expiration, and returns to a futures-based strategy can lag far behind a hypothetical return on the commodity’s spot price. Complete Story »
This little-known mistake is pushing America toward collapse Posted: 17 Dec 2010 07:57 AM PST From Gonzalo Lira: You know how when you're pushing against something heavy and unyielding—a heavy door, say, or maybe a car stuck in a ditch—and all of a sudden, the thing you were pushing against abruptly yields? What happens? Why, you fall forward, of course. Especially if you've been pushing for a good long while: You were so hell-bent on pushing at the thing—the car stuck in the ditch, the heavy door that wouldn't budge—that when it finally does move, you over-balance. You fall forward. You might even trip up. You might even fall on your face—and painfully, at that. This is what's happening to the United States: After the long struggle of the Cold War, America is falling forward. And this falling forward is turning into an epic tragedy... Read full article... More government stupidity: A terrible decision is destroying America END GAME: The Federal Reserve is now bailing out the world If you're under 30 years old or have children, you've got to see this
Must-see chart says the recovery could be over Posted: 17 Dec 2010 07:56 AM PST From Zero Hedge: Every massive inventory accumulation.... has an equal and opposite effect on GDP. To all those who snickered at the earlier chart of the Baltic Dry Index, we recommend you read the following brief blurb from Nordea, whose implications may put everything you have heard about a surge in GDP in Q4 and Q1 (primarily from the Goldman bull brigade) in a just slightly different light. Cargo stagnation We have understood that Chinese cargo ships have been told to proceed at 'wind speed', because of a collapse in US import demand - this is partly visible in the activity amongst Long Beaches shoremen - hence, is this the final proof that the inventory rebuild that drove the recovery in the autumn is OVER? Read full article (with chart)... More on the economy: Porter Stansberry: The next phase of the debt crisis is here TIPPING POINT: A financial collapse could be closer than ever Tax horror: These states will have the highest tax burdens under Obama's new plan
Oil and Gold Commitment of Traders Tell a Story Posted: 17 Dec 2010 07:48 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! Crude Oil Futures Trader Type Long Positions Short Positions Net Producers/Merchants 217,821 381,387 Short: 163,566 Swap Dealers 219,864 247,981 Short: 28,117 Managed Money 249,262 56,214 Long: 193,048 It appears that "Managed Money" is betting against the "Producers." Now here is a game that I want to watch! Complete Story »
Today in Commodities: Plenty of Interest Posted: 17 Dec 2010 07:33 AM PST Matthew Bradbard submits: Based on the market action today, there does not seem to be any slow down or lost interest in the commodity sector. Oil is still range-bound, trying to decide a direction from here. Our bias remains to the downside, but we’ve moved our target in the February contract from $85 to $86. After a near 15% correction, it may be time to explore outright longs. Our clients took a loss on their futures spreads. If we see the lows that previously held just below $4 we may start to explore bull call spreads and long futures with tight stops … stay tuned. As we’ve voiced all week, we’ve yet to suggest outright shorts but some of our more aggressive clients have started to purchase March ES put spreads. The dollar index has started to signal that we may get an upward move from here, but we suggest waiting for confirmation into next week. We’ve yet to make a play for clients but shorts in the pound, Swissie and Loonie are on our radar … stay tuned. Complete Story »
Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week Posted: 17 Dec 2010 07:14 AM 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%.
