Gold World News Flash |
- More Determined Bear Raids on Gold and Silver
- The Value Case for Silver
- Silver Stockpiling Ahead of When M0 Becomes M2
- Commodities Continue to Sizzle in 2010
- Suddenly, Gold Becomes a Pariah
- China Devalues US Buying Power By 30%
- Crude Oil Falls on China Rate Hike Fears, Gold Plunges Below Support
- Gold Seeker Closing Report: Gold and Silver Fall Almost 2% and 5%
- Payday for our Silver Trade
- From Squeeze to Crush (Part One of Two)
- In The News Today
- Hourly Action In Gold From Trader Dan
- Jim?s Mailbox
- Open Interest Shows Speculators Have Reduced Gold and Silver Positions
- Buying Gold and Silver in the Dips
- Bill Kristol Ponders a New Gold Standard
- California Governor Declares Fiscal Emergency...
- Inflationary Guerilla Tactics Resume As Comex, Nymex Hike Margins On Gold, Silver, Cracks, Spreads And Other Products
- The Biggest Lie in Finance Today
- The Gold Price Lost $23.70, a New Low for the Move
- The Surprising Price of Wheat
- Solidarity with Reykjavik, Dublin, Athens, London and Tunis is what the global Silver revolution (the most important of all the color revolutions) is all about.
- Why Retirements Are Going Bust, Again
- Gold to 2011 Lows
- Silver Spreads: Contango Crush Update
- Rhodium Under Valued and has Low Correlation with Gold and Silver Trends
- The Oddly Symbiotic Relationship Between the US and China
- THURSDAY Market Excerpts
- Another Consequence of Zero Interest Rates
- Economic Collapse Scenarios That We Could Potentially See In 2011
- The 97% Elephant in the Room
- Golden wall of worry
- Gold Daily and Silver Weekly Charts
- Sovereign debt problems worsen, support metals, Turk tells King World News
- Tunisia Central Bank Admits It Is Missing 1.5 Tons Of Gold
- Analyst: “Gold: medium term choppy, long term bullish”
- What Will They Tax Next? Is This What's Coming?
- GATA participates in Vancouver and London conferences this month
- How to Get the US Back to Full Employment in 30 Days
- Alasdair Macleod: Chinese puzzles
- Another Consequence of Zero Rates
- Gold to perform as U.S. and China take contrary paths
- Panic Selling Hit SP500 Today, Silver and Gold Are Next!
- China’s Economy is Still Soaring
- Propaganda and Rigged Markets
- Why the Fed Creates So Much Money
- US Mint Sales: Silver Eagles Hit New Monthly Record
- Silver: Overdue for a Correction
- Why Gold Is a Better Currency Indicator Than the U.S. Dollar Index
- NVE CEO Discusses F3Q2011 Results – Earnings Call Transcript
| More Determined Bear Raids on Gold and Silver Posted: 20 Jan 2011 07:47 PM PST More determined bear raids today, winnowing out the weak hands, the overleveraged, and the speculators. Look for silver to hold the most resilience and snapback on the shorts, as the shortage in wholesale supply continues to deepen. Remember that January 26th is the option expiration at the Comex.
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| Posted: 20 Jan 2011 07:29 PM PST The prices for commodities can change quickly and wildly, and in many cases, investors can hold commodities for years without any realization of profits. The wild cyclicality is what has kept many out of the commodities markets, and it is the reason why so many value investors choose to ignore commodities as a broad investment alternative. In respectful disagreement, making the case for a value investment in silver is a cakewalk at worst.
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| Silver Stockpiling Ahead of When M0 Becomes M2 Posted: 20 Jan 2011 07:27 PM PST Silver investors who have been stockpiling physical silver on massive global changes in monetary policy have been a bit ahead of themselves. While the fear of inflation exists in very broad detail, the realizations of inflation have yet to show themselves.
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| Commodities Continue to Sizzle in 2010 Posted: 20 Jan 2011 06:06 PM PST If 2009 was a recovery year for commodities, 2010 was the year they regained their crown. The Reuters-Jeffries CRB Index jumped 17.44 percent in 2010. Combined with 2009's 24 percent gain, the CRB has climbed nearly 45 percent off 2008 lows. Twelve of the 14 commodities we track were in positive territory in 2010 and nine of them saw gains exceeding 20 percent. That's in stark contrast to the bloodshed of 2008 when gold was the only commodity not in the red.
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| Suddenly, Gold Becomes a Pariah Posted: 20 Jan 2011 06:01 PM PST They're they go again! No sooner had we finished praising the Wall Street Journal for a blunt assessment of the coming train wreck in muni-bonds than they do a hit-job on gold. The article, which appeared in Thursday's editions, practically exhausted the inventory of clichés employed by establishmentarians these days to put the knock on the yellow stuff.
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| China Devalues US Buying Power By 30% Posted: 20 Jan 2011 05:21 PM PST The trade imbalance between the US and China, a hot button between the nations for the last decade or so, is finally going to start to stabilize in the summer of 2011. However, it is doing so with a de facto devaluation of the US dollar and its buying power. The average American will see a spike in the price of everything from their favorite jeans and T-shirts, to the cost of some electronics. The Chinese have decided to devalue the US dollar's buying power, without devaluing the US Treasury holdings they hold. It is an elegant solution to their issues. It will be interesting to see if they can pull it off, while they try to prop up the European Sovereign debt markets at the same time. The Chinese are attempting, successfully so far, to introduce the Yuan as a global currency in which to settle international trade. China is pumping into its own internal currency markets so much liquidity, they need an export market to develop for the Yuan or their own internal markets will overheat. 
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| Crude Oil Falls on China Rate Hike Fears, Gold Plunges Below Support Posted: 20 Jan 2011 05:12 PM PST courtesy of DailyFX.com January 20, 2011 08:51 PM Commodities fell across the board as traders locked in profits after it was reported that China’s economy grew faster than expected in the fourth quarter. Commodities – Energy Crude Oil Falls on China Rate Hike Fears Crude Oil (WTI) - $89.73 // $0.87 // 0.98% Commentary: WTI fell $2, or 2.2% to settle at $88.86 and Brent fell $1.58, or 1.61%, to settle at $96.58 on Thursday. The theme for the day was China rate hike fears after GDP figures for the fourth quarter came out better than expected. The Chinese economy grew 9.8% in the quarter, much better than the 9.4% expected. Obviously, all else equal, a robust Chinese economy is a bullish factor for commodities, including crude oil. But at the same time, the data indicates that the People’s Bank of China may raise rates sooner rather than later in an effort to cool the economy and bring down inflation. Speaking of inflation, China’s Consumer Price In...
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| Gold Seeker Closing Report: Gold and Silver Fall Almost 2% and 5% Posted: 20 Jan 2011 04:00 PM PST Gold fell to as low as $1343.24 by about 10:30AM EST before it rebounded in the last few hours of trade, but it still ended with a loss of 1.72%. Silver fell to as low as $27.39 before it also rebounded, but it still ended with a loss of 4.68%.
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| Posted: 20 Jan 2011 03:47 PM PST It will come as no surprise to Vultures that today, Thursday, January 20, 2011, silver took out our initial trading stops and then even before our one-hour "grace period" expired, the downward momentum was strong enough to hit our 20-cent lower "hard stops". Therefore we move to the sidelines with our short-term silver trade, which we have been in since August 25 of last year. It's Payday! ...
