Gold World News Flash |
- Trader Comments On This Week?s COT Report
- Hourly Action In Gold From Trader Dan
- Spread Trades – Open Interest Evaporate on COMEX Gold
- Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week
- David Freedom's Vision of 2011 and Beyond
- Investing in Gold and Silver for the Long Haul
- In The News Today
- Why is the gold price going down?
- The Light Sweet Dire Divergence: Just Another Paper vs. Physical Disruption?
- A Tangled Mess - Why Oil Mixes With Gold
- Today the Gold Price Rallied, Does This Mark the End of the Correction?
- Twitter, History & Modern Revolutions
- Trader Comments On This Week's COT Report
- What Will Gold Do Next? Predictions for 2011
- Gold and silver progress report
- FRIDAY Market Excerpts
- Lawrence Roulston: It's Time to Buy
- Nothing to Worry About
- Gold Resistance at 1330-1337
- Silver Supply Shortage?
- Gold Correction To $1260 Technical Update
- Gold Daily and Silver Weekly Charts - Potential Intermediate Bottom in Gold
- Global Insurrection Against Banker Occupation and the Silver Liberation Army (SLA) reaches Jordan
- Cramer: Egypt Speaks to Gold's Importance
- Siver pullback finished?
- Buy Silver Sell Spanish Equities
- http://www.cbe.org.eg/ Not Responding: Has The E(gyptian)CB Been Plundered?
- Short-Term Rally?
- American, British, Canadian and Australian revolutionaries join the revolutionaries in Cairo, Tunisia, Dublin and Athens – BUYING SILVER TO DECAPITALIZE THE HEAD OF THE SNAKE OPPRESSING ALL – JP MORGAN and JAMIE DIMON
- COT Gold, Silver and US Dollar Index Report - January 28, 2011
- A Turning Point in Gold
- Silver Futures CoT 2
- Egypt Crumbling Into Chaos
- Eric Sprott - Expect $50 Silver, Gold Possibly $2,150 by Spring
- Gold's Correction Might Be Longer Than Expected
- ‘Fear and Love Make Gold Strong’
- Gold prices get safe-haven boost
- Egypt’s Social Unrest As A Pan-European Economic and Financial Contagion? Let’s Walk Through The Logic
- DAVOS STRUWWELPETER (PoNZi MaN)
- US Continues Deficit Spending With No End in Sight
- Chinese Premier Wen to Support Euro With “Real Actions”
- Downgrading Japanese Debt
- China Allows Renminbi Trading in the U.S.
- Inflation to Help the Less Fortunate?
- The Troubling Doubling of Money Supply
- Is There a Silver Supply Shortage?
- Chris Powell: And was Jerusalem builded here?
- Gold's fundamentals unchanged, debt must be written off, Rickards tells King World News
- Silver bars likely to be gone within days, dealer tells King World News
- Rare Earth Element Myths Debunked
| Trader Comments On This Week?s COT Report Posted: 28 Jan 2011 05:35 PM PST View the original post at jsmineset.com... January 28, 2011 03:43 PM Dear CIGAs, Some comments on the Commitments of Traders report of this week. Today's report, detailing the activity of traders through Tuesday, shows a continuation of the recent pattern of speculative long side liquidation in the gold market and a continued drawdown in the net short position of the bullion banks and the swap dealers (sometimes the same entity). Hedge funds are now down to the lowest net long position since May 5, 2009 when gold was trading near $920. There is a continued come down also in both the "Other reportables" camp and the small speculator or general public (Nonreportables) in terms of their net long exposure. Clearly speculator interest in gold has waned and quite rapidly at that I might add. That process will need to come to a halt to put an end to the move lower in gold and allow prices to stabilize. We might have seen this occur today but cannot be sure until we get the open inte...
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| Hourly Action In Gold From Trader Dan Posted: 28 Jan 2011 05:35 PM PST View the original post at jsmineset.com... January 28, 2011 11:38 AM Dear CIGAs, Last evening during the Asian trading session, front month gold dipped into the $1310 region where it uncovered considerable buying interest. The buying was large enough to absorb the selling pressure that carried over from the poor performance of yesterday's trading session. Once gold was able to punch through the $1317 level, there was additional buying that came in which looked like a combination of shorts booking profits as well as some bottom picking. That buying took it up through $1320 which then began sparking short covering. Their forced exit provided further upward progress which then enticed additional buying as locals began looking gunning for the stops above $1330. Around 10:00am Central time, they reached $1330 but were unable to get to the stops. Apparently however some additional recruits came in and on the second approach they took it out. That forced another wave of short covering taki...
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| Spread Trades – Open Interest Evaporate on COMEX Gold Posted: 28 Jan 2011 04:30 PM PST Quick notes as we are looking over the data in preparation to begin this week's full Got Gold Report, which we are planning for late Sunday, early Monday at the latest. The second most interesting chart that jumps out from the disaggregated trader data published by the CFTC this week has to be the evaporation of the Managed Money spread trades for gold. Here's the chart.
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| Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week Posted: 28 Jan 2011 04:00 PM PST Gold fell as much as $11.10 to $1307.80 in Asia before it rebounded back to almost unchanged at $1318.19 in early New York trade and next fell back to $1310.70 by about 9:30AM EST, but then surged back higher for the rest of the morning and ended near its midday high of $1346.74 with a gain of 1.66%. Silver fell as much as $0.63 to $26.38 in early Asian trade before it also rallied back higher in New York and ended near its late session high of $28.013 with a gain of 3.3%.
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| David Freedom's Vision of 2011 and Beyond Posted: 28 Jan 2011 01:57 PM PST
The world’s banking system (which is the western banking system) has the same problems that existed before the collapse in 2008, with two exceptions: 1) The problems are much larger; and 2) They have been shifted to the public. Since 2008, the Fed has loaded up on all sorts of “toxic debt”, including Fannie & Freddie (MBS), FHA, US Treasuries ($900B) and many more. Newly issued US debt ($2T annual deficit) is being purchased/monetized by the Fed and those holdings along with all the previously mentioned toxins are now backed by the US Treasury. As of October 20, 2010 the Fed’s balance sheet exceeded $2.3 trillion ($832b in Treasury debt). What’s the Fed’s plan to manage this liability in the event of a dollar collapse? Suffices to say, the US citizen is now the largest debtor in the history of the world.
Who’s Holding the Bag? The Bernanke recently stated publically that: “Under a scenario in which short-term interest rates rise very significantly, it’s possible that there
What Ignites the Next Blaze? The potential list is long, so I’ll mention only a few. All of these things could happen in the next couple years, the first of which will start a fire the likes of which we’ve never witnessed. It could be US municipal defaults, policy shifts from the Chinese, a EU crisis, or an expanded war in the Middle East. I could go into detail about the crisis-solution agenda, but I’ll leave that for another day.
The US Market QE2 is set to expire in June 2011 and The US Congress will need to address the debt ceiling by March. Expect the debt ceiling to be revised up in the near future and QE3 will probably be masked under a different name, but make no mistake, it’ll be money printing all the same. My understanding is that the banking system intends to continue increasing credit/debt throughout the world. Through the next month or two (through Feb) we’ll likely see a continued rise in commodities and US equities. Picking a line in the sand is tricky business though, so making preparations now is prudent. As food and energy prices rise, nations will feel the sting of money printing (already happening). This will only increase the number of civil protests (RIOTS). Developing nations will feel the brunt of higher inflation, which will lead to various measures to control price increases (e.g., Russia’s recent announcement of food controls or COMEX margin hikes). The increased costs of commodities will be a drag on the world’s economy as well as the attempted policies to control the rise. As a result, I expect significant volatility throughout 2011. The global slowdown will lead to a drop in US markets by the middle of the year, giving the Fed impetus for more money printing. For anyone still expecting a return to ‘normal’, 2011 will be a wake-up call.
Beyond 2011 Similar to the “Choose-Your-Own-Ending” books (remember those?), the Fed has gone too far down the easing path to save the USD as it exists today. In the short-term, the USD is still being managed by the Fed, but this is only a temporary mirage. For the sake of this article, let’s assume they try (though highly unlikely) to restore confidence in the USD. The Fed could allow the bad debt to default (written off). As defaults rage the USD would skyrocket, due to massive liquidations and to a lesser extent, the safety trade. However, as a result of massive defaults, US banks would immediately be unable to honor deposits. Of course, the government could “back stop”/guarantee all the banks, but then we’re back into easing which puts the currency at risk. In addition to the banking collapse, The Fed and US Treasury (as the Fed’s back-stop) would default. Since this would be a sovereign default, and the USD is stock of that sovereign entity, the USD would collapse. There is one possibility in reviving the USD, albeit under a new/old system. That new system would require a huge revaluation in US gold holdings to be used as backing for the new USD. Jim Rickards has done some good work on the process and price of gold to make it a reality. Whether this happens or not remains to be seen. As we work through this crisis, there will be a combination of defaults and austerity. Pensions will be slashed, state assets will be sold to the highest bidder (at massively undervalued prices), while new and existing taxes are imposed on the citizenry. Government services will be slashed and newly privatized assets will increase all types of expenses – things like water, energy and transportation. See the IMF blueprint for how this works, or ask an Argentine. Civil unrest will increase dramatically, in places never before expected. Tensions between nations will rise and war will inevitably breakout throughout the globe. Sound gloomy? This too shall pass.
What to do? If you have wealth to protect, a minimum of 30% should be held in gold, silver or productive land. I do not advocate 100% into PMs. Although the outcome of the USD is abundantly clear, current laws enforce the USD which should be held for expenses, emergencies, purchases and so forth. Rather, I suggest 30% be stored in physical gold and silver, 30% in cash and 30% in growth. Within the growth category you will have many paper options and should look to exceed the rate of inflation. As a further precaution, it’s advantageous to hold assets and citizenship outside of your primary residence. The issues we face today are extremely complex and although the outcome appears certain, the specific events and timeline are impossible to predict. By maintaining a sound portfolio, you will afford yourself the most protection against a variety of financial outcomes.
Non-Financial You should have water and food stocks along with necessary supplies, such as water filters, alternative heat sources, community networks and other essentials for surviving disasters. In all likelihood, systems will continue to function, but on a temporary basis, these items will keep you comfortable (relatively). Learn who you are and what’s important to you. Find the meaning of your existence and strive to fulfill your purpose. Live in harmony with your surroundings and community. Love God and men. Don’t follow any institution and think for yourself. When making charitable donations, give them personally. I advise reading the bible (KJV), starting with the New Testament. Most importantly promote and vigorously protect freewill. If the Euro crashes, reduce USD positions!
~david freedom
david@thevictoryreport.org
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| Investing in Gold and Silver for the Long Haul Posted: 28 Jan 2011 01:31 PM PST Chris Mayer was quoted in the 5 Minute Forecast newsletter as having noted that "If history is any guide, inflation will likely get much worse." Being the kind of guy who goes absolutely insane about inflation in prices, you can imagine the effect this had on me, although with a modest touch of understatement, he does not take things to the logical conclusion, namely that "We're Freaking Doomed (WFD), you morons! And now everyone is going to see what happens after an excessive creation of money has distorted the economy, little by little over the decades, into a grotesque, corrupt, cancerous, incestuous economy feeding on government spending that, in the local, state and federal aggregate, now comprises an outrageous 50 percent of all spending in The Whole Freaking County (TWFC), and yet the Federal Reserve keeps creating more and more so that the federal government can borrow more and more and thus spend more and more!" I would suggest, of course, that he would finish up with, "And ...
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| Posted: 28 Jan 2011 01:07 PM PST Jim Sinclair's Commentary Three so far this week. Bank Closing Information – January 28, 2011 FirstTier Bank, Louisville, CO
Jim Sinclair's Commentary Things in Egypt continue to crumble. Mubarak Dismisses Egypt's Government Egyptian President Hosni Mubarak in an address broadcast on state television Jan. 28 said that he has dissolved the government and will form a new government Jan. 29. In other words, Mubarak is not stepping down. Changing the political face of the government is unlikely to pacify Egyptian protesters. Mubarak is undoubtedly the primary target of the demonstrations. The crisis in Egypt is thus far from over. The military still appears to be the main power broker in the country, and Mubarak's fate is likely in the hands of his generals. Mubarak's appeal to stay and the hours-long delay in making this speech could be a negotiated step between the two sides, but the potential for more direct and overt military intervention remains extremely high. Chief of Staff of the Armed Forces Lt. Gen. Sami Annan is expected to return to Cairo by Jan. 29 and next steps by the military are likely to be discussed then. The announcement was strategically made in the middle of the night in Egypt to give time for troops to take position. The military's interaction with the demonstrators will need to be watched closely. So far, the military has been able to move into the cities and has been welcomed by the protesters without employing the more heavy-handed tactics of the internal security forces. What order they imposed came not from violence but from the perception that they would enable the demonstrators to bring down Mubarak.