Gold Investors: Forget about Bond Yields Posted: 17 Dec 2010 07:12 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 »
Did The Price Of Oil Help Cause The Financial Crisis Of 2008? Will Surging Oil Prices Soon Spark Another Financial Crisis? Posted: 17 Dec 2010 07:09 AM PST Oil prices are starting to spin out of control once again.  In London, Brent North Sea crude for delivery in February hit 91.89 dollars a barrel on Friday.  New York crude moved above 88 dollars a barrel on Friday.  Many analysts believe that 100 dollar oil is a virtual certainty now.  In fact, many economists are convinced that oil is going to start moving well beyond the 100 dollar mark.  So what happened the last time oil went well above 100 dollars a barrel?  Oh, that's right, we had a major financial crisis.  Not that subprime mortgages, rampant corruption on Wall Street and out of control debt didn't play major roles in precipitating the financial crisis as well, but the truth is that most economists have not given the price of oil the proper credit for the role that it played in almost crashing the world economy.  In July 2008, the price of oil hit a record high of over $147 a barrel.  A couple months later all hell broke loose on world financial markets.  The truth is that having the price of oil that high created horrific imbalances in the global economy.  Fortunately the price of oil took a huge nosedive after hitting that record high, and it can be argued that lower oil prices helped stabilize the world economy.  So now that oil prices are on a relentless march upward again, what can we expect this time? Well, what we can expect is more economic trouble.  The truth is that oil is the "blood" of our economy.  Without oil nothing moves and virtually no economic activity would take place.  Our entire economic system is based on the ability to cheaply and efficiently move people and products.  An increase in the price of oil puts inflationary pressure on virtually everything else in our society.  Without cheap oil, the entire game changes. The chart below shows what the price of oil has done since 1996 (although it doesn't include the most recent data).  With the price of oil marching towards 100 dollars a barrel again, many people are wondering what this is going to mean for the U.S. economic "recovery".... Just think about it.  What is it going to do to U.S. households when they have to start spending four, five or even six dollars on a gallon of gas? What is it going to do to our trucking and shipping costs? What is it going to do to the price of food?  According to the U.S. Bureau of Labor Statistics, food inflation in the United States was already 1 1/2 times higher than the overall rate of inflation during the past year.  But that is nothing compared to what is coming. During 2010, the price of just about every major agricultural commodity has shot up dramatically.  These price increases are just starting to filter down to the consumer level.  So what is going to happen if oil shoots up to 100, 120 or even 150 dollars a barrel? Demand for oil is only going to continue to increase.  Do you know who the number one consumer of energy on the globe is today?  For about a hundred years it was the United States, but now it is China.  Other emerging markets are starting to gobble up oil at a voracious pace as well. Not that the price of oil isn't highly manipulated.  Of course it is.  The truth is that the price of oil should not be nearly as high as it currently is.  Unfortunately, you and I have very little say on the matter. If the price of oil keep going higher, it is really going to start having a dramatic impact on global economic activity at some point.  Meanwhile, oil producers and the big global oil companies will pull in record profits, and radical "environmentalists" will love it because people will be forced to start using less oil. When it comes to oil, there are a lot of "agendas" out there, and unfortunately it looks like the pendulum is swinging back towards those who have "agendas" that favor a very high price for oil. So what does that mean for all of us? It is going to mean higher prices at the pump, higher prices at the supermarket and higher prices for almost everything else that we buy. If the price of oil causes a significant slowdown in economic activity, it could also mean that a whole bunch of us may lose our jobs. In an article that I published yesterday entitled "Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Than Ever", I didn't even mention that price of oil.  There are just so many danger signs in the world economy right now that it is easy to overlook some of them. Yes, it is time to start ringing the alarms. The ratio of corporate insider stock selling to corporate insider stock buying is at the highest it has been in nearly four years.  This is so similar to what happened just prior to the last financial crisis.  The corporate insiders are seeing the writing on the wall and they are flocking for the exits. Many savvy investors are getting out of paper and are looking for hard assets to put their money in.  For example, China is buying gold like there is no tomorrow.  The Chinese seem to sense that something is coming.  But of course they are not alone.  All over the world top economists are warning that we are flirting with disaster. On Friday, Moody's slashed Ireland's credit rating by five notches to Baa1, and is warning that even more downgrades may follow. Just think about that for a moment. Moody's didn't just downgrade Irish debt a little - what Moody's basically did was take out a big wooden mallet and pummel it into oblivion. Irish debt is now considered little more than garbage in world financial markets now.  Unfortunately, Greece, Spain, Portugal, Italy, Belgium and a bunch of other European nations are also headed down the same road. The truth is that the euro is much closer to a major collapse than most Americans would ever dream. The world financial system is teetering on the brink of another major financial crisis, and rising oil prices certainly are not going to help that. If the price of oil breaks the 100 dollar mark, it will be time to become seriously alarmed. If the price of oil breaks the 150 dollar mark in 2011 it will be time to push the panic button. Let's hope that the price of oil stabilizes for a while, but unfortunately that is probably not going to happen. The truth is that the economic outlook for 2011 is bleak at best, especially if the price of oil continues to skyrocket.