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| From Squeeze to Crush (Part One of Two) Posted: 20 Jan 2011 03:15 PM PST There are a number of factors which are central to any traditional equity valuation methodology. One of these is profit margin, or expectations thereof. Expectations of rising profit margins are naturally positive for valuations, other factors equal. But then the opposite is also true. And ultimately, no matter how many units you sell, if your input costs are equal to or greater than your output costs, you are going to lose money and, if this situation becomes chronic, go bankrupt. The US auto industry is a good example of this in practice. Prior to being in significant part nationalized in 2009, the US auto industry has faced near-zero or even negative margins in car production over most of the past decade even as headline revenue rose. For a number of years, this situation was somewhat obfuscated by large and growing financing activities and fleet sales to downstream car rental businesses, but astute observers knew what was going on and the question for many was when, not if, the industry would be substantially restructured, and how. Naturally, few auto analysts expected the legally murky, arguably unconstitutional government-led restructuring that was forced on secured creditors by executive order. Today, with the notable exception of Ford and a few boutique producers, the US auto industry is basically a government jobs program which happens to manufacture cars. As such, while the overall revenue outlook for a firm is important, so is that for profit margins. That said, it is normally somewhat easier to gauge the revenue outlook, in particular for mature companies in mature industries, as this requires that one forecast only one-side of an equation. Equity analysts naturally have sophisticated models which can take a given view for GDP growth or other macroeconomic variables and translate this into anticipated revenue growth for an industry or specific company. Chances are that, if the GDP forecast is reasonably accurate, so should that be for revenue. More difficult is to forecast both the revenue side and the cost of production side, as is required to forecast profit margins. Now we would not accuse equity analysts of being lazy, but in our experience, financial analysts of all stripes, be they "growth-" or "value-focused", "top-down" or "bottom-up", bullish or bearish, are all inclined to concentrate on those variables they think they can forecast well, and hold constant, or regard as randomly distributed, those variables which they consider difficult or impossible to model with reasonable accuracy. It should not surprise anyone that, when it comes to global commodity prices, equity analysts don't generally feel highly confident making forecasts. In some cases, to be sure, they are obliged to do so, such as oil or mining industry analysts. But nearly all equity analysts will have more confidence in their ability to forecast revenues or profits as a function of commodity prices rather than the prices themselves. What this means is that, in practice, when you get large swings in commodity prices, up or down, you can get massive swings in profit margins throughout the business sector but–and this is the important point–equity analysts will be notoriously slow to react. In the current instance, with global commodity prices soaring, the implication is that profit margins may be coming under pressure but, unless these levels are sustained for some time, equity analysts may not take much notice. In the meantime, however, investors need to act accordingly. In this analysis, we will take a look at two prominent indicators of US corporate profit margins which show that they are already being substantially squeezed, despite weak final domestic demand–GDP minus inventories and net exports–especially when adjusted for the state of the business cycle. If one then assumes, as we do, that recent advances in global commodity prices are indeed likely to be sustained, then the profit squeeze already in evidence is likely to turn into a profit crush in 2011. In this context, the recent, relentless rise in US and global stock markets looks increasingly out of line with fundamentals. Let's take a look at a broad measure of commodity prices. Perhaps the most widely cited reference for the US economy is the venerable CRB (Congressional Research Bureau) Commodity Index. Currently at 333, this is up some 18% y/y. That said, essentially all of this rise has come through in the past four months. Now some will point out here that commodity prices are currently nowhere near the extremes they reached in the first half of 2008, prior to the subsequent financial crisis and recession. But as far as changing profit margin expectations are concerned, it is primarily the change rather than the level of commodity prices that really matters. To place things in perspective, by mid-2008 the CRB index was up about 25% y/y, more or less in line with more recent developments. This is worrying. Much more worrying is when one looks behind the data to see how much of the recent rise in commodity prices is due to a weaker dollar–the global pricing benchmark–and how much is, shall we say "real" commodity price inflation. Here we note that the dollar was declining sharply in 2007 and H1 2008, down some 12% in broad, trade-weighted terms. Over the past year, however, the dollar's value has changed by little. This implies a greater overall margin squeeze on both US and global businesses. Now consider: If you are operating a business and your input and output costs are rising in more or less equal measure due to a combination of dollar weakness on the one hand but healthy real final demand for your products on the other then your profit margins can remain intact. But when commodity prices are rising in dollar terms and your revenues are not–say due to weak real final demand–then you are going to suffer both a margin squeeze and reduced profitability. In theory, at least, we should see some evidence of this margin pressure showing up in corporate surveys and data. Indeed we do. One widely-followed measure of corporate profit margins is that provided by the monthly Philadelphia Fed Index, which publishes a prices-paid (input) index and a prices-received (output) index. Since mid-2009, the prices paid index has risen from -30 to nearly +50, the highest level since mid-2008, indicating that there has been a massive swing from falling to rising input prices. On the other hand, over the same period, the prices received index has risen from -40 to +10. While this shows that output prices are now rising, it also indicates that input prices are rising much faster, implying that a margin squeeze is already underway. Moreover, this squeeze appears to be larger than that which occurred around mid-2008, as the gap between the priced paid and prices received index, currently at 40, is ten points greater. And keep in mind that the results of the most recent survey were collected over one month ago, prior to the substantial further spike in a broad range of commodity prices in December. Another potentially useful indicator of profit margins, although one that is a bit lagging rather than coincident, is the US producer price index, especially when viewed in terms of the stage of processing. The headline PPI, that for "finished" or wholesale goods, is currently at 4.0% y/y. This is somewhat above the rate of the headline CPI, at 1.5% y/y, implying shrinking margins. However, looking at the so-called "intermediate" and "crude" stages of processing, we find that producer prices are now rising at more elevated rates of 6.5% and 15.5%, respectively. Barring a huge rise in the CPI in the coming months, this implies that a crush on profit margins looms in 2011. There is also some anecdotal evidence that US profit margins are under increasing pressure. Major US retailers did not engage in nearly as much product discounting this past holiday season as they did in previous seasons. Amidst relatively weak growth in real final domestic demand, this can only be explained as a reaction to rising input prices and sharply narrowing profit margins. Should a profit-expectation-driven correction in valuations occur, it could be rather large and sudden. This is not only because the existing squeeze on margins could become a crush but also because available market positioning data suggest that the equity bulls are increasingly speculating with leverage–borrowed funds–whereas the bears are in hibernation, so to speak. This can be seen in the surge in margin interest–leveraged equity holdings–on the major US stock exchanges which, at over 2% of market capitalization, has risen to a level which, in the past, has preceded large market corrections. Indeed, the current level has only been observed twice before (with the possible exception of 1929, for which we don't have compatible data): In fall 1987 and spring 2000, immediately prior to two of the largest equity market crashes in US history! Other measures of potentially dangerous speculation abound, including the growing dominance of high-frequency trading (HFT) and unusually high correlations between the stocks of different companies and industries. Other factors equal, speculative rather than value-driven investing tends to be higher frequency, so the explosive growth of HFT over the past two years is cause for concern. And high correlations are worrying because they imply that investors are chasing returns rather than intelligently discriminating between the shares of companies that offer good value and those that don't. As such, it is entirely possible that, should a stock market correction soon occur, it might be entirely technical in nature rather than driven by something more fundamental, such as growing acceptance that profit margins are being not only squeezed but crushed. But as our own investment process is fundamental in nature, we are inclined to see the greatest significance in that area and merely note up the various technical factors as risks which, in this case, only reinforce our core conviction. Needless to say, we are not alone. There are a number of prominent, so-called "contrarian" market analysts out there who are making points similar to those above. Indeed, following the series of bubbles and blowups in stocks, housing and risk assets generally over the past 15 years or so, the contrarians have almost certainly grown in number. This is all the more reason, perhaps, for why the US Fed feels that it must fight to reflate asset markets ever more aggressively. Low rates alone won't do. Even a gently rising rate of CPI inflation won't do. Even $600bn of US Treasury purchases–the stated amount under the present, second stage of the quantitative easing program (QE2)–won't do. No, the Fed have told speculators in no uncertain terms that they are going to keep right on printing money until the core rate of CPI is north of 2%. Well, how's that for a prod to the bulls? The problem is, by responding to artificial and unsustainable Fed incentives, investors are largely if not entirely ignoring what is happening to profit margins. Sure, core CPI might rise to over 2% before long. It might rise to over 5%. Or 10%. We don't know. After all, the Fed might lose control of price inflation at some point. They certainly have before. But what we do know, and what we are entirely comfortable positioning our investments for, is that even in the event that artificial, Fed-engineered asset reflation succeeds, corporate profit margins are, by effect of soaring global commodity prices, going to get squeezed or even crushed, implying that, to the extent stock prices rise, real, inflation-adjusted valuations should compress dramatically. In this environment, do you really want to be overweight stocks, which are claims on (shrinking) real future corporate profits, or do you want to be overweight the soaring input prices directly, in the form of commodities? We prefer the latter. There are other negative factors out there for stocks, such as the increasingly hostile tax and regulatory environment in the US and elsewhere. We are not going to address these here. They, too, are risks that we see lurking in the background although there is no easy way to quantify them. 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.] From Squeeze to Crush (Part One of Two) 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: 20 Jan 2011 02:40 PM PST View the original post at jsmineset.com... January 20, 2011 03:45 PM Jim Sinclair's Commentary Another voice you might consider. Anthony Bolton: ‘Gold is the only commodity to buy’ It’s too late to join commodities party, the Fidelity fund star says. By Emma Wall 6:30AM GMT 17 Jan 2011 Commodities enthusiasts are investing five years too late, according to legendary fund manager Anthony Bolton. "The best time for commodities was in 2006, when the whole world was growing above trend," said Mr Bolton, who manages the Fidelity China Special Situations investment trust. "Western economies are anaemic at the moment, and I am not sure emerging market growth is enough to keep commodities going." Despite many managers believing that commodities are a key part of the emerging markets story, Mr Bolton holds only one commodities stock in his fund, a gold mine. It is uncertainty about America that is keeping Mr Bolton from increasing his exposure to comm...
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| Hourly Action In Gold From Trader Dan Posted: 20 Jan 2011 02:40 PM PST View the original post at jsmineset.com... January 20, 2011 11:33 AM Dear CIGAs, Weakness in gold and silver were blamed on several factors as trade moved into New York this morning. Overnight Brazil hiked its core interest rate by 50 basis points and there was additional chatter of further interest rate hikes in China to combat surging inflation pressures on the heels of some data out of that quarter suggesting previous hikes in both interest rates and reserve ratio requirements are not having much effect on taming price rises. That led to a general reduction of the "risk trades" and selling in commodities as a whole. Witness the case of the two markets I like to track in the sector, copper and crude, which were both sharply lower, crude oil failing to hold support at $90 and copper getting spanked for more than 10 cents. Even corn, which has a strongly bullish set of fundamentals did not escape the selling barrage when it opened for trading in the pit this morning although it did...
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| Posted: 20 Jan 2011 02:40 PM PST View the original post at jsmineset.com... January 20, 2011 11:03 AM Jim, I am getting a frantic gold top vibe from every corner. Are you getting this as well??? CIGA Ken Dear Ken, What's new? This is common on every reaction in gold's price since $248. Part of it today was based on the usual suspects called China Bashers. Have the Prechterites chimed in yet? Did you read my article on the huge difference between 1980 and today? Now what we need is a totally bearish article in the Financial Times to finish the reaction. Three bearish articles and we make a new high. Watch the Angles as they have performed the best. Regards, Jim Jim Sinclair's Commentary Harry Schultz sends us CIGAs a message today. His advice is to relax! Today is the oldest you’ve ever been, yet the youngest you’ll ever be, so enjoy this day while it lasts. Vallejo proposes paying some creditors only 5% to 20% CIGA Eric Paying creditors a fraction of money owed or suspendin...
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| Open Interest Shows Speculators Have Reduced Gold and Silver Positions Posted: 20 Jan 2011 01:29 PM PST Mark O'Byrne submits: GOLD Gold is currently trading at $1,347.73/oz, €1,004.19/oz and &ound;850.12/oz. Complete Story »
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| Buying Gold and Silver in the Dips Posted: 20 Jan 2011 01:24 PM PST Robert Kientz submits: Precious Metal bulls will tell you to buy the dips. This means, wait for the price to temporarily deflate, and then purchase your position. It is a way to maximize dollars for gold and silver purchased while maintaining a steady buying program in that metal. The same concept could be used for any fund or stock, as well. Complete Story »
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| Bill Kristol Ponders a New Gold Standard Posted: 20 Jan 2011 01:20 PM PST I'm not a big Weekly Standard reader (in fact, I think I've only read it a couple of times at airports back when they used to give them away) and, while Bill Kristol's Sunday morning musings may not always ring true, this recent commentary did (hat tip NA).