Jim Sinclair's Commentary Apparently everyone reads Trader Dan. World Grows Jittery About American Debt
The rebukes came a day after a congressional projection placed this year's federal budget deficit at a post-World War II record of $1.5 trillion. It also came on the same day that another credit-rating agency, Standard & Poor's, downgraded Japan's bond rating from AA to AA- out of concern that the country isn't making a credible effort to control its spiraling debt. During his State of the Union address, President Obama proposed deficit-reduction measures like freezing domestic spending, but critics accused him of skirting the painful spending cuts or tax increases needed to truly rein in the national debt. How seriously should we take the threats issued by Moody's and the IMF? Moody's Warning Could Spook Foreign Investors, notes Bloomberg's Christine Richard: "The threat of a lower rating may cause international investors to avoid U.S. assets. About 50 percent of the almost $9 trillion of U.S. marketable debt is owned by investors outside the nation." If Japan Was Downgraded, U.S. Could Be Next, maintains Time's Michael Schuman: "Anything you can say about Japan you can say about the U.S.–and more. Unlike Japan, the U.S. is not a creditor nation, nor does the populace save enough. Despite talk of a more conservative approach to spending, the U.S. has no credible plan for reining in its deficits and debt." U.S. Debt Will Be Downgraded, argues Douglas McIntyre at 24/7 Wall St: "The US is doomed to suffer a downgrade in its debt before its begins the hard work on restructuring Social Security, Medicare and Medicaid. A downgrade may not even be enough of a shock to bring Americans to their senses. They have paid for their entitlements and they believe they deserve them." Downgrade Unlikely But Potentially Disastrous, explains The Washington Post's Howard Schneider. The U.S. still has the world's largest economy and reserve currency, Schneider reminds us. Yet, "however unlikely, a downgrade in U.S. debt or loss of confidence in the government's ability to repay its creditors could touch off a catastrophic series of events–from a shutdown of global trade finance and credit to the collapse of banks and governments that hold large amounts of U.S. debt and depend on the flow of money through and from the United States to stay afloat."
Jim Sinclair's Commentary Egypt has shut down both internet and cell phone access amidst protests. The fact that the US also has the ability to do the same is frightening. This possibility makes the ownership of direct satellite phones most inviting. I am re-installing my Motorola radio system that I have used in the past to keep lines of communication open to my office in the old non-tech world. Egypt Withdraws From Internet After Protesters Take to Streets Egypt, which has one of the most advanced telecommunications markets in the Middle East and Africa, "withdrew" from the Internet, after Egyptian authorities shut connections to the outside world. Internet traffic volumes into and out of Egypt slumped at about 12:20 a.m. Egyptian time today, according to Internet security company Arbor Networks. Mobile-phone services run by local units of Vodafone Group Plc and France Telecom SA were also halted. "Rather abruptly, in a coordinated fashion, all of the major Internet providers that have traffic in and out of Egypt basically withdrew from the Internet," said Craig Labovitz, chief scientist at Arbor Networks. Egyptian authorities shut the connections after anti- government demonstrators took to the streets inspired by an uprising that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14. Internet traffic volumes slumped at about 12:20 a.m Egyptian time today, Arbor Networks said. The Egyptian authorities couldn't immediately be reached for comment. Vodafone said it was ordered to suspend mobile-phone services in selected areas. "Under Egyptian legislation, the authorities have the right to issue such an order and we are obliged to comply with it," Vodafone said in an e-mailed statement. "All mobile operators in Egypt have been instructed to suspend services in selected areas."
Jim Sinclair's Commentary Of sorts, yes! Russia Moving to Gold Standard? With the value of the U.S. dollar exponentially declining since the establishment of the Federal Reserve Bank in 1913, it comes as no surprise that many world leaders and international economists have expressed their desire for a new world reserve currency. In light of the global financial crisis, Russia may be moving toward a sound economic solution — gold. On Monday, January 24, the First Deputy Chairman Georgy Luntovsky of the Central Bank of Russia (CBR), announced plans to purchase over 100 metric tons of gold every year — increasing the bank's gold reserves by 13 percent in 2011. Last year alone, the CBR expanded its gold holdings by 23.9 percent to 790 tons. Why the sudden increase? "The current set of reserve currencies and the main reserve currency — the U.S. dollar — have failed to function as they should," Russian President Dmitry Medvedev told a Shanghai Cooperation Organization summit on June 16, 2009, adding that he would like to see the Russian ruble become a global reserve currency. Medvedev's desire for the ruble to be a global reserve currency, or part of a new economic world order, may not be the only reason for the sudden gold increase. With the signing of the Customs Union treaty last month, the leaders of Russia, Belarus, and Kazakhstan agreed to establish a free-trade zone among themselves with a common currency. The Customs Union — set go into effect on January 1, 2012 — has been regarded as the economic restoration of the Soviet Union. A new gold ruble could serve as the basis for a common currency between the three old Soviet republics, much as the former Soviet ruble once was.
Jim Sinclair's Commentary I have told you that farming was the greatest opportunity in Tanzania. Tanzania is recognized as the greatest opportunity in Africa. This article tends to underscore that. DAVOS-Firms seek to up food output to counter more unrest DAVOS, Switzerland, Jan 28 (Reuters) – Some of the world's top firms agreed on Friday to invest in agriculture projects in Tanzania and Vietnam, warning of more unrest in the developing world if food production does not keep pace with population growth. Business leaders announced a plan at a news conference at the World Economic Forum (WEF) to increase food production by 20 percent, while cutting greenhouse gas emissions by 20 percent and reducing rural poverty by 20 percent in a decade. "This is timely given the news of continued rises in crop prices," said Hugh Grant, chief executive of Monsanto (MON.N), the world's biggest seeds company. "The expectation is that by 2050 we will have to double the amount of food that our little planet produces.
Jim Sinclair's Commentary States will go broke. Moody's to Include Unfunded State Pension Liabilities, NYT Says Moody's Investgors Service plans to include unfunded pension liabilities into its credit rating for U.S. states' debt, the New York Times reported, citing Robert Kurtter, managing director for public finance at Moody's. States haven't included those liabilities until now, prompting growing unease among investors in municipal bonds, the newspaper said. The new system will be comparable to the way Moody's now rates corporate and sovereign debt, the newspaper said. States with the highest total indebtedness include Connecticut, Hawaii, Illinois, Kentucky, Massachusetts, Mississippi, New Jersey and Rhode Island, as well as Puerto Rico, the Times reported.
Jim Sinclair's Commentary The ideas that a spread financed at $10,000,000 can control the total production of gold from South Africa shows you the madness of credit, debt and markets now. Huge U.S. gold position liquidated by fund-WSJ LONDON Jan 28 (Reuters) – Hedge fund SHK Asset Management liquidated a U.S. gold futures position this week valued at over $850 million, more than 10 percent of the main U.S. futures market, the Wall Street Journal reported on Friday. As a result of the move, which was made on Monday, the number of gold contracts on CME Group Inc.'s Comex division plunged by more than 81,000, to about 500,000, in their biggest single fall ever, the WSJ reported. It said an average daily move is about 3,000 to 5,000 contracts. Daniel Shak, who runs the $10 million fund, told the newspaper that the trade had been profitable for him for years, but it stopped working and the exchange kept raising his margin requirements, forcing him to put up more money. Shak said that when the exchange raised it by 25 percent on Monday, he decided to cut his losses and end the trade, the newspaper said.
Jim Sinclair's Commentary This period is more degraded than that of Sodom and Gomorrah. Pompei was kindergarten compared to the sociopaths of Wall Street. The problem is that the present day demons own the place. Who need enemies when you investment bankers. Wall Street Rocket Scientists Revive CDOs in Derivatives Battle The U.K. is losing about 38 billion pounds ($61 billion) a year to fraud, with the finance industry bearing the largest loss in the private sector of 3.6 billion pounds, the government said. The financial-services industry in the U.K., which saw a 14 percent increase in online-banking fraud, is losing 1 billion pounds a year to mortgage fraud and 2.1 billion to insurance scams, the National Fraud Authority, a unit of the U.K. Attorney General's office, said in a statement yesterday. The public sector is losing 21 billion pounds to fraud, and the private sector loses an estimated 12 billion pounds, according to the NFA. Fraud costs individuals another 4 billion pounds a year and charities 1.3 billion pounds, it said. The estimate "shows that 55 percent of fraud — a massive 21 billion pounds — is committed against the public sector," Francis Maude, a minister for the Cabinet Office, said in the statement. "Ripping off the taxpayer will not be tolerated." The Serious Fraud Office, which prosecutes complex fraud and white-collar crime in the U.K., said in a separate statement yesterday that it has achieved an 80 percent conviction rate in its cases since April last year, and has 103 open cases.
Jim Sinclair's Commentary CIGA Green Hornet submits this as an example of brain surgeons at work in Finance. Fitch downgrades Egypt outlook to negative CAIRO (AP) — Fitch Rating on Friday revised down its outlook for Egypt, dropping it to "negative" as mass protests in the country turned violent, engulfing the capital and other cities in the most serious challenge to President Hosni Mubarak's regime in years. Fitch said it was holding steady Egypt's other ratings, including its long-term foreign currency issuer default rating, which was held at the investment grade BB+. "The Outlook revision reflects the recent upsurge in political protests and the uncertainty this adds to the political and economic outlook ahead of September's elections," said Richard Fox, head of Fitch's Middle East and Africa Sovereign Ratings. Egypt is slated to hold presidential elections in the fall. The revision came after the Egyptian stock exchange's benchmark EGX30 plummeted about 17 percent in two days, a drop fueled by investor panic over Tunisia-inspired protests that erupted Tuesday in the Arab world's most populous nation. The demonstrations have focused on the economic disparity in the country, spiraling food prices and the grinding poverty that afflicts nearly 40 percent of Egypt's 80 million people. Analysts have downplayed the likelihood that President Hosni Mubarak's regime would be ousted as a result of the protests. But the mass rallies in which tens of thousands have clashed with riot police have pushed to the surface latent concerns about Egypt and raised questions about the economic impact on the country.
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| Why is the gold price going down? Posted: 28 Jan 2011 01:00 PM PST Alongside the falling gold price we have watched shareholders in the U.S. gold ETF, SPDR selling nearly 100 tonnes of gold over the last few weeks. The selling of gold has come from the U.S. and mainly seen at the Fixes in London at 10.30 a.m. London time or 3.00 p.m. When shareholders sell their shares the custodian HSBC is tasked with selling the fund's gold holding against these sales.
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| The Light Sweet Dire Divergence: Just Another Paper vs. Physical Disruption? Posted: 28 Jan 2011 11:52 AM PST
Over the past few weeks we have dedicated quite a few articles to the WTI-Crude spread which today once again hit an all time record wide (here and here). Yet no matter the reason for the divergence, what is certainly lacking are explanations for why arbitrageurs have not stepped in to take advantage of this mispricing. While there has been much speculation, nobody has provided a comprehensive answer. Until today. Below we present the Weekly Tanker Opinion from Posen & Partners, "Light Sweet Dire Divergence" which gives what we believe could be the most credible explanation. Bottom line: just like in gold, there appears to be a dramatic divergence being created between the paper and physical markets in WTI. "The Brent crude oil benchmark currently represents the pricing benchmark for over 65% of the world’s traded physical crude oil. The WTI contract represents a pricing benchmark for about 30% of the world’s traded physical crude oil, while physical supplies of WTI are quite scarce. It should be noted, most of the crude oil being priced off the WTI contract is already trading at a significant premium to the contract itself implying that the market has already compensated for WTI’s lack of physical relevance. This could explain why shipping rates have remained depressed in the face of such a dramatic price discrepancy between the two contracts. It would also support the growing chorus of analysts, traders, and pundits calling for the Brent contract to be more indicative of fundamental demand for physical crude oil (versus speculative demand for paper WTI contracts)." Much more in the full note... Light Sweet Dire Divergence (pdf), from Posen and Partners
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| A Tangled Mess - Why Oil Mixes With Gold Posted: 28 Jan 2011 11:23 AM PST Considerably higher oil prices are coming to the world at the worst possible time. Not only is the world far from being ready with oil alternatives when demand is on the brink of surpassing production, but this is happening at a time ... Read More...