COT Silver Report - December 17, 2010 Posted: 17 Dec 2010 06:33 AM PST COT Silver Report - December 17, 2010
Michael Victory &#8211; Idols Of The Unaware Posted: 17 Dec 2010 05:19 AM PST Idols Of The Unaware Does the average person understand what Ben Bernanke and central bankers globally are doing to money? Do they realize the incredibly high rate of inflation that is 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 prices of food and energy. What? The cost of food and energy are not considered by government standards 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 printed to "monetize" the debt. Quantitative easing and monetizing debt 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. This will cause the inflation to occur at an alarming rate. Drink Upstream Francis Bacon urged people to reexamine previously accepted knowledge, and believed people should attempt to liberate theirminds of the assorted idols. Bacon encouraged individuals to develop an alternative method of thought (Ozmon & Craver, 2008). Is there is a chance the idea of massive 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. This is indeed a time in our history to heed Francis Bacon's remarks, to free our minds and think independently. In an effort to protect against the prospect of inflation, perhaps trading in some of those dollars for some junk silver wouldn't be a bad idea. Ozmon, H. A. & Craver, S. M. (2008). Philosophical foundations of education (8th ed.). Upper Saddle River, NJ: Pearson/Merrill Prentice Hall. ~Michael Victory
How Leveraged Is JP Morgan? Posted: 17 Dec 2010 05:02 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 Supported in 2011 by Concerns About Currencies and Government Bonds Posted: 17 Dec 2010 01:32 AM PST
Abigail Doolittle &#8211; The Future of the Liquidity Rally Posted: 17 Dec 2010 12:30 AM PST In this week's "Weakly Peak" Abigail Doolittle reflects on the future of the current rally suggesting it might lie with the U.S. dollar since it is most accurately the easy U.S. dollar rally. This week's highlights: Based on a Triangle pattern that has been forming over the last nearly three years in the dollar index, I am inclined to believe the dollar will trade down to somewhat sideways for next two to three quarters. This pattern and the dollar is likely to make a break down and this implies that the Fed's policy of easy money may continue for some time. The liquidity rally assets seem poised to trade sideways to slightly up for the next two to three quarters before really turning up. Because this rally is an artificial creation of the Fed, it will derail itself when the finite nature of the Fed's balance sheet and the financial system itself sets in. DOWNLOAD THE FULL 12.17.10 WEEKLY PEAK – PDF
Silver at $40 Will Be Best Metals Performer in 2011 Posted: 16 Dec 2010 08:34 PM 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 average with some authority. By lunchtime two hours later, gold had gained back about eight dollars, before trading sideways into the close of electronic trading at 5:15 p.m. Eastern. Here's the New York spot gold price chart on its own.  One has to wonder what not-for-profit seller would dump a position in such a manner.... and I doubt that someone was going short at that particular juncture.  I would guess that it was one of the bullion banks pulling their bids... forcing whatever sellers there were, to sell into a price vacuum.  There was also a violent 35 basis point dollar rally around this time, but it didn't exactly coincide with this drop in the gold price.  More on that further down. The silver price graph looked pretty much like the gold price chart.  The big difference was that silver closed in slightly positive territory... while gold was down about ten bucks on the day.  Silver's high price [like gold's] was also set in London at 9:00 a.m... around $29.20 spot... with the low also coming at the London p.m. gold fix minutes after 3:00 p.m. in London... minutes after 10:00 a.m. in New York.  The low price print of the day was $28.32 spot. Silver's 50-day moving average currently sits at $26.19 spot... a long way down from yesterday's closing price of $28.88 spot... and the current Far East price in Friday morning trading as I write this paragraph. The world's reserve currency didn't do much of anything yesterday... declining about ten basis points between the Thursday open in the Far East and about 9:50 a.m. in New York.  