Yes and yes. Amassing huge debts seems to be the one thing that, up until last November, both parties could agree on and it remains to be seen whether election year deficit rhetoric turns out to be anything more than that. As for better Fed chairmen, as long as the big banks keep getting bigger, that seems to be a lost hope.
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| California Governor Declares Fiscal Emergency... Posted: 20 Jan 2011 01:02 PM PST Thanks to "Bill" for giving me the heads up on this. Not sure what that will accomplish other than maybe get the legislature to reduce any spending increases they are working on. Here's the news report: LINK Fiscally California is doomed and eventually will require some kind of Federal Government/printed money bailout, as will several other States. They can raise taxes but that will accomplish little as it will further hasten the exodus of businesses and wealthy people who are legally domiciled in the State. For proof of that dynamic check out this news story from Illinois, which just raised taxes: LINK. Credit to my friend and colleague Hal for that story. I continue to be amazed the way this country focuses on the financial issues over in Europe, when several large States in this country are technically insolvent. Someone asked me to comment on the notion that gold/silver are in a "bubble" now. That idea is little more than laughably absurd. There's a couple of good comments regarding that in the comment section of the today's precious post. Needless to say, until this country - and the world - figures out a way to engineer and financial "do over" AND create the framework by which every State/country can not spend more than it earns (i.e. that mechanism would be a strict gold/silver standard), the Central Banks will continue their inexorable fiat money flood and that will ultimately - and eventually - fuel a precious metals bubble that stagger everyone's concept of what a bubble is. Until then, all that remains is for the final chess pieces to be played... I'll be out Friday on back-country sno-cat skip adventure in order to take full advantage of the 2 1/2 feet of fresh, untracked powder that awaits on Berthoud Pass! Have a great weekend all - Avere una fantastica fine settimane a tutti 
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| Posted: 20 Jan 2011 12:11 PM PST
Wonder why the smart money was rushing headlong out of gold and silver over the past few days, and especially today in the AM session? Here is your answer: in tried and true fashion the Comex just hiked margins in gold, and silver by about 6%, and threw in a few other commodities to mask things up. And unlike the last time it did it, when it could at least pretend to justify its actions with the surge in gold price, this time with the PM complex dropping, we wonder what excuse the CME will use this time. Initial and Maintenance margins were just increased in everything from 10 Tr Oz Gold Futs, Comex 100 Gold Futures, Comex Miny Gold and Silver, E-mini Gold and Silver, Comex 5000 silver futures to Silver trade at settle. Also added were Copper, Iron Ore, propane, butane, and other nat gas. Most notably, and confirming that the administration and the money printing authorities are terrified by the surge in crude, the CME also hiked margins in various refined products and coal. The official scramble to "contain" the aftermath of Bernanke's lunacy is accelerating. We wonder when REDI, Prime Brokers and E-trade will comparable collapse purchasing margin for stock trading accounts. Of course, as with all other such superficial market interventions, the impact is shallow and is overrun in a matter of days. And no...there was absolutely no leak this time. We promise. Report links (metals and coal/petroleum)
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| The Biggest Lie in Finance Today Posted: 20 Jan 2011 12:04 PM PST
So it’s all about stocks?
Our esteemed Fed Chairman, now claims that QE has helped by raising stock prices. That was never a reason he listed for launching QE before. In fact, this is the first time he’s even mentioned this as a benefit (though everyone with a thinking brain knows that the Fed doesn’t give a hoot for anyone other than Wall Street which is why ALL of its moves were intended to help them juice the markets).
Why is he suddenly saying this?
It’s simple, because the market has proved he’s either incompetent or a liar (likely both) when it comes to QE. After all, he repeatedly said the reason we needed it was to boost employment and lower interest rates.
Well, 7.3 million people have lost their jobs since the Bear Stearns collapse. The Fed claims that this number would have been a lot worse without QE. It’s a pretty brilliant argument considering that there is no alternate universe where the Fed didn’t employ QE to compare to, so there is literally no evidence that refutes the Fed’s claim.
However, the fact remains that we spent over $2 trillion and still lost 7.3 million jobs. Hard to see the success rate of that policy. And given that the only folks hiring and raising salaries and bonuses right now are Wall Street firms, it’s pretty clear which demographic QE has TRUTHFULLY benefitted from an economic perspective.
As for QE keeping interest rates low, like I said, Bernanke is either incompetent or a liar. Given the abysmal performance QE has had in containing interest rates, I’d say it’s both:
As you can see, interest rates have soared BOTH times the Fed implemented a new QE program. On top of this, we now have direct evidence that the Fed’s policies are actually killing people... literally.
In case you’ve missed it, food riots are spreading throughout the developing world Already Tunisia, Algeria, Oman, and even Laos are experiencing riots and protests due to soaring food prices.
As Abdolreza Abbassian, chief economist at the UN’s Food and Agriculture Organization (FAO), put it, “We are entering a danger territory.”
Indeed, these situations left people literally starving… AND dead from the riots.
And why is this happening?
A perfect storm of increased demand, bad harvests from key exporters (Argentina, Russia, Australia and Canada, but most of all, the Fed’s money pumping. If you don’t believe me, have a look at the below chart:
As you can see, it wasn’t until the Fed announced its QE lite program that agricultural commodities exploded above long-term resistance. And in case there was any doubt, QE 2 sent them absolutely stratospheric.
In light of all of this, it’s no surprise that Bernanke is now fishing for any justification for his insane policies. However, even his claim that QE has pushed stocks higher is a big fat lie as MOST of stocks’ gains have been a direct result of inflation or decreased purchasing power.
Indeed, in nominal terms, stocks have rallied 91% since their March 2009 low. However, when you account for Dollar devaluation by pricing stocks in Gold, you find that nearly two thirds of stocks’ gains have come as a result of the US Dollar lowing purchasing power. Put another way, stocks have only rallied 31% since their March 2009 in REAL terms.
And it looks as though stocks are about to drop even MORE in real terms.
As you can see, stocks have outperformed Gold since December. However, priced in Gold they’ve recently been rejected at long-term resistance. to 0.925 if not 0.90 (meaning Gold would greatly outperform stocks on a relative basis).
Indeed, while I think stocks are more than overdue for a correction, I view the latest pullbacks in Gold (and Silver) as MAJOR buying opportunities for both inflation hedges.
Let’s be blunt, the Fed is going to do one thing and one thing only: print money. And while stocks might benefit somewhat from this, inflation hedges like Gold and Silver will positively EXPLODE higher.
After all, while stocks are up only 31% in REAL terms, Gold has soared 58% while Silver has more than DOUBLED. One can only imagine the returns investors will see in the coming years as the world’s central banks (lead by the Fed) print us into oblivion.
Good Investing!
Graham Summers
PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
PPS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy. You can access this Report at the link above.
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| The Gold Price Lost $23.70, a New Low for the Move Posted: 20 Jan 2011 11:40 AM PST Gold Price Close Today : 1346.50 Change : (23.70) or -1.7% Silver Price Close Today : 27.459 Change : (1.333) cents or -4.6% Gold Silver Ratio Today : 49.04 Change : 1.447 or 3.0% Silver Gold Ratio Today : 0.02039 Change : -0.000620 or -3.0% Platinum Price Close Today : 1810.50 Change : -24.50 or -1.3% Palladium Price Close Today : 812.55 Change : -1.85 or -0.2% S&P 500 : 1,280.26 Change : -1.66 or -0.1% Dow In GOLD$ : $181.51 Change : $ 3.12 or 1.7% Dow in GOLD oz : 8.780 Change : 0.151 or 1.7% Dow in SILVER oz : 430.56 Change : 0.12 or 0.0% Dow Industrial : 11,822.80 Change : -2.49 or 0.0% US Dollar Index : 78.82 Change : 0.176 or 0.2% The GOLD PRICE lost $23.70 to close at $1,346.50, a new low for the move, and lower that the previous low, $1,353. Once that former $1,362 low was broken a few days ago, it became very likely gold would fall lower, in spite of the last few days' rally. Gold lost 1.7% today and silver skidded 4.6% [sic] That fall typifies the reaction off a GOLD/SILVER RATIO low (3 January). Give it room, 'twill carry further, but 'twill also stop. Be ready. Remember that a downtrend is defined as a series of lower highs and lower lows. Bear in mind also that a "trend in force remains in force until broken." At the very least, a trend change requires a higher low, a little higher high, even to hint of a beginning. Just watch. Be patient. My targets for gold range from $1,330 to $1,280. Problem with telling y'all that is that you get the idea that I EXPECT to see that lower number. I don't, I just recognize it as a possibility. Every day you have to look at the chart again to see whether it has changed its mind. Maybe at $1,330, or $1,315, or $1,295 it will show that mind-change. I won't know till it happens. For the nonce, $1,345 support held for gold. From here gold has lots of trading back and forth all the way to $1,315. Below that, not so much till you reach $1,260. In fact, I don't expect this to be a brutal, major correction, but fairly short and shallow. But there's no sign of relief yet. The SILVER PRICE fell off a cliff at 2820c at NY open, and never hit bottom till 2740c. By the time Comex closed silver had shed 133.3c to close at 2745.9c. This took silver below its 50 DMA, 2853c, portent of more downside to come. A good place to stop would be 2650c, but the 200 DMA, which silver oft revisits on corrections, stands at 2187c. Most likely seems 2240c, but what do I know? Paid Moneychanger subscribers can pick up the January edition by logging in at www.the-moneychanger.com Sorry I missed sending a commentary yesterday, but I was busy finishing up the monthly Moneychanger. Day before yesterday, I would bet if I were a betting man, marked the top in the Dow and S&P. Today's stock market momentum was heavily down until noon, then climbed gradually toward the close. Help from the NGM? Who knows, but it doesn't matter because stocks have built that huge fatal rising wedge on the chart and the vicious break coming will overwhelm all manipulation. Days of pain approach: seek cover. The US DOLLAR INDEX bounced off 78.50 support after yesterday's low at 78.30, and climbed 17.6 basis points from yesterday to end trading at 78.816, up 0.23%. Five day chart shows an inverse head and shoulders or V-bottom that ought to mark the reversal. Dollar needs to push cleanly up through 79 now, to prove a turnaround. I'm still expecting a strong dollar for the first quarter or half. 