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| Today the Gold Price Rallied, Does This Mark the End of the Correction? Posted: 28 Jan 2011 11:23 AM PST Gold Price Close Today : 1,340.70 Gold Price Close 21-Jan : 1,341.00 Change : -0.30 or 0.0% Silver Price Close Today : 2793.4 Silver Price Close 21-Jan : 2741.6 Change : 51.80 or 1.9% Gold Silver Ratio Today : 48.00 Gold Silver Ratio 21-Jan : 48.91 Change : -0.92 or -1.9% Silver Gold Ratio : 0.02084 Silver Gold Ratio 21-Jan : 0.02044 Change : 0.00039 or 1.9% Dow in Gold Dollars : $ 182.31 Dow in Gold Dollars 21-Jan : $ 183.01 Change : $ (0.70) or -0.4% Dow in Gold Ounces : 8.819 Dow in Gold Ounces 21-Jan : 8.853 Change : -0.03 or -0.4% Dow in Silver Ounces : 423.27 Dow in Silver Ounces 21-Jan : 433.03 Change : -9.75 or -2.3% Dow Industrial : 11,823.70 Dow Industrial 21-Jan : 11,871.84 Change : -48.14 or -0.4% S&P 500 : 1,276.34 S&P 500 21-Jan : 1,283.35 Change : -7.01 or -0.5% US Dollar Index : 78.135 US Dollar Index 21-Jan : 78.130 Change : 0.01 or 0.0% Platinum Price Close Today : 1,792.40 Platinum Price Close 21-Jan : 1,826.50 Change : -34.10 or -1.9% Palladium Price Close Today : 812.50 Palladium Price Close 21-Jan : 818.05 Change : -5.55 or -0.7% The GOLD PRICE and SILVER PRICE place the most twisted riddle before us today. Did today's rally mark the end of the reaction, or merely a sharp reaction against the trend? GOLD jumped a healthy $22.30 on Comex to close at $1,340.70. That was strong, that was tough, that was admirable, but that was not a close through $1,345 resistance. Therefore, today's close answereth not our riddle. The Williams %R indicator shows an extreme low, but that, too, speaketh with forked tongue. It might indicate a little rally, then a resumption of the downtrend. No answer there, either. What about the low so far? $1,318.40, yesterday's close, nearly fits one of my targets, that $1,308 support. That's a clear "maybe." I am trying to learn not to draw to inside straits, but to stick to the main chance. Gold must clear $1,345 and then $1,355 and $1,365 in short order to state clearly that it has finished dropping. SILVER outshone gold today. The rise to 2800c (high at 2804c) cleared the last high at 2780. Still, the close came at 2793.4c, up a hefty 89.8c but still not ABOVE 2800c. I will leave the many metaphors to your imagination, but "not there" in the end means "not there." It either is or it ain't, and so far, it ain't. Besides, this silver reaction doesn't meet my expectation either in time or price. Time should drag out another month or more, price drop further than what we have already seen, less than 15% from the peak. Just doesn't seem a sufficient tergiversation for volatile silver. But lo! I am teachable, and chary of ever wedding myself to my own preconceptions. Still, it cleaveth to my mind the main chance is a silver jump not higher than 2860c (the 20 DMA), then a drop to lower lows. Now arguing against lower lows are the RSI and MACD, which are hinting that the SILVER PRICE and the GOLD PRICE are ready to move up. So in the end, I can't answer the riddle and can only wave one hand in the air and then the other. Next week will tell us. Be not confused, neither be dismayed: the primary uptrend in silver and gold remains as robustly healthy as ever. You are witnessing a temporary correction after a long move up. The bull market is not even near a beginning of an end, much less the end. Strange unto weird. Look at that board: gold within 70c of last week's close, US dollar index within half a basis point, and all else but silver and platinum are nearly unchanged. DOLLAR INDEX gave today the first sign of breaking out of that falling wedge it has spent so long drawing. Dollar closed today up 40.8 basis points to 78.135, comfortably above 78 at least. Is it a breakout? If so, Monday it must rise again, and in fact ought also to rise for three days or more. Since the Yen fell today 0.68% and the Euro fell 0.69%, it looks like a short covering rally at least. Behold: the rising dollar coincided with falling stocks and rising silver and gold. I do not interpret, I only observe. Maybe the riots in Islam land boosted gold today? But then, how do you explain silver rising further than gold today? Dollar topped today at 78.28, so 78.30 and 78.40 are the marks to beat next week. A drop below 77.60 launches dollar into free-fall. STOCKS took a hard beating with a white oak stick. They began the day looking poorly, then some lemming-like impulse sent investors running over the cliff. By noon the Dow had fallen to 11,805. Dow closed at 11,823.70, down 166.13 (1.4%) and the S&P500 lost 23.20 (1.8%) to close at 1,276.34. Look at the chart. This was a waterfall, a severe break breathing panic and fear. As I have been repeating, and repeatedly been rebuked for repeating, the Dow has formed a fatal (read: deadly, tending to croak) rising wedge, which points AWAY from the direction it will break-out, a prolix way of saying that a rising wedge breaks out downward. Stocks will continue to offer a wild, dangerous, and downward roller coaster ride in the Great Amusement Park of Investing. Keep off! DOW IN GOLD DOLLARS hit a high this week at its last low, and it stands above the 200 day moving average. I think that was the top of the move, and 'twill descend from here. On Friday, 4 February 2011 I will be speaking in Severn, Maryland for the Institute on the Constitution: "The Only Cure For The Economic Depression, and It Ain't From Washington, DC." For details, go to www.iotconline.com. If you make it, come up and introduce yourself. Admission is free but limited seating requires you register in advance. Y'all enjoy your weekend. 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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| Twitter, History & Modern Revolutions Posted: 28 Jan 2011 11:19 AM PST
Revolutionaries in Tibet, Burma and Thailand used the internet and YouTube as a way to spread the word of what was happening in their countries during times of civil unrest. Twitter however, as a revolutionary tool, came of age during the recent protests in Iran, following the rigged election of 2009. It was during this failed attempt by the oppressed people of Iran that both sides learned the power of Twitter. The capacity of twitter/SMS to allow civilians on the streets and at home to share information between them was a new tool used by revolutionaries in a new way. The ability to decentralize communications between demonstrators electronically became the besieged Governments greatest fear. Governments are always accused of fighting the last war. In this case, the people are adapting to newer technology, without needing to use the old forms of controlled communication. The decentralized nature of the internet gives the people a new capacity to distribute the news or changes in plans unlike anything in human history. A few weeks ago in Tunisia we had an uprising that was so spontaneous it completely caught everyone by surprise. It happened so quickly, elements of the government were unable or unwilling to act fast enough to stop it before the army switched sides and joined the movement. In Egypt, people have set the current Governments party headquarters on fire, as a sign of their anger after the government turned off the internet and twitter. The police and the people are meeting in a surge of civil war events. The genie of revolution has been released. The power of what Twitter has unleashed has never been more visible. When Egypt cut all internet and twitter communications, it was the true sign of the desperation of the Government now. The autocrat Governments around the world are trembling this weekend, as the reality of the last few weeks hits home. Tunisia was not a single event and Egypt will not be the last. The people on the streets of Arabia are standing up and shaking off the shackles of dictatorship. The Egyptian revolution is unfolding in real time, in front of the world. The Twitter revolution is still happening, 140 characters at a time, just not in Egypt at this time.
Fear is an interesting thing. Once experienced it changes everything, values become relative. In such a world, the US dollar becomes king again. The world reserve currency returns to its role as a medium between all traders. The US Treasury market, all warts included, becomes the most liquid place to park funds while fear rages in the emerging markets. Fear in the market has been on hold during one of the greatest market bounces in history. That fear may have just returned to the markets. One twit at a time. The world changes.
Confessions of a Macro Contrarian www.jackhbarnes.com
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| Trader Comments On This Week's COT Report Posted: 28 Jan 2011 10:43 AM PST Dear CIGAs, Some comments on the Commitments of Traders report of this week. Today's report, detailing the activity of traders through Tuesday, shows a continuation of the recent pattern of speculative long side liquidation in the gold market and a continued drawdown in the net short position of the bullion banks and the swap dealers (sometimes the same entity). Hedge funds are now down to the lowest net long position since May 5, 2009 when gold was trading near $920. There is a continued come down also in both the "Other reportables" camp and the small speculator or general public (Nonreportables) in terms of their net long exposure. Clearly speculator interest in gold has waned and quite rapidly at that I might add. That process will need to come to a halt to put an end to the move lower in gold and allow prices to stabilize. We might have seen this occur today but cannot be sure until we get the open interest readings from the exchange Monday morning of next week. A great deal will now depend on developments in Egypt and in the mid-East in general over the weekend. When a market is trading below its major moving averages, as gold is currently, there is a strong tendency for longs to use rallies to reduce their long side exposure. To prevent this from occurring, price must at least recapture the downtrending 10 day moving average which comes in very close to today's session high near $1350. That the bulls were able to get price to close above that critical support level of $1320 at the week's end is no mean feat. About that sharp drop off in the open interest as was reported this week and which drew considerable attention. It did come out of the managed money camp ( I had thought some of it might also show up in the "Other Reportables" camp) and in particular in the spreads put on by that group of traders. The number of their spreads fell a huge 65,755 contracts. I am still wondering how in the world a money manager could put on a spread trade and lose the amount of money that was reported to have been lost in the story that came out about this overnight. As a large spread trader myself in various markets, I can tell you that takes some real doing to accomplish a loss of that magnitude. You have to completely disregard sound money management techniques and become totally undisciplined. These markets take no prisoners today – something all would-be and active traders would do well to remember. Overall, the COT report is pretty much what we have come to expect in this market during times of lower prices in gold. While I would have preferred to see the general public net long position come in lower than the actual numbers, it is the hedge funds (Managed Money) that still hold the key to this market and they are still ditching longs. Once that process halts, the market bottoms. It is that simple. Click image to enlarge today's COT chart in PDF format
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| What Will Gold Do Next? Predictions for 2011 Posted: 28 Jan 2011 10:29 AM PST Doug Eberhardt submits: When it comes to making predictions in the gold and silver market, there are many variables to consider. Sometimes I'll got out on a limb and publicly make a statement on what I believe will occur with gold and silver prices based on the information I've compiled. I come to my conclusions by weighing the pros and cons of the data. These predictions are only for short-term analysis as my long-term philosophy is to hold physical gold and silver to counter that portion of your portfolio that is subject to U.S. dollar risk. On September 29th, I called a top for "traders" of gold and silver. Traders mean those who own gold and silver mutual funds, ETFs or mining stocks as well as those who have purchased physical gold and silver on leverage. For holders of physical gold and silver, I recommended dollar cost averaging in or holding on to their metal. The HUI was trading at 512.56 back in September, and is presently at 503.81. Gold was trading at $1,314.10 then and is presently trading at $1,313.70. Complete Story »
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| Gold and silver progress report Posted: 28 Jan 2011 10:21 AM PST Charts presented in this report are courtesy Stockcharts.com unless indicated. This chart courtesy Federal Reserve Bank of St. Louis shows the increase in M2 money supply is speeding up again after a somewhat slower rise during the past year. This represents monetary inflation, which precedes price inflation, which in turn provides energy for gold, silver and many other commodities. “The central economic problem plaguing this country since 1913, has been the presence of the federal Reserve System. Without the FED’s debt-currency scheme having effectively supplanted the constitutional monetary system based upon silver and gold, would have been impossible – not simply improbable, or difficult, but impossible – for politicians in the public sector and speculators in the private sector to have amassed the staggering level of un-payable, unconstitutional, and unconscionable debt that now bear down upon this country.” Dr. Edwin Viera, Jr. (f...
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| Posted: 28 Jan 2011 10:16 AM PST Gold bounds higher mid-day as Egyptian protests escalate The COMEX April gold futures contract closed up $21.90 Friday at $1341.70, trading between $1309.10 and $1348.00 January 28, p.m. excerpts: see full news, 24-hr newswire…
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| Lawrence Roulston: It's Time to Buy Posted: 28 Jan 2011 10:03 AM PST Source: Brian Sylvester of The Gold Report 01/28/2011 The value of gold may be plummeting but many gold stocks are clocking double-digit gains, according to Lawrence Roulston, the editor of the Resource Opportunities newsletter and an expert on mining investments."It's definitely a buying opportunity. The fundamentals are strong, and we're seeing weaknesses in the prices on a short-term basis here," he says. In this exclusive interview with The Gold Report, Roulston explains why he loves the prospect generator model and why now is the perfect time to snub bullion and cozy up to mining equities. The Gold Report: So far this year, gold prices have fallen from about $1,420/oz. to around $1,360/oz. Yesterday, DundeeWealth Chief Economist Dr. Martin Murenbeeld told a Toronto audience that this correction could go even deeper and last as long as half the year. Do you agree? Lawrence Roulston: There are so many variables impacting the gold price that it's really hard to ma...
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| Posted: 28 Jan 2011 09:51 AM PST The 5 min. Forecast January 28, 2011 01:32 PM by Addison Wiggin - January 28, 2011 [LIST] [*] Inflation “not a cause of concern” at Davos... While food riots rage in world’s largest Arab country [*] Q4 GDP prints at 3.2%...The 5 digs in for devilish details [*] Gold bounces off 4-month low... Fascinating chart points to ongoing demand [*] Readers resurrect ghost of Smoot-Hawley, insist on a “balanced” track record [/LIST] Global inflation is “not high on the list of concerns” of Treasury Secretary Tim Geithner. So he told the annual gathering of the World Economic Forum. Of course not. Why would it be high on the list of your concerns when you’re comfortably ensconced at a five-star hotel in Davos, Switzerland, eating bonbons and discussing matters of little concern to the hoi polloi? We can think of one reason: In the world’s most populous Arab country, and the world’s biggest wheat importer, just 1,629 ...
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| Posted: 28 Jan 2011 09:30 AM PST courtesy of DailyFX.com January 28, 2011 07:57 AM 240 Minute Bars Prepared by Jamie Saettele Gold is testing a multiyear support line. A break below 1317.10 (10/22 low) would put 1270.30 (June high) in play. Former supports are now resistance at 1330.30 and 1337.00. With weakness unfolding in an impulsive manner (5 wave declines), there is no reason to abandon a bearish stance....
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| Posted: 28 Jan 2011 09:25 AM PST
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| Gold Correction To $1260 Technical Update Posted: 28 Jan 2011 09:23 AM PST Super Force Signals A Leading Market Timing Service We Take Every Trade Ourselves! Email: [EMAIL="trading@superforcesignals.com"]trading@superforcesignals.com[/EMAIL] [EMAIL="trading@superforce60.com"]trading@superforce60.com[/EMAIL] Weekly Market Update Excerpt Jan 28, 2011 Gold and Precious Metals UUP (US Dollar Proxy) Chart US Dollar Analysis: [LIST] [*]Your focus is gold, I know. But I want you to focus also on the fact that the action of the US dollar in the last week is not impressive. I have said repeatedly that when the natural trend is up and all you get is distribution followed by lower prices, we may be entering the look out below season prematurely. That time is now. [/LIST] [LIST] [*]There are rumors in the last few days that the Fed might announce an end to QE. Personally, I don't think that is possible, not now. That would require strong leadership. We don't have strong political leadership. Conservatives in congress have talked about real s...