Then, in the space of fourty minutes, the dollar jumped up about 30 basis points... and has been in a gentle decline since then... closing down about 25 basis points on the day. As I mentioned earlier, the big drop in the gold price just before the London p.m. gold fix... and this dollar rally... didn't exactly coincide.  I would say that there wasn't any co-relation between the dollar and the gold price yesterday, unless it happened by accident. The gold stocks bottomed minutes after gold hit its low of the day.  Then the shares struggled for the rest of the New York trading session... but did finish off their lows.  The HUI finished down 1.66%.  The silver shares, despite the strong close of the metal itself, were decidedly mixed on the day. The CME's Delivery Report on Thursday showed that 33 gold and 28 silver contracts were posted for delivery on Monday.  The 'action'... such as it was... is linked here. The GLD ETF was down again yesterday.  This time it was 78,100 ounces.  The SLV ETF had no report. While I'm talking about these two ETFs, Ted Butler pointed out that there was a big drop in the SLV short position as reported by the good folks over at shortsqueeze.com.  The current short position [as of about ten days ago] now sits at 12.1 million ounces.  That's down 32.5% from what it was in the reporting period before that.  In the GLD ETF... the short position there is 2.0 million ounces of gold... up 2.9% from the prior reporting period.  The link to the SLV stats are here. There was no sales report from the U.S. Mint on Thursday. But there was a big silver withdrawal from the Comex-approved depositories on Wednesday... the biggest draw-down I've seen in a while... 1,782,039 ounces.  All the withdrawals were from either Brink's, Inc. or HSBC USA.  The link to the action is here. Sponsor Advertisement Bayfield Ventures Corp. (TSX.V: BYV) is exploring for gold in the Rainy River District of NW Ontario. The Company's "Burns" Block property adjoins the immediate east of Rainy River Resources' (TSX.V: RR) world-class gold deposit which includes 2.37 million ounces Au at 1.3 g/t indicated in addition to 2.66 million ounces Au at 1.2 g/t inferred. Bayfield is presently exploring the known eastward extension of Rainy River's main ODM17 gold zone onto the Burns Block. The Company is delineating both lower grade, bulk-tonnage gold mineralization as well as higher grade gold zones with drill results right in line with Rainy River's. Two of the more notable holes intersected 81 metres of 5.08 g/t Au including 35.93 g/t Au over 10.0 metres, and 31.71 g/t Au over 3.0 metres within 9.0 metres of 12.88 g/t Au. Bayfield also holds a 100% interest in two other properties in the Rainy River District. Claim blocks "B" and "C" are well located to the immediate east and west (respectively) of Rainy River Resources' #433 and ODM17 gold zones. The early success of the current 50,000+ metre drill program is very encouraging and much more drilling will be carried out on Bayfield's Rainy River properties. Please visit our website to learn more about the company and request information. ¤ Critical Reads Subscribe U.S. Commodity Regulator Delays Speculation Caps Plan Well, the CFTC's meeting on Thursday ended suddenly with the main issues not really resolved.  I listened to a Bloomberg interview with CFTC Chairman Gary Gensler... and I got the distinct impression that the meeting was ended because the silver position limit issue had reached an impasse.  A rock had come up against a very hard place... and no one was blinking.  So Gensler ended the meeting rather than put it to a vote.  He was careful to point out on a couple of occasions during the press scrum that followed, that although the meeting was over... this issue was still very much on the table. Ted Butler made it absolutely clear to me yesterday that the bone of contention was 100% the silver position limits issue... and I agree totally.  He also said that whatever stories that showed up in the main-stream media on this issue, would not reflect the titanic forces that ran head-on into each other at this historic meeting yesterday.  