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: 20 Jan 2011 10:00 AM PST I was intrigued by the title of the essay "The Cheapest Thing on Earth" by Nathan Lewis here at The Daily Reckoning. I was interested because I thought that such a tasty trivia tidbit could come in handy, like this morning when I could have used it as a distraction when my kids were calling me "cheap" because I wouldn't open up my wallet and give them another king's ransom for some new dumb reason; I forget what, but there was a lot of crying and wailing about it, whatever it was. This is where I could have said, to throw them off, "Cheap? What do you know about cheap? Do you know what is the cheapest thing on earth? Huh? Do ya? Huh? Do ya? Yes or no?!" Instead of providing me with the answer, he starts off with a pop quiz! Damn! And when I say "pop" quiz, I mean exactly that, as he says, "Quick: name an asset, publicly traded, that is the cheapest in a hundred years." Pop! I, of course, had no idea, and instead of admitting it, I quickly read ahead, hoping to immediately find the answer, only to be surprised when he taunted me. "Houses?" he asks. "Nope. Stocks? I don't think so. Commercial real estate? Bonds?" By this time I was pretty peeved, and getting bored, too, as I was sure that if it was, indeed, none-of-the-above, then this was going to devolve into something about investing in something obscure, the significance of which would elude me even if you explained it to me over and over again, in a company I never heard of, and, probably, in a country I never heard of, either. Just before I gave up reading in disgust, he dared to taunt me one more time, the bastard! "Not too many, are there?" he asks. At this final insult, my mind screamed, "Damn you! Damn you to hell! Tell me now, or I will fire off a flaming email that will be both highly insulting and vaguely threatening!" I could almost hear his cruel, mocking laughter as he rudely called my bluff, and further insulted me and my false bravado with, "Now here's a tougher one. Name an asset that is near the lowest price in all of human history." Arrgghhh! In all of human history? By this time I am angry and distraught, mostly angry, that somebody was exposing my stupidity and ignorance! Suddenly, I am gasping for air and screaming that if he doesn't tell me the answer pretty soon, I am going to start hearing those voices in my head again, and (now that you mention it) if I listen really closely, I can almost hear them already, way off in the distance, screaming to be heard and obeyed. And we all remember how it turned out the LAST time that happened. Obviously intimidated by the sudden revelation of the strange, powerful forces he is unleashing, he quickly announces, "The answer is: wheat"!! I admit that I personally put those two final exclamation points at the end of his sentence as an emphasis, both to indicate surprise and to remind you that there are surely significant ramifications of this "price of wheat" thing, the horrors of which I never allow myself to even think, except during sleep, and then hopefully only when I am dreaming of being with some beautiful young thing, and maybe with some of her friends, too, who are all naked and sweaty and grunting and heaving and writhing around in some surreal bacchanalia of some kind, where the only interruption is the masses of people outside wailing and crying that "The price of food is up so much that we are burning things and looting grocery stores in mindless anger and desperation, and we are looking for the Fabulous Mogambo Seer (FMS) to pledge our undying allegiance and love because he predicted that this inflationary hell is Exactly What Would Happen (EWWH) when the stupid Federal Reserve kept creating more and more fiat money, creating astonishing amounts of money, creating outrageous amounts of money, creating So Much Freaking Money (SMFM) for so, so long that We're Freaking Doomed (WFD)!" I can reliably report, thanks to these dreams, that the sound of people starving to death is a real "mood killer," perhaps on a par with the horror that wheat is now at the highest price ever, even going back to Biblical times, which is probably why those old Bible-era people were always "breaking bread," and eating unleavened wheat crackers, and consuming miscellaneous cheap wheat products instead of having, you know, a few tasty tacos or maybe a pizza once in awhile, which I figure must have been because they were very expensive or something, which is why you never hear of anybody eating them. Anyway, I immediately used this new information-as-icebreaker at the supermarket, and told the cashier, as she rang up my groceries, "I'll bet you don't know that wheat is at its lowest price in recorded history, but climbing fast because the horrid Federal Reserve is still creating So Freaking Much Money (SFMM) that the terrifying, heartbreaking misery and suffering of inflation in the prices of subsistence prices of items, like wheat, is guaranteed! Guaranteed, I tells ya!" She just dragged my frozen burrito across her laser scanner, the irritating "beep!" noise only underscoring her complete lack of interest. I went on, helpfully adding that they also said, "Actually, the entire agriculture complex, including corn, beef, pork and beans could fit this description." Again the lonely "beep!" as she listlessly ran my bag of Oreo Double Stuf cookies through the beam, her face never changing, not even to make the time pass with idle conversation about, for example, how much she adores cute old guys who buy such delicious cookies, or how my eyes twinkle so charmingly, or even to say how she noticed I kept looking at her boobs. You know; anything. Giving up, I took my groceries in hand and parted without giving anyone my usual advice, which is to "Buy gold and silver right now, using whatever money you can glean from your stupid little job, because inflation is going to eat us alive, and a weird, distorted economy will make it even more hellish, all thanks to the horrid Federal Reserve continuing to create so much excess money. And buying gold and silver is so easy that a bunch of bored, underpaid worker-bees in a low-margin business like you can do it! In fact, it's so easy that even morons say, 'Whee! This investing stuff is easy!'" The Mogambo Guru The Surprising Price of Wheat 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: 20 Jan 2011 09:43 AM PST Silver Spreads: Contango Crush Update MK: Oz. by Oz, month after month, the process of replacing the fiat facade with accountability and PM's continues apace. Our PM 'march to the sea' began with Gold $400. Ten years of steady 20%+ gains against the financial terrorists have increased our forces by millions. They will lose. Any [...]
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| Why Retirements Are Going Bust, Again Posted: 20 Jan 2011 09:26 AM PST Forget 2008… We're seeing the worst hit to retirement accounts right now! Mutual funds, specifically tax-exempt funds, have long been favorites among near retirees. With the clock ticking, where would you go for an edge on retirement building? And if you could find tax-free, high-yielding, considerably safe income, wouldn't you take it? Unfortunately, those who bought into this line of thinking over the past several years have just rudely awoken to a major collapse. Many municipal bond funds offer investors a tax-exempt source of income that is backed by the full faith and credit of US cities and states. These, in turn, have an implied backing by the federal government. (After all, would Obama really let California break off into the ocean?) And with a gigantic slew of near-retirement-aged baby boomers, weak interest rates, and 2008's stock performance stuck in the back of investors' minds, the municipal market has looked as sexy as ever. Over the past two years, we've seen nothing but cash inflows into muni funds. But that trend has reversed with a vengeance. We've noted the recent outflow of bond funds in weeks past. But that was just headline stuff. A mere sampling of the pain funds in general have felt. Here's what the muni universe has looked like:
Quite a hit. And of course, when a panic like this starts, bottoms can be a tricky subject. The muni market isn't a clear one. We're not saying it has no transparency. We're saying that often, no one can really make heads or tails out of the figures. But here are the steps, as best as anyone can understand so far, that caused this two and a half month panic. First, we saw a QE2 build up. We discussed this program before. But quickly, it simply opened up a pile of $600 billion (plus another $300 billion potentially) to buy up medium-term Treasuries. In theory, this should push yields down, spitting more cash into the rest of the economy, nudge the inflation rate higher, stimulate job growth, and save the planet from a flesh-eating super robot. Okay, one of those things wasn't part of the deal. Nonetheless, what it did was virtually nothing…so far. But the anticipation of the program led investors out of the muni market and into Treasuries. After QE2, the new threat to city and state debt was the potential end of the Build America Bonds program. Then the actual end of BAB. And it certainly doesn't look like the new "deficit-conscious Congress" will inspire similar attitudes at the state government level any time soon. In this time period, we also had a number of rating downgrades and bad press, such as the rating cuts to San Francisco and Philadelphia. We saw threats to California and Illinois as well, even going so far as comparisons to Greece and Ireland. Sure, all of these factors, combined, led to some of the muni outflows. But all they really did was lightly nudge the giant calamity of muni investor losses down the giant figurative hill. Once investors started pulling out of muni mutual funds, the funds had to sell some of their muni bonds. That led to a decline in actual muni prices…which led more fund investors to sell. This circular pattern is actually still happening. Take a look at this:
Even if you know nothing about charts, you can tell this ain't pretty. This chart represents the past nine months of trading of the iShares municipal ETF. It tracks the most popular municipal bonds on the market. And since the first week in November – which corresponds to the first week of fund outflows – all bets have been off. All the technicals, all the support, all the buyers have turned away from the municipal market completely. And this pattern may continue for some time. Of course, as we noted above, no one can truly read the muni market 100% of the time… That is especially true now. So what does this say? We don't know. There seems to be two drastically different points of view in the press. That much we do know. Meredith Whitney, the "genius" that called the banking crash of 2008, went on 60 Minutes last month claiming that the muni market will see more defaults than anyone can imagine. She called for "hundreds of billions" in losses. As widespread as that show is – and her own newly-acquired following – it wouldn't surprise us if some of the recent selling came from that interview. And we're even less surprised by the backlash it caused in the rest of the media. Joe Weisenthal, a largely-followed and highly-syndicated author for Business Insider, struck back at Whitney, claiming the free fall in muni prices is 100% attributable to the downward selling spiral we summed up above, which he called "the feedback loop"… instead of actual risk of defaults. Charles Gasparino wrote on Huffington Post that Whitney needed to "finally come clean." He wants her to show her evidence of the "hundreds of billions" in losses prediction. Celebrity (kind of) economist David Rosenberg went so far as to claim that the muni market fall is "a huge long-term buying opportunity". And who knows? Maybe they are all right. We expect muni funds will find a bottom at some point. And then, just as quickly as they stabilize, they'll fall again on actual news of defaults. It won't take much in the way of a real scare to truly collapse these investments. Regardless of their future, the point is: we're entering into panic mode on some of the best performing and hottest assets for pension plans, 401(k)s and IRAs. Pensioners are no doubt beginning to reel again. We're keeping a critical eye on this whole situation. And, of course, we never stop looking for solutions. Regards, Jim Nelson Why Retirements Are Going Bust, Again 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: 20 Jan 2011 09:11 AM PST courtesy of DailyFX.com January 20, 2011 07:40 AM Daily Bars Prepared by Jamie Saettele “The gold decline from the high is an impulse (5 waves), therefore the odds are high that an important top is in place.” Waning downside momentum warns of a b wave low. The implications are for a rally in wave c that exceeds 1380 (if just barely) before the next leg lower.” After trading to 1392.90, gold has plummeted to 2011 lows and focus is on 1317.10 (October low). A break there put 1270.30 (June high) in play....