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| Gold Daily and Silver Weekly Charts - Potential Intermediate Bottom in Gold Posted: 28 Jan 2011 09:19 AM PST | ||||
| Global Insurrection Against Banker Occupation and the Silver Liberation Army (SLA) reaches Jordan Posted: 28 Jan 2011 09:10 AM PST Thousands protest in Jordan Join the global revolution. Join the Silver Liberation Army (SLA) Crash JP Morgan Buy Silver. Share this:
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| Cramer: Egypt Speaks to Gold's Importance Posted: 28 Jan 2011 09:07 AM PST By Tom Brennan He had predicted the precious metal would pull back throughout January before resuming its climb higher, but Egypt has served to stop that fall a few days early, as investors seek out the precious metal in such times of volatility. … Cramer has been endorsing investments in gold, telling investors to wait for the declines to end before getting back in. He believes the trend among the world's central banks of printing more and more cash will devalue currencies, which makes gold more attractive. He also thinks that demand for the commodity itself from China and India's growing middle classes, coupled with a scarcity of new mines, will push up gold prices. Now, with the riots in Cairo, Alexandria and Suez, and the fear that they could spread to the rest of the Middle East, investors have another reason to consider owning gold. Cramer has predicted that those prices will eventually reach $2,000 an ounce over the next five years. [source]
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| Posted: 28 Jan 2011 09:02 AM PST Buy Silver Sell Spanish Equities Share this:
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| Buy Silver Sell Spanish Equities Posted: 28 Jan 2011 08:55 AM PST
From Nic Lenoir Buy silver sell Spanish equities Following my thoughts on the fireworks going off everywhere in emerging markets, if you are not short emerging yet (EEM is a great proxy. Look at Bovespa in Brazil or TUR the Turkish ETF, it is all looking horrible and about to get completely decimated), you can still buy silver and sell Spanish equities. A few weeks ago when silver had broken the 50-dma I had pointed that it should retrace towards 25.80/26.50. We came right around those levels and caught a huge bid today. Confirmation by breaking out of the bearish downtrend channel since the recent highs would point towards new highs. Meanwhile the IBEX has completed a consolidation wedge and held resistance at 11,000. As a long as we stay below the afore-mentioned resistance the next stop on the way down is 9,600.
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| http://www.cbe.org.eg/ Not Responding: Has The E(gyptian)CB Been Plundered? Posted: 28 Jan 2011 08:22 AM PST
We were doing some diligence on Egyptian (now historic) gold holdings but unfortunately the following link no longer seems to work:http://www.cbe.org.eg/ To those who guessed correctly that this is the web site of the Egyptian Central Bank, you win whatever is held in the vaults of said building. Which we are willing to bet against all that is held in our own tungsten warehouse in Kentucky, is absolutely nothing. To any potential readers in Egypt, may we recommend you go politely enter the building at 31 Kasr El-Nil Street, Cairo, go to the basement and check on the precious metal inventory. There should be 75.6 tonnes of gold. Which incidentally may also be a sufficient motive for someone to pull off a Die Hard 23.
As a reminder, there should be signs of life here: after all the ECB decided against hiking rates today despite what at first glance appears a food price inflation driven revolution:
And for the motherfucking win:
It is unclear if the head of the Egyption Central Bank was also 100% confident he too can take away inflation on a 15 minutes notice. All those who wish to ask him directly are invited to try: +20 2-2393-6127 Alas, nobody is picking up.
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| Posted: 28 Jan 2011 07:42 AM PST January has been a tough month for gold. From its year-end 2010 price of $1,420 an ounce to its recent low just over $1,320, gold has lost some $100 - about seven percent. In percentage terms, this doesn't amount to much of a correction ... Read More...
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| Posted: 28 Jan 2011 07:41 AM PST SEEKING ALPHA: There are some bizarre things going on in the silver market at the moment There has been a growing movement led by Max Keiser. Reasonable estimates suggest that if only 15% of those long silver futures decide to take delivery of physical silver, the Comex will not have enough silver to deliver and [...]
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| COT Gold, Silver and US Dollar Index Report - January 28, 2011 Posted: 28 Jan 2011 07:34 AM PST
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| Posted: 28 Jan 2011 07:33 AM PST On Wednesday, I pondered whether the FOMC inspired rebound in gold was a turning point. Today, I'm happy to erase the question mark. It's a small change in grammar, a huge change in confidence. What prompted this is not just the rebound today, which is quite impressive in its own right, but more the WSJ report (by way of ZeroHedge) that a tiny hedge fund unwinding its gold futures spread position had caused a crescendo of near-panic selling earlier this week, on top of the correction that started since the beginning of the year. Complete Story »
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| Posted: 28 Jan 2011 07:32 AM PST Adam Hamilton January 28, 2011 3090 Words After rocketing 76% higher in just 5 months, silver continues to enthrall investors and speculators. In the decade I've been gaming its bull through actively trading silver stocks, I've never seen this metal so popular. As more traders discover silver and start following and trading it, I've heard a lot of questions on a recent development in the silver-futures market. Its open interest recently declined sharply. Specializing in stock trading myself, I don't delve into the futures world very often. I haven't written about silver futures since 2005. Mostly this is because years of research, study, and trading experience have shown me that silver futures usually aren't particularly relevant to silver price action. Silver's primary driver is actually the price of gold, so if you want to trade the silver complex successfully watching ...
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| Posted: 28 Jan 2011 07:32 AM PST  I am no expert on Egypt, but I know a client state when I see one. Egypt is the second largest recipient of US Foreign aid - only Israel receives more. And this is no accident, the two have been historic rivals, only to be at peace with each other under Carter's Administration with the Camp David Accords. The US, more than any other nation, is extremely influential in the Middle East - a region, due to its oil reserves, that has been described by US policy planners as "history's greatest prize." Oil, you see, goes hand in hand with money. The two are strategic assets. To have the world's reserve currency means you also control, or at least influence the most oil rich region in the world. Dick Cheney once said at a 1999 speech at the Institute of Petroleum in London: Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world's economy. The Gulf War was a reflection of that reality. The degree of government involvement also makes oil a unique commodity. This is true in both the overwhelming control of oil resources by national oil companies and governments as well as in the consuming nations where oil products are heavily taxed and regulated. Essentially, the petroleum industry deals with extreme risk and with billions of dollars on the line. Oil is produced in distant lands as a result of huge risk and enormous capital outlays, it is transported over vast distances, refined in expensive refineries with very heavy outlays required to protect the environment and to comply with strict and expensive regulations, distributed through a wide network of pipelines, trucks and wholesale outlets and sold at stations in prime locations and taxed heavily. It is the basic, fundamental building block of the world's economy. It is unlike any other commodity.SOURCE I was never a big fan of Cheney, but the man understands what makes the world work. I know many bloggers have covered this Egyptian crisis. But there are many aspects to it. There is the political aspect, the human rights aspect, and there is also the aspect of contagion. But as far as the focus of this blog, the global monetary system, this crisis represents a challenge to the US: a challenge of national security, energy, and as a result, the US Dollar. Let us not forget that a large portion of the recent run up of the national debt has been due to the wars in Iraq and Afghanistan. Thus, the Egyptian crisis falls at an extremely inconvenient moment. It is so inconvenient, that Vice President Joseph Biden said when asked if he would characterize Mubarak as a dictator: "Mubarak has been an ally of ours in a number of things. And he's been very responsible on, relative to geopolitical interest in the region, the Middle East peace efforts; the actions Egypt has taken relative to normalizing relationship with – with Israel. … I would not refer to him as a dictator."When it comes to foreign policy, there is little difference between Republicans and Democrats that inhabit the White House. Biden's answer is how the White House views client regimes - they are a necessary evil in order to effectuate US policy. The US needs Mubarak, just as it once needed these guys:  President Eisenhower with Cuba's Batista, later to be overthrown by Castro  Vice President Nixon, with King Idris of Libya, later to be overthrown by Khadaffi  President Carter and the Shah of Iran and his wife, during Ayatolla Khomeini's rise All of the above "transitions in power," and there have been many more, were big setbacks for US foreign policy. What is compounding the issue today with Egypt is the ongoing global financial crisis, as well as the ongoing wars in Afghanistan and Iraq. The US, financially, is not in the same state as it was during the cold war, when it only had to face the USSR with little debt, or at least, had a greater ability to finance military operations and foreign governments. I know that MMT'ers will say, the US is not debt-constrained technically, and that is true. But the US nonetheless has financial limits that affect the execution of its foreign policy. Thus, this crisis in Egypt is worrisome for the US, and by extension, the US global monetary system which also relies on the US maintaining influence in the Middle East. For the purposes of this blog, I am not viewing this crisis in a moral or patriotic context. I am viewing this crisis in a geopolitical context, based on realpolitik, and how it can affect the current global order, and by extension, the current global monetary system. 
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| Eric Sprott - Expect $50 Silver, Gold Possibly $2,150 by Spring Posted: 28 Jan 2011 07:30 AM PST  With gold and silver rallying off the lows today, King World News interviewed Eric Sprott, Chairman of Sprott Asset Management which has $8 billion under management. When asked about the Sprott physical silver trust acquiring silver Eric stated, "We had to go into the market and buy about 15 million net ounces from third parties and it took us about ten weeks. It was a very, very long process and the one thing we can read out of it is obviously there weren't 15 million ounces sitting around somewhere."
This posting includes an audio/video/photo media file: Download Now | ||||
| Gold's Correction Might Be Longer Than Expected Posted: 28 Jan 2011 07:30 AM PST Geoffrey Ching submits: Those who were calling a bottom in gold during the last week certainly appear prescient after today's pop higher. The most common reason for this bottom calling was a big drop in sentiment. However, I think it may be premature to call an end to the correction in gold and that we may be in for a longer correction or an extended period of sideways movement. We may, perhaps, have a small rebound, but I don't believe it will take gold to new highs in the near future. The primary reason I think gold's correction or sideways will last considerably longer is that gold has traded above its 200 DMA for a full two years. While the ascent has not been extremely rapid and was punctuated by several corrections, it has been quite large with an over 50% rise. Complete Story »
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| ‘Fear and Love Make Gold Strong’ Posted: 28 Jan 2011 07:27 AM PST For the BIG GOLD annual gold forecast survey published in January, Jeff Clark surveyed seven gold experts and nine top economists and fund managers, along with Doug Casey himself, to provide their best insight on what to expect in 2011 and how to invest. One expert he interviewed was Frank Holmes, head of US Global Investors, which manages 13 no-load mutual funds, many of them recognized for consistently high performance by Lipper Fund Awards. Last year, Frank's Gold & Precious Metals fund returned 36.8% – more than triple the Dow – and the World Precious Minerals fund gained 45.4%, outgunning the S&P almost four-fold. Read on for Frank's thoughts on gold and precious metals stocks… BIG GOLD: Gold was up 30% in 2010; to what do you attribute its rise? Frank Holmes: Investors have to look at gold demand as both the fear trade and the love trade. What most media focus on is the negativity of government policies to drive gold prices. I characterize this as the fear trade — deficit spending and negative real interest rates for the G7 countries. More significant is the love trade – where more than 60% of the world's population is in emerging countries averaging over 6% GPD growth and 8% rising personal income, and they believe in giving gold as a gift for birthdays, weddings, religious holidays, etc. This love trade is entrenched, and it is not going away. Fears over the European debt crises were a big driver of gold in the first half of the year, as investors bought both gold and the dollar for safety. However, by mid-year, the dollar started to break down as smoldering budget woes in the US began to reignite concerns over the fiscal situation here. Gold got a second lift by October as both the fear and love trade showed up together. We had the season of Diwali lights in India and we had QEII, so gold went to new highs. By year end almost all the gains made by the dollar were eroded away, while gold finished the year with a respectable rise of 29.5%. BG: What forces will move gold this year? And what's your price projection for 2011? FH: US equity strategists are way too complacent and so are risk measures such as the VIX, which is back to pre-Lehman lows despite government debt levels at even higher levels. The broad view is that there will be no inflation in the US, as labor markets are slack, with 10% unemployment; however, rising commodity prices, which are controlled by international demand, will remain strong. A second wild card will be whether the German public will go along with the "transfer society" concept. European woes are not over. Third, US lawmakers will have a bitter potion to swallow, as the vote on raising the US debt ceiling will be a rallying point for the Tea Party this year. And if inflation, such as rising oil prices, starts to sap spending, wages in the US may have to rise, and then the cat would be out of the bag. It's been a great ten years for gold, which was fully justified due to the explosion in consumer credit and debt, but gold may still have a very important role to play going forward. I believe in the next five years the price of gold will double from current levels, and that means it has the potential to have a 15% annual compounded rate of return. BG: How volatile do you expect gold to be? FH: What is really key in understanding and managing expectations in the capital markets is that over any 12-month period, it is a non-event for gold to go plus or minus 15% in a year. This happens 68% of the time. The stocks of gold producers can go plus or minus 40% over any 12-month period, so they have greater risk but can also provide substantial returns. It is thus important to respect and look at volatility as an opportunity. BG: Gold stocks as a group did not outperform gold in 2010 – does that change in 2011? And if the broader markets sell off, do gold stocks fall along with them or trade on their own? FH: Actually, 2010 may have been a turning point, as major gold-producing companies, measured by the Gold Bugs Index (HUI), gained 34.1%. This hopefully has reversed the trend of the last couple years where bullion outperformed the stock. Junior gold mining companies, on average, returned roughly twice the gain of gold bullion, but some of those names were fairly silver rich, and we know how well silver did last year. In the scenario of a market sell-off, gold stocks are still equities and can get pulled down with any surge towards liquidity. However, the price action since the 2008 credit crises showed us that gold stocks did very well for investors relative to the broader markets. In addition, while those of us in the gold business are very close to the story, there are a lot of people that are still coming around to investments in the precious metals sector. When one looks at what has been some of the best-performing stocks over the last 10 years, gold and gold stocks may very well trade on their own as a preferred asset class. BG: Silver was up 81.9% in 2010, but is still below its 1980 nominal high. What's your outlook for silver in 2011? FH: Silver may have gotten ahead of itself a bit. In the coin market, for instance, it is not uncommon to see certain gold coins sell for a 30% premium to the spot price, but in the last quarter we saw some collectable silver coins with asking prices as much as a 300% premium. Silver does offer exceptional leverage to gold, almost 2 to 1. Right now, while it looks like the economy is getting stronger, silver could continue to benefit from a pick-up in industrial uses. BG: What's your best advice for precious metal investors in 2011? FH: Investors should consider buying gold as insurance. We recommend having about 10% of their portfolio in gold and gold stocks, and rebalancing every year. Two stocks that we like at current prices are Randgold (GOLD) and Silvercorp (SVM). Both companies focus on high-quality ore deposits that will be economic at prices substantially below current spot prices. In Randgold's case, their share price has fallen about 20% since the presidential elections in the Ivory Coast became locked in a stalemate. The company's Tongon mine is their newest project and is currently being commissioned, but news flow has been slow and hasn't drawn much attention. Look to see this issue resolved over the next couple of months. Silvercorp is one of the few companies that has successfully navigated in China, and our models indicate there is much more upside available from these assets than where the stock is currently priced. SVM also has a very attractive relative valuation to its North American peers, where in some cases we have seen 5% of their market capitalization turn over fairly consistently everyday over the last month – those shareholders are obviously not around for the long term. Regards, Jeff Clark 'Fear and Love Make Gold Strong' 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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| Gold prices get safe-haven boost Posted: 28 Jan 2011 07:25 AM PST by Alix Steel Gold for April delivery was up $21.90 to $1,341.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,348 and as low as $1,309.10. … There was a slew of factors pushing gold higher Friday. First, the metal had been under a barrage of technical selling in 2011. …… The shakeout of the "fast" money led many investors to see this week's selloff as a bottom, which was prompting a flood of money into the metal. "I think we are [within] 1% to 2% of the bottom," says David Banister, chief investment strategist for ActiveTradingPartners.com. "I would think that aggressive gold investors would think about getting long here." And aggressive they were. Gold prices were trying to find their footing in early trading but after the U.S. said the economy grew only 3.2% in the fourth quarter when expectations were for 3.7%, traders dumped stocks and fled to gold. … Gold also glimmered as a safe haven asset as the crisis in Egypt erupted and panicked investors parked their cash in gold. The other concern is that the political unrest in Egypt will spread throughout the Middle East and North Africa. [source]
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| Posted: 28 Jan 2011 07:24 AM PST
We now know why I had my team specifically model in the fuzzy, yet quite relevant social unrest factors into our Sovereign Contagion Models. Egypt appears to have erupted, and I will illustrate the path in real time using the roadmap that we created to predict such an event igniting a powder keg much earlier last year. First let’s check out the headlines:
Now, what is it that has the Egyptians in such an uproar. Well, let’s turn to that other source that has been the brunt of massive efforts to censor their Internet presence. By the way, many of these cables have been faxed in order to get around the Egyptian internet ban, including one regarding Lebanese children being shipped to (or through) Egypt for an organ harvesting operation. Heavy stuff!