But, as Ted said, they now both know exactly where each other stands. Gensler, who is nobody's fool, tried to do all of this above board and attempt to reach a consensus... but, when push became shove, the 'fine folks' at the CME and JPMorgan/HSBC circled the wagons.  Both Gensler and CFTC Commissioner Bart Chilton tried to put as positive a spin on it as they could... but the fight is now on. The linked Bloomberg story is headlined "U.S. Commodity Regulator Delays Speculation Caps Plan".  After you've read the story, you can click on the video tab and listen to what both CFTC Chairman Gary Gensler and Commissioner Bart Chilton had to say.  This story is worth spending some time on... and the link is here.  I thank Florida reader Donna Badach for digging this up. View full GSD edition OCC Derivatives Graph 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 Comptroller of the Currency] latest derivatives report.  Basically JPMorgan and HSBC are the derivatives market in precious metals in the U.S.A.  Their respective Comex futures short positions in both silver and gold reflect their derivatives positions almost exactly. Click here to enlarge. View full GSD edition Bernanke's Problem The next story I have for you today is courtesy of Australian reader Wesley Legrand.  It's a short piece by Alasdair Macleod that's headlined "Bernanke's Problem"... and is posted over at financeandeconomics.org.  Normally I wouldn't give a piece like this more than a passing glance, but this one is different.  It's right on the money... and extremely well written.  I  totally agree with the author's conclusions.  It's worth a read... and the link is here. View full GSD edition Eurozone debt crisis spreads to Belgium on rising political risk Over the last year or so, I've been mentioning Belgium more and more frequently.  In the last couple of weeks, the country's problems have really come to the fore... and are getting a lot of ink over in Europe.  I have two stories on that.  The first is from reader Roy Stephens... and it's an Ambrose Evans-Pritchard offering out of Wednesday's edition of The Telegraph.  If you don't know much about the history [and politics] of Belgium.. this [and the following] story are very much worth your time.  This first story is headlined "Eurozone debt crisis spreads to Belgium on rising political risk"... and the link is here. View full GSD edition Interview with Flemish Separatist De Wever: 'Belgium Has No Future' The second story on Belgium is also from reader Roy Stephens.  This one was posted yesterday on the German website spiegel.de.  Six months after the general election, Belgium still has no new government. Flemish nationalist Bart De Wever, head of the country's largest party, wants to split Belgium into two states. In an interview that has caused a scandal in his country, he told SPIEGEL why the nation has "no future".  The headline reads Interview with Flemish Separatist De Wever: 'Belgium Has No Future'.The map and graph are wonderful... and I suggest that you put this on your must read list.  The link is here. View full GSD edition Saving the Common Currency: German Obstructionism Heightens Euro Fears Here's another spiegel.de offering from reader Roy Stephens.  This one is headlined "Saving the Common Currency: German Obstructionism Heightens Euro Fears".  All eyes are on Brussels as European leaders gather to discuss ways to solve the ongoing euro crisis. So far, though, German Chancellor Angela Merkel has proven unwilling to consider measures that may require additional German funds. Others in the EU are getting anxious.  The link to the story is here. View full GSD edition Silver at $40 Will Be Best Metals Performer in 2011 My remaining stories are all precious metals related in one form or another.  The first is a silver story from Bloomberg that's courtesy of reader Scott Pluschau.  I love the headline, which reads "Silver at $40 Will Be Best Metals Performer in 2011".  The question that's crossing my mind right now is... how much higher than $40 will silver be at the end of next year?  The link is here. View full GSD edition
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