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| Silver Spreads: Contango Crush Update Posted: 20 Jan 2011 09:07 AM PST
A Continuation from Yesterday’s Story: Silver Contango Crushed – Short Squeeze Imminent or Position Limit Ruling Fall Out? Courtesy of FMX Connect Silver spreads continue to sell off on Thursday. So far, any theories that weaker spreads are ultimately bullish for the physical metal have to be viewed suspiciously. We spoke with a couple of traders on the topic and our revised possibilities list is as follows:
Counterpoints
For the time being, we can not discount that there is a short squeeze coming but more information is needed before we can know for certain. If a bullion dealer is selling spreads because they anticipate making delivery we think we’d probably be the last to know, that’s why we are think it is more likely than not that this a charade. Whatever the message may mean, it is certainly expensive to send.
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| Rhodium Under Valued and has Low Correlation with Gold and Silver Trends Posted: 20 Jan 2011 09:04 AM PST Rhodium Trading Thoughts is about timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. Profits are the goals, not trades. Do not expect all recommendations to be profitable. No system can achieve that lofty goal. Our goal is simply to state whether conditions for a metal are favorable or not. Buy signals are issued when appropriate. These signals are generally speaking for day they are issued. If price remains below signal price, buying can be done. Do Not Buy signals are given when market is over bought, and buying is unwise. Blue triangles indicate an over bought condition. These would not be good times to buy, so they are labeled Do Not Buy. Software is not showing complete legend, for some reason.
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| The Oddly Symbiotic Relationship Between the US and China Posted: 20 Jan 2011 08:47 AM PST Yesterday, against the better advice of Voltaire, your editor spent the afternoon tending another's garden. The weeds had grown long on the lawn and the vines' creeping tendrils spanned the entire stretch of the backyard wall. The yard, having been left to its natural state, was beginning to look like a jungle. We sweated against the sun, mate close at hand, the cool earth beneath our fingernails. Why all the effort? For one thing, we write for a living; it's good to get one's lily-white hands dirty from time to time. For another, the garden is out back of the house we are temporarily occupying here in Argentina's capital. Our rental agreement is particularly favorable, so it behooves us to look after the place, to help out those who are taking care of us. Besides, we work (in the office downstairs) with an Englishman and, as we all know, there is nothing quite so offensive to an English gentleman's eyes as the sight of an unkempt garden…with the possible exception, that is, of a disorderly queue. We'll return to our backyard in a second. First, let's take a look a little farther afield… The markets were awash with non-activity yesterday. The Dow Jones Industrial Average ended the day a dozen points lower than where it began the session. Gold shed a few bucks. If you were sleeping off a hangover, you barely missed a thing. Not so today. Within an hour and a half of the open, the Dow was seen lurking around 80 points below its open. Gold, too, had fallen $21 before lunch. What's going on? "US Stocks Slip On China Worries," says one headline… "Stocks open lower despite jobs data," reads another… "Stocks, Commodities Decline on China Rate-Rise Concern," asserts a third… If the mainstream press gets anything right, it is by accident only. The rise of China…unemployment…declining productivity in the west; these are not driving factors, Fellow Reckoner. They are not causes. They are effects. Symptoms of a larger trend. As usual, newspaper editors have put the horse before the cart. They should spend more time in the garden, digging around in the dirt, and less time making cocksure assertions about what's causing daily, hourly, minute-by-minute moves in the world markets. Bill has more on what Harvard economist Lawrence Katz calls a "genuinely puzzling" employment situation in his notes below. So we'll take up the China question… The relationship between the world's two competing superpowers is indeed a curious, if not curiously symbiotic one. One nation produces, the other consumes. One borrows, the other lends. One is a capitalist in communist uniform, the other talks of freedom and liberty even as the weeds of encroaching bureaucracy threaten to paint the Capitol red. The Americans, for their part, press China hard on her human rights record and on the issue of currency manipulation. And they do so, amazingly, with a straight face. To be sure, China's human wrongs record is nothing short of disgraceful. It's true, for instance, that while last year's Nobel Peace Prize recipient welcomed China's leader to the White House this week, the recipient of this year's award, a noted Chinese dissident, sits in a dank cell back in the Middle Kingdom. The media in China is heavily censored, operating behind what is sometimes referred to as the Great Firewall of China. All this is hardly surprising. The state, as a wholly unnatural entity, is anathema to freedom…whether it barks orders and exerts force in Chinese, English, Swahili or other. Back in the "Land of the Free," Americans are engaged in a persistent struggle against the meddlesome zeal of their own public servants. Harry Reid, Obama's senate majority leader, and the man who referred to President Hu as a "dictator," lately referred to the Congress over which he and fellow do-gooder, Nancy Pelosi, presided as one of the "most productive in history." Translation: more laws, more meddling, more interference…than ever. On the economic front, Fed Head Ben Bernanke is furiously tinkering with any and every aspect of the monetary system he can get his grubby mitts on. While the administration points the finger at China for artificially suppressing the value of its yuan, Helicopter Ben works overtime to fix interest rates, devalue the greenback and rescue institutions in desperate need of failure. Meanwhile, Treasury Secretary Tim Geithner sells off the financial security of future generations of Americans to the highest bidder – usually China – at scheduled auctions…in broad daylight…for all to see! Currently, your child's share of the national debt is around $45,000. Come 2015, provided current trends continue, it'll be bumping up against $70,000. China will own an unnervingly large portion of that debt. If policy makers in the US are so concerned about China's human rights record and its monetary meddling, how can they possibly justify shackling their children with debt handcuffs that are, so to speak, "Made in China"? Generally speaking, the state tends toward war, either on the battlefield, the balance sheet, or, more often, a combination of the two. The endgame between the US and China will be no different. "The situation is hopeless…but it's not serious," as our friend, Doug Casey, likes to say. Which brings us back to our own garden… What can we, as individuals, do to protect ourselves from the inevitable, impending collision of these 21st century empires? For one, we can speculate on the distortions that arise in the market as a result of geopolitical jostling. Readers may recall, for example, the recent "disruption" in the rare earths sector, a sector China dominates with some 97% of world production. Byron King, editor of the Energy & Scarcity Investor, has written extensively about the rare earth story – and the associated opportunities for investors – in these pages in the past, in his essay "China's Leg Up in the Rare Earths Market". "China will 'cooperate' with the international community on future rare earth exports – ONLY to the extent that the overall process benefits China," Byron observes in his latest presentation on the subject. "Otherwise, they'll always have an excuse for what they're doing or not doing." "Ten years ago," Byron continues, "China exported 75% of its production of rare earth metals to the rest of the world. Today it exports less than 25%, even though the production in the last 10 years has more than doubled." "There IS a GREAT future for the rare earth industry in the West," Byron concludes. "But you have to be careful about chasing momentum. You need to invest wisely, with a focus on companies that can actually deliver an end product after managing years of capital expenditure, and forming-up many systems of systems." We "little people" may not carry much weight when it comes to international political gamesmanship, but we can, as that wise Frenchman advises, tend to our own garden. Joel Bowman The Oddly Symbiotic Relationship Between the US and China 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: 20 Jan 2011 08:41 AM PST Upbeat U.S. data, China worries weigh on gold price The COMEX February gold futures contract closed down $23.70 Thursday at $1346.50, trading between $1342.40 and $1370.90 January 20, p.m. excerpts: see full news, 24-hr newswire…
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| Another Consequence of Zero Interest Rates Posted: 20 Jan 2011 08:38 AM PST Over the past two years, I have visited the topic of the consequences of our new zero rate world on several occasions. Despite media ramblings about ‘free’ money stimulating the economy and igniting another 2005-esque period of time, there have been several very negative consequences. Obviously, pathetic rates of return on what are traditionally referred to, as ‘risk-free’ assets are one well-understood development. There are others. This week we’ll take a look at the specter of zero-rates from a risk management perspective and demonstrate exactly how much our world has changed. Perhaps, ironically, the news is not all bad; there is a bit of a silver lining in here!
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| Economic Collapse Scenarios That We Could Potentially See In 2011 Posted: 20 Jan 2011 08:25 AM PST What could cause an economic collapse in 2011? Well, unfortunately there are quite a few "nightmare scenarios" that could plunge the entire globe into another massive financial crisis. The United States, Japan and most of the nations in Europe are absolutely drowning in debt. The Federal Reserve continues to play reckless games with the U.S. dollar. The price of oil is skyrocketing and the global price of food just hit a new record high. Food riots are already breaking out all over the world. Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time. Most Americans have no idea that a horrific economic collapse could happen at literally any time. There is no way that all of this debt and all of this financial corruption is sustainable. At some point we are going to reach a moment of "total system failure".
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| Posted: 20 Jan 2011 08:21 AM PST The 5 min. Forecast January 20, 2011 01:01 PM by Addison Wiggin - January 20, 2011 [LIST] [*] While Hu meets Obama in Washington, his deputies back home consolidate resource control [*] Byron King on China's "nationalization" move... and how it's still not too late to invest in rare earths [*] Gold whacked, stocks spanked... Steve Sarnoff on the bears hitting back [*] An exercise in minimalist pointlessness... The "Dow Piano" [*] Readers follow up on hard-to-get European cars... inquire about when to sell tiny takeover targets... and insist on carrying on our Starbucks conversation [/LIST] 3,891 words… and not one of them about rare earths? You’d think if President Obama and Chinese President Hu Jintao were to hold “wide-ranging” talks in Washington that rare earths would come up somewhere on the agenda. After they met yesterday, they issued a 41-point statement of diplomatic bromides and banalities. (Example: “The two lead...