So, what does all of this have to do with the Pan-European Sovereign Debt Crisis? Well I have already demonstrated the high correlation exhibited in both the equity and fixed income markets (yield), particularly since the most recent crash. Here’s the home page of CNBC as I type this…
You can guess what Europe and Asia did. Now, as excerpted from Japanese Downgrade Illustrates Potential Paths To Contagion:
Now, lets reference the subscription “BoomBustBlog Sovereign Contagion Model“, wherein we spent many analyst man/months to create a realistic model to capture the potential for social unrest, financial and economic contagion as they could skip across sovereign borders, continents, asset classes and hemispheres. Most analysts, investors and financial pundits look at the cross correlations between countries this way…
What we have down was to adjust the pathways of apparent pure financial contagion with several, real world factors. Let’s see how close we came (this model was published in May of 2010. Professional subscribers can find this on page 15 of this document:
Closest thing you can get to a crystal ball? No, just and objective, empirical approach from a realistic perspective. None of that bull or bear crap, not being pessimistic nor optimistic – just realistic. While this model is far from exact, and has ambiguity as does any other model (of real life) it goes a long way in illustrating “realistic” paths to contagion – and as you can see there was a very material chance of this breaking out in the middle east and also a material probability that it can and will spread along financial markets. We are working hard to release an updated to this model next week , along with a proprietary currency model. In order to derive more meaningful conclusions about the risk emanating from the cross border exposures, it is essential to closely scrutinize the socio-political, socio-economic, and the geographical break down of the total exposure as well as the level of risk surrounding each component. We have therefore developed a Sovereign Contagion model which aims to quantify the amount of risk weighted foreign claims and contingent exposure for major developed countries including major European countries, the US, Japan and Asia major. See the entire Pan-European Sovereign Debt Crisis series here. Summary of the Contagion Model Methodology
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| DAVOS STRUWWELPETER (PoNZi MaN) Posted: 28 Jan 2011 07:11 AM PST
Unless you are German or a European national, chances are you are probably not familiar with the classic but macabre Struwwelpeter children's stories written by a German named Dr. Heinrich Hoffman. Simply put, Struwwelpeter is a classic book of stories designed to literally scare young children into listening to what the advice of their parents and elders by showing them the consequences of failing to heed. I don't know if people still buy this book for their kids in Germany. It was very popular in the early part of the last century. I do know that I somehow wound up with a copy when I was a kid and it failed to influence my behavior in the least. However, the artwork left a long lasting impression. It is really a book for kids and adults with the same problem. It has been parodied on many occasions and was made into a show more recently. I published a whole series of Subprime Struwwelpeter stories back in March 2009. Take a look at this.
The original book consists of a series of vivid stories with titles like "The Dreadful Story About Harriet and the Matches, The Story of Cruel Frederick, The Story of Little Suck a Thumb, The Story of Little Augustus Who Would Not Have Any Soup and The Story of Johnny Head In The Air." Basically these little bratwursts or kids, depending on your point of view, never listen to any warnings and suffer terrible consequences as a result. It can be readily found for online viewing in English. Here is an example of one Struwwelpeter story.
So where am I going with this? All week we have witnessed an army of "Davos Men" consisting of PhD morons, globalist policy wonks, feckless government bureaucrats, self important billionaires, businessmen and business women, TBTF bankers and heavily sedated politicians playing, networking and blathering on and on about turning the economic corner, sustainable growth and stability and the dawn of an emerging market better tomorrow. Collectively, these are the same people who failed to spot the last crisis, barely dodged the subprime silver bullet and have now ushered in an era of even greater hyper-networked, closed-end systemic and macro economic risks that have simmered all week. Today we see things are starting to boil again. They are all a bunch of Ponzi Struwwelpeters who want us all to believe everything is swell and dandy. I am not going to repeat the litany of reasons why this is just a plain farce. I don't have to direct you to the other posting activity on ZH today. It certainly seems to confirm that these morons are wasting their time Piste Off in the Alps literally studying how to "identify and address" global risks. Thats right, go to the website and check it out. Remember little Johnny Head In the Air? Well up there in the Alps are a few thousand Johnny Heads Up Their Asses partying like its Benny Ink Jet's 1999. Welcome to 2011 Ponzi Man. The party is just getting started. WB7
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| US Continues Deficit Spending With No End in Sight Posted: 28 Jan 2011 07:07 AM PST Let's throw out a few numbers. Numbers lie. The 5 is crooked. The 8 goes nowhere. The 0 is nothing, whatever that is. So, let's throw them out. 15, 34, 92, 98888, 21… Throw them all out. Or, how about this…? $14. That's how much gold fell yesterday. Why is gold going down? As expected, the Great Correction continues. Domestic consumer price inflation is still subdued. Speculators are getting worried. They bought gold at high prices. What if there really is a recovery; who will need gold? Now prices threaten to go down. It wouldn't surprise us to see gold under $1,300. Or under $1,200. Or even under $1,000. But don't mistake a dip for a change of direction. The bull market in gold won't end until the financial crisis is over. And that's not going to happen soon. Here's another number we can throw out to prove our point: 1,500,000,000,000 What the heck is that? That's the number of dollars that the US government is supposed to need this year to fill the gap between what it collects in taxes and what it spends. It's the deficit, in other words. And it's a lot of money. But remember, it's just a number. And you can't trust numbers. Because it was just a few months ago that we were told the budget deficit would be much, much lower. Remember those numbers? Less than $1 trillion? Then, $1.2 trillion. Numbers, numbers…1,2,3,4,5,6,7,8,9 – we've seen them all! But the important thing is not the number itself… It's like a Christmas present; it's the spirit behind it that counts. And behind every number in the federal budget is the Spirit of Christmas…well, it would be the Spirit of Christmas if Santa was a kleptomaniac and he gave all the loot to himself and his friends. We're not complaining about it. It's just what happens in an advanced, degenerate economy. More people spend their time trying to figure out how to redistribute wealth than trying to create it. In the event, the Obama team is going to redistribute $1.5 trillion more than it can collect in taxes. Let's throw out some more numbers. That's $5,000 per person…$20,000 for a family of four. And we're talking spending IN EXCESS of tax receipts. This is just the deficit. That's in addition to the $8,000 or so per person that is taken from one taxpayer and given to others. Okay… So the feds spend $1.5 trillion more than they take in. Or $4 dollars in spending for every $2.50 they get in taxes. Big deal? Yes… You can imagine how long you could do that. It's like earning $100,000 and spending $160,000. Do that once…maybe you could get away with it. Do that every year…? And the feds are doing this when the economy is supposed to be growing at 3% to 4%. If it grows more slowly, or not at all, the deficit gets worse. You'll notice also that $1.5 trillion is about 10% of GDP. You'll notice also – since we're having such a good time with numbers – that if you keep adding 10% of GDP to the debt that pretty soon you have a lot more of it than you want. That's why we were so disappointed with Mr. Obama's State of the Union address. He gave a false impression. He talked about "winning the future" and made it sound like it was just a matter of doing things better. Not so. Americans have to do things differently. They'll never win the future this way. They have to change the numbers. You can't borrow 10% of GDP, year after year, with no end in sight, and still hope to have a healthy economy. You can't expect to win the future that way. Let's face it, that's the way to be a big loser… Bill Bonner US Continues Deficit Spending With No End in Sight 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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| Chinese Premier Wen to Support Euro With “Real Actions” Posted: 28 Jan 2011 07:07 AM PST I've been watching the run of the stock market with a lot of interest lately… No, I'm not turning into a stock jockey… Instead, I'm watching it with amazement at how well it is performing… But something has to boil over soon; I mean, 81% of stocks are above their average price… Makes you wonder, eh? The currencies overnight have that look and smell of another dollar sell off, but, as we've seen most of this week, what happens in Asia and Europe overnight, stays in Asia and Europe… The US traders have their own thoughts as to the direction of the dollar, and those thoughts are the exact opposite of those in Asia and Europe. Each morning, this week, I've come in, gotten my glass of water, turned on the currency screens, and seen that a nice rally has taken place overnight, with the dollar looking like it just came back from a trip to the woodshed… But by the time I hit the send button on the Pfennig, I notice that there are cracks in the rally's foundation… So… Let's hope that today, since it's Chris Gaffney's birthday, will be different! But all in all, these are tight ranges that the currencies have traded in this week, with nothing out of the ordinary going on. Last week, we were talking about the euro (EUR) hanging on to 1.36, and this week we're talking about the euro hanging on to 1.37. Yesterday we saw some data that the White House didn't want to see, and immediately blamed the snow for the awful results of the Weekly Initial Jobless Claims… By my way of thinking that excuse card was probably better played last week, when the Weekly Jobs Claims fell by 37,000 (filers couldn't get to the unemployment office to file the claim), So this week, they job claims rose by 51,000… Lucy… You've got some 'splainin' to do! The other big event today – aside from Chris Gaffney's birthday – will be the printing of the first estimate of fourth quarter GDP for the US. The third quarter ended up at 2.6%, and the forecast for the fourth quarter is a healthy 3.5%… Now, I would be jumping up and kicking my heels together if the GDP in the US wasn't so influenced by government spending… But the mass media will not skip a beat worrying about that… They'll be out this morning, after the data prints, with some strong statements about the economic recovery, and all that… Look, the US economy is stronger than it was before, but the strains on it are holding it back, and without government spending, GDP would look like 2.0-2.5%… That's my take on it… You may disagree, and that's the beauty of being American! US Treasury Secretary Tim Geithner gave a pretty interesting speech in Davos, Switzerland overnight… I know that I've been quite hard on the Beaver (Geithner) in the past, but this time I think he got most of what he was saying right… Here's an example… Geithner said that "political will to deal with the US fiscal issues was growing" and acknowledged that the US could not "grow its way out of fiscal challenge." WOW! Talk about a reversal! Is this the "new Administration"? Not so cocky, not so brash, and willing to admit that they may have made mistakes? I doubt it… I'm sure someone slipped something into Geithner's drink that made him talk this way! Oh… And nothing, absolutely nothing on how the US is going to: 1. Finance the $1.5 trillion budget deficit this year, and 2. What is being done to reduce that deficit… In Japan, where they saw their credit rating downgraded the night before, unemployment printed at 4.9%, which represents falling unemployment in Japan… CPI (the Big Kahuna for Japan) actually fell a bit… How that can happen in a country where there's been no sign of inflation for two decades is beyond me, but it fell, along with household spending… All-in-all, a pretty weak economy, which is no surprise, I mean, what else is there to say about the Japanese economy… It hit the slippery slope in 1992, and remains there… Yesterday, when I told you about how S&P had downgraded Japan's credit rating for their indebtedness, I forgot to say that I wish the leaders of the US would take into consideration the old phrase that, "it's better to be wise from the misfortunes of others than from your own." Bloomberg TV showed a graph yesterday of debt by country, and of course Japan is the leader at 200% of GDP, but they had the US at 59% of GDP… I don't agree with that number. By my calculations and those of others, we see US debt at 95% of GDP. Bond vigilantes… You know what those guys are right? They are the market investors who protest monetary or fiscal policies they consider inflationary by selling bonds, thus increasing yields. Well, the bond vigilantes in the US have yet to really show their cards… They came out briefly, pushing US Treasury yields in the 10-year from 2.63% to 3.45%, but that's just a taste of the damage they can do to bond prices if they really want to show their strength. I'm a true believer that the goings on in the Eurozone, where the bond vigilantes woke up and destroyed Eurozone periphery country bond prices, is going to end up waking up the US bond vigilantes… And then we'll be faced with the problem I discussed the other day regarding increased debt servicing… (The interest on the bonds) and how with low yields the US is struggling to meet the debt servicing… China's Premier, Wen, said that China will do more to support the euro through "real actions"… Chinese support for the euro, along with German support, has really turned the fortunes/direction of the euro around… A couple of weeks ago, people were talking about the end of the world as we know it, for the euro… Now, those same people are back on board… Oh… And Geithner also said that he believed the euro would survive their debt crisis… Hmmm… Remember about a month or so ago, I talked about how an analyst had issued a report on India and the rupee (INR), and how I agreed because I liked the direction of India and the rupee? OK, then you'll also remember that I ended that discussion of the rupee with a comment, that basically I had now put the kyboshes on any chance the rupee had to gain… (My kiss of death)… Well…. I turn on the screens today to see a story glaring at me stating that the rupee is "heading for [its] worst start since 1996"… Sorry, rupee… But don't give up the ship, just yet… All the things I said about India a month or so ago remain in place… So maybe if you liked rupees at the level they were a month ago, you'll love them now! Brother, did gold and silver get whacked again yesterday! WOW! Pretty crazy trading if you ask me! The only thing I see going on, folks, are the people that bought gold and silver for the wrong reasons… They bought it because the neighbor that they don't like said he had bought gold and silver! They didn't buy it as a hedge for their investment portfolio, and a store of wealth… The stock market is sexier right now, according to these investors, and they are selling their gold and silver to buy stocks… Chasing price… Oh, they'll be back… And feeling like they ran through a gauntlet, falling to their knees, with tears in their eyes, when they get to hold a gold coin again… OK… Maybe I went a little far there… But that's what I was thinking, and my fat fingers love to