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| Posted: 20 Jan 2011 08:18 AM PST by Mark Hulbert And, yet, the average gold market timer is as depressed as you'd otherwise expect him to be if we were in a far more major decline. This suggests to contrarians that gold's weakness is more likely than not to be a mere pause in an ongoing bull market. [source]
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| Gold Daily and Silver Weekly Charts Posted: 20 Jan 2011 08:06 AM PST |
| Sovereign debt problems worsen, support metals, Turk tells King World News Posted: 20 Jan 2011 08:00 AM PST 1p PT Thursday, January 20, 2011 Dear Friend of GATA and Gold (and Silver): Interviewed today by Eric King of King World News, GoldMoney founder James Turk remarks that Europe's sovereign debt problems are being camouflaged and getting worse, not alleviated, and this will put a bid under the precious metals despite the usual bear raids. Excerpts from the interview are posted at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/20_Ja... Or try this abbreviated link: CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Join GATA here: Vancouver Resource Investment Conference Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Tunisia Central Bank Admits It Is Missing 1.5 Tons Of Gold Posted: 20 Jan 2011 07:41 AM PST
When we first reported on the rumored "confiscation" of 1.5 tons (or is that tonnes?) of gold by deposed Tunisian surging food inflation beneficiary Ben Ali we joked that the next WGC update of Tunisian gold assets would be strangely lower by 23%. Once again, the Onion reality sets in as we uncover we were right. Dow Jones reports that "Tunisia's central bank this week said it held about 5.3 tons, but dismissed reports that the family of ex-leader Zine El Abidine Ben Ali had withdrawn the gold, saying the bank vaults were "under draconian security measures." Um, yeah, that's just off by the amount that Ben Ali is now desperately trying to eat... From Dow Jones:
That's funny: also just as funny is that according to the WGC the US has 8,133.5 tonnes of gold. We wonder if we should apply the same 22% pro forma haircut on that number when adjusting for physical gold holdings long since moved to various armored safes in Wall Street's offshore villas located in non-extradition countries. But we jest. We would be satisfied with just learning how much Tungsten is currently located in Fort Knox. h/t London Dude Trader
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| Analyst: “Gold: medium term choppy, long term bullish” Posted: 20 Jan 2011 06:48 AM PST If gold hits that target of $1,284 per ounce, there is a good chance gold will decline to about $1,155 per ounce. MK: As we've been saying, a few Oz's at a time, over time is the key to playing this bull market in Gold and Silver. Share this:
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| What Will They Tax Next? Is This What's Coming? Posted: 20 Jan 2011 06:26 AM PST |
| GATA participates in Vancouver and London conferences this month Posted: 20 Jan 2011 05:58 AM PST 10:50a PT Thursday, January 20, 2011 Dear Friend of GATA and Gold: Here's a reminder that GATA will be participating in the Vancouver Resource Investment conference, to be held this Sunday and Monday at the new Vancouver Convention Centre West on Coal Harbor. Many GATA favorites will be speaking and many resource companies will be exhibiting. Admission is free if you register in advance. You can learn all about the conference here: http://cambridgehouse.com/conference-details/vancouver-resource-investme... At the conclusion of the conference, starting at about 5:30 p.m. Monday, the GATA delegation plans to be haunting the Lions Pub, 888 West Cordova St., just a couple of blocks away from the convention center, and hopes to meet friends there. Just remember that, while "in vino veritas," coherence is something else. Your secretary/treasurer and GATA favorites James Turk of GoldMoney, Hugo Salinas-Price of the Mexican Civic Association for Silver, London silver trader Andrew Maguire, and financial market analyst and journalistic provocateur Max Keiser, among others, will be speaking at the Cheviot Sound Money Conference in London on Thursday, January 27. Again admission is free but reservations are required. You can learn about the Cheviot conference here: http://www.gata.org/files/CheviotSoundMoneyConferenceInvite.pdf CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf Join GATA here: Vancouver Resource Investment Conference Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Drills 71.17 Metres of 0.52% NiEq Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit: http://prophecyresource.com/news_2010_nov29.php
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| How to Get the US Back to Full Employment in 30 Days Posted: 20 Jan 2011 05:48 AM PST We're in the airport, on our way back to Washington. Below…we'll tell you more about one family's economy… But first, let's look at the whole world's economy… Nothing much happened in the markets yesterday anyway. "Why jobs aren't part of US revival," asks a New York Times headline. The US now has a higher unemployment rate than Russia…or Britain…or Germany…or Japan. When it comes to joblessness, the US is a world leader. But why? Economists can't figure it out. Harvard economist Lawrence Katz says it's "genuinely puzzling." After admitting that he has no idea why there are so many people without jobs, columnist David Leonhardt goes on to tell us that "fixing the job market will take years." Hmmm… How does he know that? And how does he think he can fix something if he doesn't know how it's broken? No point in asking questions like that… The fixers never know what is going on…but they're always ready with a solution. In Leonhardt's case, he proposes a few meddles that are bound to make the situation more complicated…and generally, worse. So, since we've been giving unsolicited advice lately, we won't hold back today. First, why are so many people unemployed? The answer is very simple. Because there is no profitable work for them to do as present labor rates. Thanks to previous meddles, the US economy focused itself on building houses and importing geegaws from overseas for people who couldn't afford to pay for them. This was a dead-end economic model. And the end came in 2007. Now, the latest figures show an uptick in manufacturing…which is clearly the direction to go. But it will take years before the US economy has made the adjustment to a new, healthier model…making and selling things at a profit. In the meantime, unemployment levels will remain high. But wait…there's more. For which the adjustment is taking place, US authorities are trying to block it. How? By taking resources from the new, unborn industries and using it to prop up the old, dying ones. Like Wall Street, for example. The financial industry grew like Topsy in the bubble years. It began to shrink in the crisis of '07-'09, but the feds came in and pumped more than a trillion dollars into the financial sector, producing record profits for the big banks, but depriving the rest of the economy of much needed capital. Not only that, the feds also take the pressure off labor to make adjustments. Food stamps, minimum wages, unemployment compensation, make-work, shovel-ready boondoggles – all these things cause workers to think they can continue as before…that a "recovery" of the good ol' days is just around the corner…and that they'll soon be earning as much as they were in 2007. Maybe more! Want to really fix the unemployment problem? Listen up. Eliminate all bailouts, subsidies, giveaways and support systems – both to business and to labor. Abolish all employment restrictions and employment paperwork. All free labor – undocumented non-citizens – to compete equally with native-born workers. Cut taxes to a flat 10% rate for everyone. Abolish every government agency that begins with a letter of the alphabet. Then abolish the rest of them. We confidently guarantee that the nation would be back at full employment within 30 days. But wait…you're not reading The Daily Reckoning to solve the nation's problems. And we're not delusional enough to think our advice is going to make any difference whatsoever anyway. So, let's turn back to our normal, dreary work…trying to figure out what is going on in the world economy. On this trip to Europe, we visited with two of our Family Office partners… The "Family Office" is the organization we use for investing, and preserving, our own family money. What's "family money"? Glad you asked. It's money that is owned by a family, rather than by one person alone… It's money that is expected to grow and endure…for generations, if you're lucky. Not many people have "family money." It's hard to get. And hard to hold onto. You can get money by accident. But you can't get family money by accident. Of course, you need some money. But that's the easy part. You can have a family fortune of any size. It's how you look at it…and how you manage it that matters…not how much money you have. But it's the family that is hard…that's where most family wealth usually washes up. And it's why you have to prepare the next generation…develop a family culture that lasts…and avoid conflicts that destroy both the family and its money. It's hard work. And it's getting harder. And becoming more necessary too. When the European and American economies were in full expansion, each generation could make its own way. Now that growth has slowed…it will be harder to start with nothing and build a fortune. The next generation may need help… Stay tuned. Regards, Bill Bonner How to Get the US Back to Full Employment in 30 Days 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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| Alasdair Macleod: Chinese puzzles Posted: 20 Jan 2011 05:33 AM PST 10:30aa PT Thursday, January 20, 2011 Dear Friend of GATA and Gold: In commentary posted today at his Internet site, Finance and Economics, economist and former banker Alasdair Macleod speculates on China's gold policy. He thinks that China has vastly greater gold reserves than the official data shows and plans to be ready when the Western financial system and its gold price suppression scheme fail. Macleod's commentary is titled "Chinese Puzzles" and you can find it here: http://www.financeandeconomics.org/Articles%20archive/2011.01.21%20Chine... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Join GATA here: Vancouver Resource Investment Conference Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Another Consequence of Zero Rates Posted: 20 Jan 2011 05:23 AM PST Over the past two years, I have visited the topic of the consequences of our new zero rate world on several occasions. Despite media ramblings about 'free' money stimulating the economy and igniting another 2005-esque period of time, there have been several very negative consequences. Obviously, pathetic rates of return on what are traditionally referred to, as 'risk-free' assets are one well-understood development. There are others. This week we'll take a look at the specter of zero-rates from a risk management perspective and demonstrate exactly how much our world has changed. Perhaps, ironically, the news is not all bad; there is a bit of a silver lining in here!
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| Gold to perform as U.S. and China take contrary paths Posted: 20 Jan 2011 05:11 AM PST by Julian Phillips As we pointed out in our last article we expect to see a sufficient quantity of Yuan sent into world markets from China to hold it steady or weaken in a 'free float'. It is part of a very large global strategy unfolding now. To those who doubt this, ask yourself, "If Chinese exporters price their goods in the yuan or even in the other global currencies, what will happen to the dollar?"