type what I'm thinking… The best performing G-10 currency this year, the Swedish krona (SEK), finally saw a speed bump this morning, when December retail sales showed a fall of 0.8% from November… So, some selling has occurred in krona this morning… In fact, it's really strange to see krona weak, while the Norwegian krone (NOK) gets stronger… These two normally move in the same direction. Then there was this… French President Nicolas Sarkozy told participants at the World Economic Forum that allowing the euro to fail is "unthinkable" and that Germany and France will never let that happen. "To those who would bet against the euro, watch out for your money because we are fully determined to defend the euro," he said. "You have to understand, the euro is Europe. And Europe is 60 years of peace. We will never allow the euro to be destroyed." Way to go Nicolas! To recap… The big deal today is that it's Chris Gaffney's birthday… And then the little things are the first estimate of fourth quarter GDP, and other smaller data prints. The currencies have performed nicely overnight, with the bias to sell dollars reaching around the world, and stopping in most ports. There were more quotes from Davos, where propeller heads have gathered to exchange ideas about the world economies, and Chinese Premier, Wen said that China would support the euro with "real actions"… Chuck Butler Chinese Premier Wen to Support Euro With "Real Actions" 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: 28 Jan 2011 07:06 AM PST Every winter, economists and finance ministers and central bank governors, and just about anybody else who could stand to sit and listen to hours upon hours of economic speak, get together in Davos, Switzerland… And from that boondoggle, we normally get quite a few "Pfennig worthy" statements. This year is no different, as we already have received some that "qualify"… So… We've got that going for us today, along with the results of the Cartel's meeting yesterday. So, strap yourself in, all legs and arms must remain inside during your ride… Front and center this morning, there's news overnight that S&P downgraded Japan's Credit Rating… This is HUGE, folks! Standard & Poor's lowered its rating on Japan to AA- from AA, citing lingering deficits that it said will reduce the government's already-weak fiscal flexibility. The firm also said Japan's fast-aging population challenges its fiscal and economic outlook. Again… The ratings agencies show up with their "late to the party" ratings… Japan's deficit has been huge for years now, so why is it important for S&P to downgrade them now? Well… OK, my conspiracy blood is really boiling over right now, so I'm going to throw this out there and see if it sticks… S&P is just getting tuned up for a run at the US's credit rating… Now that would take some intestinal fortitude to do that, and I'm pushing the envelope there, thinking that S&P has that kind of intestinal fortitude, but, I'm willing to take that chance! Don't think that a downgrade can't happen here? Don't bet the house on that, folks… It's coming… Oh, and before I go on… Yen (JPY) dropped versus the dollar on the rating cut announcement, and traded back over the 83 handle, but as I look at it right now, yen is back to an 82 handle… But then the US traders haven't seen this news yet… So… Back to the deficit thing in Japan, and my thought that a rating cut could very well happen here, and sooner than most people think… Yesterday, the Congressional Budget Office (CBO) announced that their latest computations lead them to believe that this year's budget deficit will be near $1.5 trillion! That's trillion with a capital "T", folks! That will push our national debt to more than $15 trillion!!!! It's coming, folks… And what will that do to yields on Treasuries, I hear you asking? It will send them to the moon, and it will deep six the dollar… And why would the US be different than Japan, for the yen is not collapsing? The difference, as I've explained many times in the past is the difference between the Japanese consumer and the US consumer… They save… we don't… OK… So… The euro (EUR) continues to gain ground versus the dollar this week. Yesterday, the euro was around 1.37 as I wrote the award winning, journalistic phenomenon, called the Pfennig. But during the trading day, the single unit slipped about 1/2-cent… But this morning, the euro is back above 1.37, and looking pretty healthy trading there. The theme this week is all about the markets feeling better about the euro's prospects with Germany behind the wheel. And with that feeling better, we're seeing quite a few institutions, calling off their calls for a HUGE drop in the euro this year… For instance, DWS Investment Gmbh, Germany's biggest mutual fund manager, reversed their call for a return to parity in the euro, and now says that the euro may reach 1.50 this year… That's pretty interesting stuff, eh? Oh sure, there are still many out there that believe that no matter what Germany does, the euro is doomed… Of course these are the same people that thought that in 1999, 2005, 2008, and 2010… 1999 was the introduction of the single unit, and 2005, 2008 & 2010, were all short-term dollar rallies that confused people into thinking the euro was going to collapse… Have I mentioned lately that these guys and gals were wrong? The FOMC ended their two-day board-game-apalooza yesterday, and when they did, everyone was left wondering why the heck they took two days to make the statement they made! Big Ben Bernanke and the Fed Heads left rates unchanged, and basically said the same thing they said six weeks ago… They also mentioned that they were going to go ahead and continue the bond buying program, otherwise known as QE2… This, no change in status, really lit a fire under the currencies, but that didn't last too long for currencies like the Aussie dollar (AUD), which rallied to parity, and then sold off all night long. The reason the Aussie dollar would have been a knee-jerk reaction is that rates in the US are going to remain at zero for some time to come, and those currencies with a yield advantage should be reaping the rewards. That brings me to a thought that I think I've gone over with you before, but it doesn't hurt to circle back and go through it again… And that thought is… Interest rates in the US can't go up… Think about this… All the debt that we keep running up here in the US has to be financed, right? We use the issuance of Treasuries as our financing tool, right? OK… These Treasuries have an interest rate that's tied to them, that pays the holder of the Treasury every six months… Right now, with interest rates low, and Treasuries being issued with low yields, the US is struggling to meet the interest payments, as tax receipts continue to fall… Well, if interest rates move higher, so do the yields on Treasuries, which means as interest rates go up, so does the amount of payment the US has to make to the holder! It's all there… Right there in front of us… And yet, the markets fail to see this… OK… This plays well with my continuing thought that home prices will continue to fall… Speaking from Davos, one of my fave economists, Nouriel Roubini, had this to say about home prices… "If you look at the data, Case Shiller has been falling every month since the tax credit expired in May. Everyone who wanted to buy a home did so by April. That tax credit stole demand from the future and its expiration led to another 30% fall in home sales, pushing Case & Shiller lower for the last few months." Roubini also believes that housing has double dipped… And… Well… I think I told you that several times in the past… Well, the Reserve Bank of New Zealand, (RBNZ) left rates unchanged yesterday, as I told you I thought they would… But what was interesting was the statement by RBNZ Governor Bollard… Let's listen in… "Forward indicators of activity have firmed somewhat. Trading partner activity continues to expand and New Zealand's export commodity prices have increased further. Within New Zealand, business confidence, across a range of industries, has picked up and imports of capital equipment have grown. Furthermore, there are tentative signs that housing market activity has stabilized, after having trended lower for some months." Sounds like a central banker that's laying the groundwork for a rate hike later this year, when he can point to how long he's been talking about things in the economy that have been improving. In Australia… The problems to the economy that the floods have caused will continue to mount… But here's a story that you'll not hear anywhere else, folks… There's a milk price war going on in Australia, with milk prices dropping, which could help to offset the rising prices of agriculture that was ruined by the floods… That reminds me of when I first began driving a car… In the area of the city that I lived, every street corner either had a gas station, a bar, confectionary, or some other business… And the gas stations would have "gas price wars", where you could drive back and forth, and get gas for 25-cents, 24-cents, 23-cents, and so on… As Archie Bunker used to sing… Those were the days… The Aussie dollar – which had rallied yesterday afternoon on the yield differential realization after the FOMC left US rates near zero, but sold off overnight – is taking it on the chin, this morning… Australian Prime Minister, Julia Gillard, announced a one-off levy to help pay for reconstruction… The levy won't be that big of a strain on the economy, but the fact that it was imposed was enough for traders to take their bets off of a rate hike in Australia in 2011… Me? I'm still leaving the light on for a rate hike later this year… But that's pushing back my previous thought that rate hikes would begin appearing by the end of the first quarter… UGH! The Bank of England (BOE) held rates steady yesterday, but not without some sawdust being left on the floor of the meeting room… Two BOE members voted to hike rates, and one member voted to cut rates, while the rest voted to remain steady… I would think that, with the inflation pressures all around in England that we talked about the other day, a rate hike isn't that far off in England's future. Well, I'll say this… It had better be, or else they will suffer from runaway inflation… And that won't be pretty. I saw a great quote last night that made me laugh and cry at the same time… OK… Let me set this up for you… We all know that the Fed Heads and their leader, Big Ben Bernanke have repeatedly said that inflation in the US was too low, and they were going to attempt to stir inflation, right? OK… Here you go… If inflation is good for the economy, why isn't Zimbabwe the wealthiest nation on earth? Gold and silver are getting whacked again this morning… Yesterday they rallied on the news that the US was keeping interest rates near zero… But this morning, it's back to taking long trips to the woodshed for these two. I keep seeing people talking about the demand for wealth protection being reduced because of the improving US economy… That's all HOGWASH! Did these same people not see the CBO's announcement yesterday? OR… Has everyone become comfortably numb with our deficit? Just remember this, folks… When dealing with non-believers, it's a battle of words, and most of them are lies… Then there was this… One of the great analysts in this country is Richard Russell… And if you recall, I wrote about the dollar index approaching a level that it had touched three times before and bounced off…. But if the dollar index traded and remained below the psychological level, then we could see the dollar really begin to fall again… Well, Richard Russell saw it too, and had this to say to his readers… This is the US Dollar Index. Today there's no definition for the dollar. So how do we price the dollar? At one time, the dollar was priced in terms of the time-honored standards – gold and silver. But today we must price the dollar against other fiat currencies. A dollar is worth so much against the yuan, or so much against the pound sterling, or against the euro and so forth. Thus we have the Dollar Index, an index that pits the dollar against six other fiat currencies. To get back to the chart, we see that the Dollar Index is now trading below its blue 50-day moving average. The 50-day, in turn, is below the red 200-day MA. Thus, the Dollar is in the classic bearish configuration as long as it trades below its 50-day MA. The Russell advice – swap your dollars for physical gold or CEF, GLD, or SGOL. In other words, do as China and Russia and many other nation are now doing – get out of your dollar assets. …I realize that what I've written above may seem outlandish to many subscribers. Outlandish? Then you tell me how the US is going to finance a national debt of $13.9 trillion (some say the real debt is over $50 trillion). The fact is that we now BORROW just to pay the interest on the national debt. Treasury is moving the debt to ever-shorter maturities, hoping that the current zero interest rates on short debt will ease the situation. But with bonds sinking, rates are now rising, so what's the answer? Well… We all know what the answer is…don't we! To recap… S&P downgraded Japan's Credit Rating from AA to AA-, and sited their indebtedness… OK, so when is S&P going to say the same about the US? The CBO updated their forecast for 2011, and said that the budget deficit will be near $1.5 trillion this year! The euro weakened in the afternoon yesterday, but has rallied again this morning above the 1.37 handle. The FOMC left rates unchanged, like they have any other choice, and said they would continue their bond buying program, AKA QE2… Chuck Butler Downgrading Japanese Debt 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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| China Allows Renminbi Trading in the U.S. Posted: 28 Jan 2011 07:04 AM PST Rosanne Lim submits: In a move that provides a glimpse of the future of US dollar and gold, China has allowed its currency to be traded for the first time in the United States. This is a bullish sign for gold investors. It is an important step in the country’s plan to make the renminbi an international currency. The explicit move is an endorsement by Beijing since the state-controlled Bank of China Ltd (BACHF.PK) is at the forefront of this development. Although a floating currency allows price moves in both directions, it is general consensus that the renminbi will strengthen against the US dollar due to trade imbalances between the two countries. The impact on commodity markets, including gold, will depend on the extent and speed to which China allows its currency to rise. Complete Story »