For a number of years now, China has been developing its gold market. Huge precious metals warehouses are now situated in Hong Kong next to its very efficient Airport there. Recently China expanded the number of gold importers permitted to import gold to China. China's banks have developed gold distribution centers throughout the major cities of China. The Chinese public can see the benefits of owning gold by the price rises it has seen in the gold price over those years. The government itself is accumulating its own local gold production as well as encouraging its citizens to buy gold. If there was any intention of re-valuing the yuan, then the Chinese public could well see this as a betrayal of investors by the government. …… Instead, we continue to expect the gold price to perform, in the yuan, much as it does in the U.S. dollar now. For that reason and because of the ongoing development of China and the growth of a huge middle class in China, for the foreseeable future, we see a steady growth in the rise of gold investments in China. Whether it is the Obama Administration or any other we expect the change in attitude towards China by the U.S. as being one where both seek mutually beneficial policies. Despite the change in the fortunes of the two nations, there will be a desire to quietly adjust to the situation by both sides. And these adjustments will be huge. Just as Britain in the last century started as the number one world power and had to slip well down the ranks, so the U.S. will see the beginning of a similar process in the next couple of years. The greatest change in that process will be the shrinkage of the use of the U.S. dollar… … As part of this process, it is inevitable that the U.S. will not oppose the use of the yuan as a petro currency, in sales of oil to China. We cannot see China accepting the pressure to keep using the dollar to impact on its oil imports, just as it is now using the Ruble and the Yuan in its oil trade with Russia already. Be ready for considerable change in the future. [source]
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| Panic Selling Hit SP500 Today, Silver and Gold Are Next! Posted: 20 Jan 2011 05:01 AM PST By Chris Vermeulen, TheGoldAndOilGuy Today the stock market bled out with a river of red candles. All of the recent gains vanished in one session. Strong selling volume sessions like this are typically a warning sign that distribution selling is starting to enter the market. Distribution selling is when the big money players start unloading large positions in anticipation of a market top. They do try to hide it by selling into good news or earnings when the average investors are buying into all the hype of better than expected earnings on the news. As average investors jump into the market because of the good news, this extra liquidity helps the big money players (banks, hedge funds, etc..) sell large amounts of their positions to the eager buyers. This is why the "buy on rumor and sell on the news" saying is kicked around wall street…. To me, panic selling is typically seen as a bullish sign to enter the market simply because if everyone is/has rushed to the door to sell what they own, then really most of the down side risk has been taken out of the market. That being said after an extended multi month rally and higher than selling volume I look at it more like distribution selling and a shift in momentum. I feel the precious metals sector will be starting something like this in the near futures, and possibly it has already started as seen in the rising volume on the down days. Let's take a look at the charts… AAPL – Apple Stock 10 Minute Chart The average investor listening on the radio or catching snippets on the news do not pick up on these things which is why the big money players can get away with this over and over again.
GS – Goldman Sachs 10 Minute Chart Distribution selling looks to be entering the market and this is a bearish sign. I would not be surprised if we see the market top out in the next 5-10 trading sessions.
SPY – SP500 10 Minute Chart As you can see from this chart the SP500 is trading down at a support level so a bounce is likely going to take place. If in fact today was the first distribution day then the big money should let the price inflate back up to the recent highs and possibly make a new high to help keep investors bullish before the hit their SELL BUTTON again… They like to play these games and understanding them is a key part of trading. Expect choppy price action for a week or two…
Silver Daily Chart – The Next Wave of Selling? As you can see silver is trading under 3 of its key moving averages and todays bounce was sold into after testing the 14 and 20 period moving averages. Take a looking at the bottom of the chart and you can see distribution selling volume as the spikes are all down days. If silver breaks below the $28 level then we could easily and quickly see the $26 and maybe even the $24 level.
The Mid-Week Market & Metals Trading Conclusion: That being said, I still think the market could grind higher and make another new high. But any rally or new high will most likely get stepped on with heavy selling. Expect strong selling days followed by a couple days of light volume sessions where the price drifts back up into resistance levels. This could take a week or two to unfold so don't jump the gun and short yet. It's best to see more distribution selling before picking a top. If you like this trading reports or if you would like to get my daily pre-market trading videos, intraday charts, updates and trade alerts be sure to join my newsletter: http://www.thegoldandoilguy.com/trade-money-emotions.phpChris Vermeulen
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| China’s Economy is Still Soaring Posted: 20 Jan 2011 04:58 AM PST Front and center this morning, the big news from last night was that China's fourth quarter GDP beat the estimates! China's economy grew at a 9.8% pace in the fourth quarter. OK… I have to ask this with a snicker in my voice… Where are all those pundits/economists that predicted a collapse of the Chinese economy a year ago? For those of you keeping score at home, for all of 2010, China's economy grew at a 10.1% pace. OK… Remember when I told you that a customer of mine, who had done business in China for over 20 years, told me to only believe half of what the Chinese reports to the public? So… If that's true, the 4th quarter GDP was 4.9%! Still… It certainly hasn't collapsed, nor has it even moderated, which is what the Chinese government was hoping for. So… That means the wink and nod has been given to commodities… And as I look at the currencies, I'm shocked that the Aussie dollar (AUD) is back below parity… I would have thought this GDP report would mean smooth sailing for the Aussie dollar… Now, I know that the markets are going to be calling for another rate hike by the Chinese in another attempt to moderate their economy… But, the previous rate hikes didn't do the job, right? The currency strength we saw yesterday remains intact this morning, although the figures for each respective currency are off a bit… The euro (EUR) traded well above the 1.35 handle yesterday, but has slipped back through the figure this morning, albeit barely… As it trades at 1.3490 right now… The US housing data yesterday was awful… And once again, I saw a well-known economist on TV saying that housing had bottomed… Hmmm… That's about a dozen different times now since 2008 that we've heard someone saying that housing had bottomed. One of these times the forecaster will be correct… Unfortunately, I don't believe this will be the time. Housing Starts for December fell 4.3%, and had the worst monthly performance since October of 2009, when we were probably hearing the 5th or 6th person tell us housing had bottomed. Look folks, it's one vicious cycle… The economy, housing, unemployment… They are all dependent on the other, and none of them are doing well… This rot on housing's vine is a huge indicator that the US economy is weak… It has a pulse, and that's good… But it's weak…very weak… Well… The big meeting between the Presidents of China and the US took place yesterday… I got a kick out of watching and seeing the text of the press conference… The Chinese President, Hu, just smiled a lot and kept repeating that the US and China are going to work to improve this, that and the other things… Nothing like the grenade he threw from left field on the dollar prior to his visit to Washington DC. Now, he left that to his Commerce Minister, Chen, who said, "the US trade deficit with China isn't a result of the value of the Chinese currency. US controls on certain exports to China have exacerbated the deficit." The US just needs to be patient, folks… China will move on its own timetable, but more and more we're seeing a consumer driven economy in China, with the newfound middle class driving the economy. And that middle class will be wanting the stuff from the western world… And the renminbi (CNY)? It will continue to gain versus the dollar, but on China's timetable, not from the wishes and demands of lawmakers in Washington DC. The New Zealand dollar/kiwi (NZD) is much weaker this morning than it was yesterday. Last night, New Zealand's latest inflation report was not as robust as the currency traders were looking for (higher interest rates would be the result of a stronger inflation report), and so all the buys that were put on ahead of the report, were unwound. And In Japan… Japan's Economic Minister, Kaoru Yosano, was doing his best to point out the real problem in Japan, which seems to be Hush-Hush with the Japanese government, and the markets just keep looking the other way… What I'm talking about is the Japanese debt… Yosano said, "If we keep going with no fiscal discipline, allowing the stock of public debt to grow larger or continuing to borrow more than we receive in tax revenue, international confidence in Japan could be gradually eroded." Whew, I had to do a double check on that statement, because I wasn't sure if he was talking about Japan or the US! Speaking of debt here in the US… The ratings agency, Fitch, issued a report on the US and debt… Here's what Fitch had to say about that… "Record US Budget deficits due to stimulus measures and a lack of a plan to reduce debt may undermine confidence in the dollar and raise inflation concern. The US fiscal metrics will be the worst of any AAA rated sovereign." That's right… We're now the "worst AAA rating"… Great! One of these days, the fact that the size of the US economy, and the fact that the US dollar is the world's reserve currency isn't going to imply a higher debt tolerance, as it does now… And guess where we are headed here in the US very soon? We're headed to a showdown on raising the debt ceiling… I wonder how that will all play out… You have to wonder if back room deals will be the call to order on raising the debt ceiling… No wait, no wondering needed, we all know that back room deals will be made… That seems to be the way we get things done these days… And that's all I'm going to say about that! On the emerging markets front… An interesting comment was made yesterday by an emerging market Central Bank Governor… Poland's Central Bank Governor, Marek Belka, said that the Polish zloty, "retains substantial potential to appreciate, with the scope of possible gains oscillating around 10%!" Hey, folks… When was the last time you heard a central banker make a statement like that? Talk about possible appreciation? Most of the time, all we hear about are the knucklehead central bankers who want to "weaken their currency"… Not talk about possible appreciation! And not only talk about it, but embrace it! So… Kudos to Poland… Here's hoping the Central Bank Governor is bang on! And they erect a statue of him someday! Oh… And get this! Belka's comments must have been a wink and nod to his buddies, and family to buy zloty… You see, this morning, the Polish Central Bank raised interest rates 25 basis points (1/4%). Gold and silver spent two days in the sun, and then the shades were pulled on them again yesterday afternoon… Again, the Chinese GDP performance should have geared these two precious metals higher, but NOOOOOOOO! I guess the price manipulators were at it again… So… Gold and silver are both down versus the dollar, and looking pretty sickly, folks… Last week, I bought more silver… I just thought that the price had dropped so much that it was time to buy on the dip… See? I practice what I preach! But, if I liked silver at $28.75, I'm going to love it at $28.50! HA! Seriously… This is a dip… Unfortunately, the dip is not on terra firma right now… But, as we all know from watching gold and silver for the past 10 years, things can change in a heartbeat, and before you know it gold is setting new record all-time highs… Now, certainly there's a chance that this scenario won't happen again, like it has for the last 10 years… And that's the little legal beagle that sits on my right shoulder talking to me… The little sarcastic devil-may-care what I type guy sits on my left shoulder… Both are telling me what I should write, and what I shouldn't! Stop it! Either let me write, or don't! Then there was this… Big Al Greenspan is back in the news… The former Cartel chairman, and someone I despise, is talking about the stock market these days… Remember back in his day, when he said that stocks were irrational, and they went on to rally strong for about five more years? Well, according to the interview by The Wall Street Journal's Kelly Evans, Greenspan believes that "stocks are cheap if earnings are to continue higher"… Whoa there partner! Big Al has really told us something here, eh? NOT! I will say this, folks… Don't know if you've seen this or not, but margin debt in brokerage houses is up 24% in the past year… And the funding of hedge funds? It's increasing again… Hedge funds are reporting that they have increased their leverage to within 10% of the peak in 2008… Here in St. Louis, there's a famous rock station that used to run a commercial of a father and daughter listening to the station, and the Rolling Stones song "Brown Sugar" comes on, and the dad gets up and starts playing the air guitar, and the daughter cries, "Mom, he's doing it again!"… If it were the bad things that get into stock markets, I would be saying, "Markets, they're doing it again!" To recap… The currency strength that we saw yesterday morning has backed off a bit, but the bias to sell dollars remains, albeit a weaker bias this morning. China's fourth quarter GDP was an impressive 9.8%, with the overall GDP for 2010 an equally impressive 10.3%… So much for the calls of an economic collapse in China, eh? Aussie dollars and the other commodity currencies have backed off yesterday's highs, as the markets believe that China will hike rates in yet another attempt to moderate their economy… And gold and silver are getting sold again… Chuck Butler China's Economy is Still Soaring 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." More articles from The Daily Reckoning….
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| Posted: 20 Jan 2011 04:58 AM PST By Jeff Nielson, Bullion Bulls Canada To any who analyze our daily "news" (rather than simply absorbing it like a sponge), it has been obvious for quite some time that the information with which we are bombarded each morning is not "news to inform us", but rather disinformation to deceive us, and conceal the farcical rigging of global markets. Few days provide as stark an illustration of that disinformation campaign as today. Upon awaking and discovering that gold and silver had dropped a couple of percent overnight, I do what I always do. I immediately went to Kitco.com – for all of the anti-precious metals propaganda which would be put out to "explain" this move in markets. I was particularly well-rewarded today, as the gold bears at Kitco had furnished no less than four anti-gold headlines, telling all the sheep why gold and silver should be moving lower today. With two of those items focusing on the economic data out of China, I will take that as my cue that the China news is the principal "explanation"of the propagandists for the moves today in bullion markets. The "news" was that China's economic growth accelerated faster than expected by the "experts". What this directly implies is that China's demand for commodities (which includes gold and silver) will increase, the Chinese people will have more money in their wallets to buy these commodities, and this will increase inflationary pressures – making gold and silver much more attractive investments as hedges against that inflation. This is why virtually every time economic news of this nature comes out, gold and silver have been strongly higher on the day. What did the propagandists have to say to justify their "reasoning"? Because of increased inflationary pressures, they expect China's government to raise interest rates, which is (supposedly) "bearish" for commodities because demand will go down rather than up. Let's look at this analysis more closely. Unlike the interpretation I supplied (the usual interpretation of this data) where the "drivers" for higher commodity prices are direct, the interpretation supplied by the propagandists is not only indirect, but also built atop several assumptions. In other words, it's extremely speculative. First, what the propagandists are saying is that higher economic growth in China will cause increased demand for commodities and higher inflation (both very gold-bullish), but that China will react to this bullish development with a bearish response. Not only is that indirect reasoning, but it assumes that (automatically) China will respond by raising interest rates, when there are many arguments that they would not (see below). However, that immediately illustrates the second assumption here: that any response by China's government would negate the upward pressure on commodities (and gold and silver). In fact, we have two full years of empirical evidence which shows us commodity prices steadily rising despite weak demand from anemic Western economies – because the insane money-printing of Western bankers has meant that the speed with which they are destroying our currencies has overwhelmed all other economic fundamentals. Have these Western bankers shown the slightest inclination to curtail their reckless money-printing? Not at all. Ben Bernanke has repeated again and again that he planned on finishing his latest batch of Bernanke-bills (totaling $600 billion) irrespective of whether he sees stronger U.S. economic data. Meanwhile, "across the pond" in Europe, we see the Euro printing press being ratcheted-up to an almost Fed-like level. More articles from Bullion Bulls Canada….
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| Why the Fed Creates So Much Money Posted: 20 Jan 2011 04:57 AM PST One of the reasons behind the Federal Reserve creating so many trillions and trillions of dollars in new money is so the stock market will go up so that more taxes will be collected, and the bond market will go up so that more taxes will be collected (and less interest paid by issuers, too!), and the housing market will go up so that more taxes will be collected, and prices of everything will go up so that more taxes will be collected, so that massive, backbreaking, bankrupting deficit-spending by the government can continue going up. The astute Junior Mogambo Ranger (JMR) senses, as do I, an ominous theme in there somewhere, although any snap judgment may be hasty, as it is entirely possible that an alternative reason for the Federal Reserve creating so much money is that the Federal Reserve is, in a word, evil. Or perhaps the Federal Reserve is filled with robots under the control of beings from outer space. Creatures from another planet are "softening us up" before their main battle forces get into their flying saucers and come eat us, enslave us, or (as seems to be their usual practice) probe our orifices. So far, there is nothing about "monsters from outer space" at zerohedge.com, although you will notice that I said "so far." But I did see at zerohedge.com that Tyler Durden quotes SocGen's Albert Edwards as saying, "I would suggest that although GDP growth may be more closely related to the absolute growth of the working population, asset price inflation may be more closely related to the proportion of workers in the general population." Of course, speaking as I do as a guy who invests solely to make a lot of money fast with minimal work, I have no idea what this would mean, or why I would even mention it at all, except as a question on the mid-term exam, such as: Question #1: "GDP growth is to absolute growth of the working population as asset price inflation is to (blank)." The exact answer is, of course, "proportion of workers in the population," but I will also accept "We're freaking doomed!" or anything along the lines of, "The damned Federal Reserve creating So Freaking Much Money (SFMM) that the prices of a lot of things will increase." I will also accept the answers, "The evil Federal Reserve destroying us," "The loathsome neo-Keynesian econometric idiot-savants at the Federal Reserve are ruining the value of the dollar," or anything that suggests that instead of taking some stupid test, they should be out buying gold, silver and oil with a frantic, manic hyperactivity as desperate protection against the catastrophic inflation in prices that will result from the Federal Reserve creating so monstrously much money. But I soon saw that I was wrong in interpreting the importance of this interesting face, being blinded by my impatient greed, thus being so shortsighted that I missed the long-term implications of things, in a kind of "tendency" and "gravity" and "inevitability" kind of way. He explains, "If that is the case, as the former baby-boomers start to retire, this burgeoning cohort will tend to liquidate assets. This only exacerbates the secular bear market for property prices (which have already begun to decline again), as well as the equity market." Hmmm! Fewer buyers, more sellers? It is the old supply/demand dynamic, and it's pointing to lower prices, but – and probably very importantly! – curiously being offset by the Federal Reserve creating so much new money, to monetize so much new debt, so that all of this sheer, overwhelming tonnage of new money has to end up somewhere, and the stock, bond and derivatives markets are the only things which can absorb So Freaking Much Money (SFMM). In practice, Mr. Edwards says, "This means that Bernanke for all his efforts may not be able to prevent the secular valuation bear market fully playing out until rock bottom valuations are reached." Mr. Durden says, "oops." I, on the other hand, say, "Whee!" because at stock market bottoms, one ounce of gold is about all it takes to buy the Dow, or buy the S&P500, or a few ounces for houses, or cars, or anything you can name, all because of the incredible rise in the price of gold, all because of the incredible rise in inflation, all because of the incredible rise in the money supply, all because of the evil Federal Reserve creating so incredibly much more and more money. And with gold and silver still hovering incredibly at these low, low, bargain-basement prices, at the same time as so incredibly, outrageously much money is being created by the Federal Reserve and spent by the odious Obama administration, buying gold and silver is so glaringly obvious and childishly simple that you can't help saying, "Whee! This investing stuff is easy!" The Mogambo Guru Why the Fed Creates So Much Money 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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| US Mint Sales: Silver Eagles Hit New Monthly Record Posted: 20 Jan 2011 04:57 AM PST Talk about a busy month for the US Mint. January 2011 sales of Silver Eagle bullion coins shattered the all-time monthly record when they hit 4,588,000 this week.
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| Silver: Overdue for a Correction Posted: 20 Jan 2011 04:56 AM PST Today’s action in the silver market (down almost $1 an ounce as this is written) will do little other than reinforce the recent trend for the “tonnes in the trust” at the world’s most popular silver ETF – the iShares Silver Trust (NYSE:SLV) – that is now almost 350 tonnes lighter than it was on the first day of the year.
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| Why Gold Is a Better Currency Indicator Than the U.S. Dollar Index Posted: 20 Jan 2011 04:56 AM PST Doug Eberhardt submits: When commentators on CNBC and elsewhere talk about the U.S. dollar being weak or strong, they reference the U.S. Dollar Index being up or down as their source. But most people I have found don't really understand what the U.S. Dollar Index represents. In reality it is simply a camouflage meant to conceal the real weakness of the U.S. dollar. This article will explain the U.S. Dollar Index and then make conclusions on how it is not a true indicator of U.S. dollar strength or weakness, and show how the price of gold is.
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| NVE CEO Discusses F3Q2011 Results – Earnings Call Transcript Posted: 20 Jan 2011 04:56 AM PST
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And it's worth further asking–as more and more people are beginning to ask–whether a modernized international gold standard, which anchors currencies to a standard outside government manipulation, wouldn't better serve the interests of free and limited government both at home and abroad. After all, it's the dollar's status as a reserve currency that has allowed the U.S. government to amass huge debts, debts which the legislatively imposed debt ceiling has been unsuccessful in limiting. Fiat currency seems to be related to bloated and unlimited government, and to speculative bubbles, and to international instability. Do we just to have to live with this, or simply hope for better Fed chairmen?
The Reuters-Jefferies CRB index, a commodities benchmark, looked set for its largest one-day loss in over two weeks, led by 2% drops in oil and copper on fears that strong growth in China could prompt more monetary tightening. Worries that Chinese tightening could derail global economic recovery sparked losses in stock markets too, with equities falling on both sides of the Atlantic…
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