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| Inflation to Help the Less Fortunate? Posted: 28 Jan 2011 07:00 AM PST I almost didn't read the essay by Gary Gibson, the managing editor of the Whiskey & Gunpowder newsletter, because he was talking about Paul Krugman, whom Mr. Gibson refers to as "cheerleader of the state," and for whom I have a much, much lower opinion, probably because of my envy of his career success despite being, as far as I can tell, a complete failure in predicting the bursting messes we are in, or ever warning against them as they were building, when it was obvious to the Austrian economists all along. I mean, as an economist, how bad can you be and not suffer for it, for crying out loud? My problem with it is that "gladly suffering fools" was never popular anywhere I ever worked, as all my employers were very specific in demanding "results" and "competence," which I obviously could not deliver, as my career path of perennially bouncing along the bottom, never really getting past the "trainee" rung of the corporate ladder, so richly attests. Anyway, Mr. Krugman writes that he and his hotshot Democrat buddies view their position as, "It's only right for the affluent to help the less fortunate." So that, in a nutshell, is it! He, apparently speaking for all Democrats, wants to help the "less fortunate," and he is as full as any Democrat with his own self-righteousness and smug self-satisfaction in proudly declaring himself so. Well, I got some Hot Mogambo News (HMN) for Mr. Krugman; everybody wants to eliminate suffering, and the affluent have always helped the less fortunate, to one degree or another, although it has never been enough to satisfy everybody, a tradition of whining carried forward even to today when total government spending is almost exactly half of total spending in the Whole Freaking Country (WFC)! Half! I mean, if spending half of GDP by local, state and federal governments to let them "help" is not enough, how could it EVER be enough? I thought it was actually funny when he ridiculously villainized all others as greedy and irresponsible, with the laughable mischaracterization, "The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That's what lies behind the modern right's fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty." Hahahaha! "No matter how needy"? Hahahaha! "Violent rhetoric?" "Tyrannical"? Again, hahahaha! But as absurdly silly as this, and he, is, his real comic punch line came with the sublime, "There's no middle ground between these views." Hahahaha! Hahahahaha! Truer words were never spoken! Hahahahahahahacoughcoughcoughhahacough! That was so funny that I was laughing so hard, and so long, that I started coughing, which I notice, now that I see it written out, does not convey the experience as well as I had hoped, but which still, I hope, conveys the Utter, Utter Contempt (UUC) I have for Mr. Krugman and his egregiously bad economic idiocies, the sum of which is always "more spending, more budget deficits, and more taxation of the rich." I say this not because Mr. Gibson says, "Mr. Krugman is unquestionably on the side of evil," which is true, but because the most evil thing that you can do to poor people (and the others in that "less fortunate" category) is to make suffer more! Which they do when they must pay higher prices for the things they need to survive. How cruel! How monstrous! And that – that! – is exactly what Mr. Krugman guarantees – guarantees! – when he urges more monstrous amounts of government deficit-spending, more insane increases in national debt, and an insanely increasing money supply, all thanks to an irresponsible Federal Reserve creating the money necessary to the task. And then, as Mr. Krugman does, to advocate more taxes when he knows these business expenses are always passed on to the ultimate consumer in the form of higher prices, which fall disproportionately high on the poor, and when he knows that raising taxes inhibits economic growth, he seems to be the epitome of insanity! This is madness! This man is, obviously then, truly evil. And he is evil because he advocates deliberately inflicting pain on the poor! He is thus a villain. He is thus a monster. As a guy who has seen a lot of "how things work," I am thus a guy who knows that there is nothing that I can do about horrid people like Paul Krugman, or about Princeton, or about The New York Times, except seethe and bemoan the low quality of public education, so rampant in the American school system, that allows this kind of thing to flourish. And I'm a guy who also knows that having a lot of silver will be both a terrific financial asset to own in terms of capital gains as silver rises in the massive inflation in prices caused by the massive over-creation of money by the Federal Reserve, and I'm a guy who has seen enough movies to know that silver is also a weapon against werewolves, especially when made into a hollow-point magnum bullet, at which point it becomes a defense against everything else, too! Hahaha! Being serious for a moment, except vampires, of course, which I figure probably, explains why The Lone Ranger was famous for his silver bullets, although we'll never know because all the documentary evidence is mysteriously "lost." So while I am not quite sure of the precise utility of silver bullets, either now or in the Old West, I am sure of silver reacting to the sorry economics of Mr. Krugman, as it rises along with, and surely ahead of, the massive rises in other prices caused by the Federal Reserve creating enough money to let the government help the "less fortunate" by making them more miserable. And that is why the decision to buy gold, silver oil is so easy that you happily say, "Whee! This investing stuff is easy!" The Mogambo Guru Inflation to Help the Less Fortunate? 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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| The Troubling Doubling of Money Supply Posted: 28 Jan 2011 06:59 AM PST James Turk of GoldMoney.com says that silver is in backwardation, meaning that, as I understand it, the spot price is higher than the price of the commodity future contract, when the reverse is usually the case, or the reverse is the usual case, I am not sure which. I am pretty confused because I don't remember and I am too lazy to look it up again, which is because it would be pointless since I have proved that I don't remember it when I look it up, and so I would be wasting my time looking it again up since I have, obviously, determined that it had no immediate use for me in my quest for fast-yet-immense wealth without risk or working. So, while I don't understand the mechanics of the thing, I am nevertheless impressed with the backwardation of silver futures because it is not just unusual, and it is not for the next month's future, or just for a silver future contract somewhere in the next calendar quarter, but it is in backwardation for a whole year out! A whole year! Wow! Normally, there are people wanting to know, "What can I do to keep from being completely destroyed by the Federal Reserve creating so much money, which this backwardation thing is probably a part of?" I always advise people to follow the Dollar-Cost-Averaging method of investing, wherein one merely buys the same dollar amount of silver each month, with the enviable but boring result that it is almost always superior to any other method of investing over the long-term, assuming you are with the trend or, as George Soros is famed for having said, "Identify the trend whose premise is false, and bet against it." Dollar-cost-averaging is not, alas, something for those whose greed for mountains of undeserved wealth wants – Nay needs! Nay demands! – something with a lot more "kick." However, taking on a philosophical tone, there are times when, as the saying goes, one "backs up the truck" to take on a load of an investment, or "bets the farm" on an investment, and this may be one of those times because, as Mr. Turk explains, the last time this happened, silver exploded upward by 40 percent in a few weeks! And even a guy like me, dreaming of the shameless gluttony and self-indulgence made possible by vast wealth, is satisfied with a 40% move in just a few lousy weeks! And this is the kind of thing that one would expect when the money supply is going up, which is the subject of Michael Pollaro in his "The Contrarian Take" column in Forbes, and which had the headline "Monetary Watch January 2011: Money supply firing on all cylinders?" First, let me make sure that you know that I am a guy who is absolutely sure of two things: one, that the Austrian Business Cycle Theory is the Only True Economic Theory (OTET), and two, that We're Freaking Doomed (WFD), meaning that if you are not buying gold and silver with a frantic, monomaniacal intensity, then there is something Very, Very Wrong (VVW) with you. As such, I was instantly enamored when he opens with, "Our monthly Monetary Watch, an Austrian take on where we are on the monetary inflation front and what's next." Naturally, I hoped that he would ask an opening "teaser" question, like, "Is The Fabulous Mogambo (TFM) right when he says we're freaking doomed?" Instead, he uses another headline, which you know is a headline because he starts off with "Headline Monetary Aggregates, Where We Are." To this, I extemporaneously made a joke by saying, "We're right here! Hahaha!" Well, nobody laughed at my joke, which, upon reflection, I admit is pretty lame, but I was distracted by still being disappointed that Mr. Pollaro didn't mention me or my crackpot opinion. Anyway, I'm sorry that I didn't put more effort into my joke-making, because what followed is scary enough that it needed a joke to lighten the mood! He says, "The US money supply aggregates based on the Austrian definition of the money supply, what Austrians call the True Money Supply or TMS, continued their recent surge, in December posting an annualized rate of growth of 38.9% on narrow TMS1 and 24.6% on broad TMS2. That brought the annualized three-month rate of growth on TMS1 and TMS2 to 22.3% and 18.1%, respectively, 8.6 bps and 2.7 bps higher than those posted in the prior month." Inflation in the money supply of double-digits means at least double-digit inflation in prices!! By the use of the two exclamation points to punctuate that last sentence, you are alerted to the fact that I am so frightened that I am locked in the Mogambo Big Bunkeroo (MBB), waiting for the explosion of price inflation that will result from such outrageous expansion of the money supply. While I make a quick check to see if I have enough supplies and ammo to last until the bankrupted, starving, desperate people whose money has no purchasing power left have all killed each other and it is safe to come out again into a Brave New World where we can begin again with a gold-standard money, please read ahead to the next part of Mr. Pollaro's horrifying news. He writes, "Turning to our longer-term twelve-month rate of change metrics – more indicative of the underlying trends – and focusing on our preferred TMS2 measure, we find that TMS2 saw another healthy increase, in December growing at an annualized rate of 9.9%. Not only was this a tick up from November's 9.8%, but we think close enough to 10% to mark December as the 23rd time in the last 24 months that TMS2 posted a twelve-month rate of growth in the double digits." This kind of double-digit growth in the money supply has been going on for two years? Two years! Two Freaking Years (TFY)! Double-digit growth in the money supply every year for Two Freaking Years (TFY)! As to what this portends, all I see is terrifying inflationary horror and catastrophe, but Mr. Pollaro is too refined to, like me, run down the street in an adult diaper and a tinfoil hat, screaming his guts out, "We're freaking doomed, you morons!" Instead, he keeps it on a strictly professional, technical level, and writes, "For new readers of the Monetary Watch, the last time TMS2 saw this kind of string was during the run up to the now infamous housing boom turn credit implosion, a time during which TMS2 saw 36 consecutive months of double digit growth." So while Mr. Pollaro is too polite and professional to resort to hysterics and name calling, I am not so disposed, and will tell you right to your face that if you are not buying gold and silver, especially since their prices have seen a little dip lately, then you are, indeed, an idiot. For those who are not idiots, on the other hand, then buying gold and silver is, paradoxically, an idiot's delight, because, "Whee! This investing stuff is easy!" The Mogambo Guru The Troubling Doubling of Money Supply 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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| Is There a Silver Supply Shortage? Posted: 28 Jan 2011 06:52 AM PST Jason Hamlin submits: There are some bizarre things going on in the silver market at the moment, reminiscent of the supply shortages and high premiums witnessed in 2008. For starters, silver is currently in both short-term and long-term backwardation, suggesting there is higher demand for silver now than in the future. This is backed up by the U.S. mint reporting all-time record sales for silver eagles during the month of January, with three days still left to go. Sales are on pace to breach 5 million coins sold, shattering the November 2010 record of 4.6 million. It is worth noting that all of the 2010 American eagle gold proof coins also sold out, but the focus of this article will be on the increasing signs of a shortage in silver. Just yesterday, King World News interviewed one of the top gold and silver dealers in the United States about tightness in the silver market. Bill Haynes is President and owner of CMI Gold & Silver, and when asked about a shortage in silver he stated: Complete Story »
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| Chris Powell: And was Jerusalem builded here? Posted: 28 Jan 2011 06:43 AM PST Remarks by Chris Powell, Secretary/Treasurer Most Americans will believe almost anything if it's said with a British accent. I'm not here to ask you to return the favor, but rather to consider some evidence, to be receptive to questions, and to start asking some questions of your own. In September 2009 Jim Rickards, director of market intelligence for the Omnis consulting firm in Virginia, was interviewed about the currency markets on the cable television network CNBC. Rickards remarked: "When you own gold you're fighting every central bank in the world." That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the value of government bonds. This was documented in an academic study published in 1988 in the Journal of Political Economy by Lawrence Summers, then professor of economics at Harvard, future U.S. treasury secretary, and Robert Barsky, professor of economics at the University of Michigan — a study titled "Gibson's Paradox and the Gold Standard": http://www.gata.org/files/gibson.pdf This close correlation among gold, interest rates, and government bond values is why central banks long have tried to control — usually suppress — the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power. As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government. Of course what Jim Rickards said about gold was no surprise to my organization, the Gold Anti-Trust Action Committee. To the contrary, what Rickards said has been our premise for most of our 12 years, and we have documented it extensively. But while the gold price suppression scheme is a hard fact of history, it is seldom mentioned in polite company in the financial world. So it is a thrill for me that everyone here today is being so polite. How have central banks tried to suppress the price of gold? The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971. That's what the gold standard was about — governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies backed by gold. Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price. Throughout the 1960s the United States, Great Britain, and some of their allies attempted to hold the price at $35 per ounce in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement was known as the London Gold Pool. As monetary inflation rose sharply, the London Gold Pool was overwhelmed by gold demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold — convertibility for government treasuries that wanted to exchange dollars for gold. At that moment currencies began to float against each other and against gold — or so the world was told. In fact since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes it has been You may have heard GATA derided as a "conspiracy theory" organization. We are not that at all. To the contrary, we examine the public record, produce documentation, question public officials, publicize their most interesting answers, or their most interesting refusals to answer, and sometimes litigate to get information. I'd like to review some of the public record with you. The official records The gold price suppression scheme was a matter of public record in January 1995, when the general counsel of the U.S. Federal Reserve Board, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee's minutes, that the U.S. Treasury Department's Exchange Stabilization Fund had undertaken gold swaps. Gold swaps are exchanges of gold allowing one central bank to intervene in the gold market on behalf of another central bank, potentially giving anonymity to the central bank that wants to undertake the intervention. The 1995 Federal Open Market Committee minutes in which Mattingly acknowledges gold swaps are still posted at the Fed's Internet site: http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p… The gold price suppression scheme was again a matter of public record in July 1998, six months before GATA was formed, when Federal Reserve Chairman Alan Greenspan told Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." That is, Greenspan contradicted the usual central bank explanation for leasing gold — supposedly to earn a little interest on a dead asset — and admitted that gold leasing is all about suppressing the price. Greenspan's admission is still posted at the Fed's Internet site: http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm Incidentally, while gold advocates love to cite Greenspan's testimony from 1998 because of its reference to gold leasing, that testimony was mainly about something else, for which it is far more important. For with that testimony Greenspan persuaded Congress not to regulate the sort of financial derivatives that lately have devastated the world financial system. The Washington Agreement on Gold, made by the European central banks in 1999, was another admission — no, a proclamation — that central banks were working together to control the gold price. The central banks in the Washington Agreement claimed that, by restricting their gold sales and leasing, they meant to prevent the gold price from falling too hard. But even if you believed that explanation, it was still collusive intervention in the gold market. You can find the Washington Agreement and its successor agreements at the World Gold Council's Internet site: http://www.reserveasset.gold.org/central_bank_agreements/cbga1/ Barrick Gold, then the largest gold-mining company in the world, confessed to the gold price suppression scheme in U.S. District Court in New Orleans on February 28, 2003. That is when Barrick filed a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market. Barrick's motion claimed that in borrowing gold from central banks and selling it, the mining company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit. Barrick's confession to the gold price suppression scheme is posted at GATA's Internet site: http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf The Reserve Bank of Australia confessed to the gold price suppression scheme in its annual report for 2003. "Foreign currency reserve assets and gold," the Reserve Bank's report said, "are held primarily to support intervention in the foreign exchange market." The Reserve Bank's report is still posted at its Internet site: http://www.rba.gov.au/publications/annual-reports/rba/2003/pdf/2003-repo… Maybe the most brazen admission of the Western central bank scheme to suppress the gold price was made by the head of the monetary and economic department of the Bank for International Settlements, William S. White, in a speech to a BIS conference in Basel, Switzerland, in June 2005. There are five main purposes of central bank cooperation, White announced, and one of them is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." White's speech is posted at GATA's Internet site: Two years ago a remarkable 16-page memorandum was found in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled "U.S. Foreign Exchange Operations: Needs and Methods." It is a detailed plan of surreptitious intervention to rig the currency and gold markets to support the dollar and to conceal, obscure, or falsify U.S. government records and reports so that the rigging might not be discovered. Amazingly, this plan for rigging the currency and gold markets remains on the Internet site of the Federal Reserve Bank of St. Louis: http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf In August 2009 the international journalist and provocateur Max Keiser reported an interview he had with the Bundesbank, Germany's central bank, in which he was told that all of Germany's gold reserves were held in New York. That interview is posted at the YouTube Internet site: http://www.youtube.com/watch?v=EzVhzoAqMhU Some people saw the Bundesbank's admission as a suggestion that Germany's gold had become the tool of the U.S. government. GATA consultant Rob Kirby of Kirby Analytics in Toronto then pressed the Bundesbank for clarification. The Bundesbank quickly replied to Kirby by e-mail with a denial of Keiser's report, but the denial was actually pretty much a confirmation: "The Deutsche Bundesbank," the reply said, "keeps a large part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centers. This," the Bundesbank continued, "has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centers. Moreover, the Bundesbank needs to hold gold at the various trading centers in order to conduct its gold activities." The Bundesbank did not specify those "gold activities" and those "trading centers." But those "activities" can mean only that the Bundesbank is or recently has been surreptitiously active in the gold market, perhaps at the behest of others — like the United States, the custodian of German gold. A few weeks ago the German journalist Lars Schall, at GATA's urging, pressed the Bundesbank for clarification about the German gold reserves, and particularly about whether the Bundesbank had undertaken gold swaps with any U.S. government agency. Schall sent the Bundesbank 13 questions. But the Bundesbank brushed him off, even as it seemed to acknowledge meddling surreptitiously in the gold market: The Bundesbank replied: "In managing foreign reserves, the Bundesbank fulfils one of its mandated tasks as an integral part of the European System of Central Banks. We trust you will understand that we are not able to divulge any further information regarding this activity. Particularly with respect to the confidential nature of information about where gold holdings are kept, we are unable to go into any greater detail concerning exact locations and the quantities stored at each of these. Likewise, owing to the strategic nature of the activity, we are not at liberty to provide you with more detailed information about gold transactions." In 2009 a New York financial market professional and student of history, Geoffrey Batt, posted at the Zero Hedge Internet site three declassified U.S. government documents involving the gold market. The first was a long cable dated March 6, 1968, sent by someone named Deming at the U.S. Embassy in Paris to the State Department in Washington. It has been posted at the Zero Hedge Internet site: http://www.zerohedge.com/article/declassified-state-dept-data-highlights… The cable described the strains on the London Gold Pool, the gold-dishoarding mechanism established by the U.S. Treasury and the Bank of England to hold the gold price to the official price of $35 per ounce. The London Gold Pool was to last only six months longer. The cable is a detailed speculation on what would have to be done to control the gold price and particularly to convince investors "that there is no point anymore in speculating on an increase in the price of gold" and "to establish beyond doubt" that the world financial system "is immune to gold losses" by central banks. The cable recommended creation of a "new reserve asset" with "gold-like qualities" to replace gold and prevent gold from gaining value. To accomplish this, the cable proposed "monthly or quarterly reshuffles" of gold reserves among central banks — what the cable called a "reshuffle club" that would apply gold where market intervention seemed most necessary. Of course these "reshuffles" sound very much like the central bank gold swaps and leases of recent years. The idea, the cable says, is for the central banks "to remain the masters of gold." Also disclosed in 2009 by Zero Hedge's Geoffrey Batt was a memorandum from the Central Intelligence Agency dated December 4, 1968, several months after the collapse of the London Gold Pool. This too has been posted at the Zero Hedge Internet site: http://www.zerohedge.com/article/cia-chimes-gold-control-highlights-hist… The CIA memo said that to keep the dollar strong and prevent "a major outflow of gold," U.S. strategy would be: "– To isolate official from private gold markets by obtaining a pledge from central banks that they will neither buy nor sell gold except to each other." And: "– To bring South Africa to sell its current production of gold in the private market, and thus keep the private price down." The third declassified U.S. government document published by Geoffrey Batt at Zero Hedge in 2009 may be the most interesting, because it was written on June 3, 1975, four years after the last bit of official fixed convertibility of the dollar and gold had been eliminated and the world had been told that currencies henceforth would float against each other and against gold and that gold would be free-trading. The document is a seven-page memorandum from Federal Reserve Board Chairman Arthur Burns to President Gerald Ford. It is all about controlling the gold price through foreign policy and defeating any free market for gold. It has been posted at GATA's Internet site: http://www.gata.org/files/FedArthurBurnsOnGold-6-03-1975.pdf Burns tells the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" — that's Helmut Schmidt, West Germany's chancellor at the time — "that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce." Burns adds, "I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price." While the Burns memo is consistent with the long-established interest of central banks in controlling the gold price, it was written 36 years ago. But there is a contemporaneous admission of U.S. government intervention in the gold market. It has come out of GATA's long Freedom of Information Act struggle with the U.S. Treasury Department and Federal Reserve for information about the U.S. gold reserves and gold swaps, information that has been denied to GATA on the grounds that it would compromise certain private proprietary interests. (Of course such a denial, a denial based on private proprietary interests, is in itself a suggestion that the U.S. gold reserve has been placed, at least partly, in private hands.) Responding to President Obama's declaration, soon after his inauguration, that the federal government would be more open, GATA renewed its informational requests to the Fed and the Treasury. These requests concentrated on gold swaps. Of course both requests were denied again. But through its Washington lawyer, William J. Olson (http://www.lawandfreedom.com), GATA brought an appeal of the Fed's denial, and this appeal was directed to a full member of the Fed's Board of Governors, Kevin M. Warsh, formerly a member of the President's Working Group on Financial Markets, nicknamed the Plunge Protection Team. Warsh denied GATA's appeal but in his letter to our lawyer he let slip some stunning information: http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf Warsh wrote: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4″ — that's Exemption 4 of the Freedom of Information Act — "consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you." So there it is: The Federal Reserve today — right now — has gold swap arrangements with "foreign banks," and the public and the markets must not be permitted to know about them. Eight years ago Fed Chairman Alan Greenspan and the general counsel of the Federal Open Market Committee, Virgil Mattingly, vigorously denied to GATA, through two U.S. senators who had inquired of the Fed on our behalf, that the Fed had gold swap arrangements, even though FOMC minutes from 1995 quote Mattingly as saying the U.S. has engaged in gold swaps: But now the Fed has admitted such arrangements, if only inadvertently. GATA subsequently sued the Fed in U.S. District Court for the District of Columbia to gain access to the documents involved. That suit is pending. Central banks are out of control There is a reason for the Fed's insistence that the public and the markets must not know what the Fed is doing in the gold market. It is because, as the documents compiled and publicized by GATA suggest, suppressing or controlling the gold price is part of the general surreptitious rigging of the currency, bond, and commodity markets by the U.S. and allied governments; because this market rigging is the foremost objective of U.S. foreign and economic policy; and because this rigging cannot work if it is exposed and the markets realize that they are not really markets at all. This should not be so surprising. For intervening in markets is what central banks do.. They have no other purpose. They've just gotten out of control. Central banks often admit intervening in the currency markets, buying and selling their own currencies and those of other governments to maintain exchange rates at what they consider politically desirable levels. Central banks admit doing the same in the government bond markets. There is even evidence that the Federal Reserve and Treasury Department, through intermediaries, have been intervening frequently in the U.S. stock markets since the crash of 1987. You do not have to settle for rumors about the "Plunge Protection Team," the President's Working Group on Financial Markets. Again you can just look at the public record. The Federal Reserve injects billions of dollars into the stock and bond markets every week, on the public record, through the major New York financial houses, its so-called primary dealers in federal government bonds, using what are called repurchase agreements and the Fed's Primary Dealer Credit Facility. The financial houses thus have become the Fed's agents in directing that money into the markets. As GoldMoney's James Turk notes, the recent rise in the U.S. stock market matches almost exactly the money funneled by the Fed to the New York financial houses through repurchase agreements and the Primary Dealer Credit Facility — devices of "quantitative easing." Meanwhile, for years the International Monetary Fund, the central bank of the central banks, has been openly intervening in the gold market by threatening to sell gold and then finally selling some, or at least claiming to have sold some. The IMF said its intent in selling gold was to raise money to lend to poor nations. This explanation was ridiculous on its face, though the IMF has never been challenged about it in the financial press. No, the financial press has been happy to tell the world that central banks that lately have effortlessly conjured into existence, out of nothing, fantastic amounts of money in many currencies could find a little money to help poor countries only by selling gold. Of course the intent of the IMF and its member central banks was not to help poor countries
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| Gold's fundamentals unchanged, debt must be written off, Rickards tells King World News Posted: 28 Jan 2011 06:43 AM PST 12:30p GMT Friday, January 28, 2011 Dear Friend of GATA and Gold: Market analyst James G. Rickards of Omnis Inc. in Virginia tells King World News that gold's recent dip is irrelevant to the metal's fundamentals and that the only way out of the worldwide economic depression is debt devaluation. The interview is 11 minutes long and you can listen to it at King World News here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/27_Jim_R… CHRIS POWELL, Secretary/Treasurer 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
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| Silver bars likely to be gone within days, dealer tells King World News Posted: 28 Jan 2011 06:43 AM PST 12:10p GMT Friday, January 28, 2011 Dear Friend of GATA and Gold (and Silver): Interviewed by King World News, Bill Haynes of CMI Gold and Silver in Phoenix reports immense tightness in silver and predicts that hundred-ounce silver bars are likely to be out of stock within days. You can read excerpts from the interview at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/27_Al… Or try this abbreviated link: CHRIS POWELL, Secretary/Treasurer 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
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| Rare Earth Element Myths Debunked Posted: 28 Jan 2011 06:43 AM PST Matthew Smith submits: Bull markets climb a wall of worry. This is a saying we have constantly reminded our readers of over the years as we invested in bull markets such as uranium, potash and now rare earth elements. As the story becomes more prevalent in the investment community and the returns on investment are realized the bears start to come out of the woods. Almost always they have their facts wrong, whether it be major issues regarding the market in general or company specific where sloppy research is usually the culprit. In every one of these bull markets we have been a part of we have noticed that the skeptics usually have their ‘facts’ wrong. The greatest lies have a kernel of truth to them, and sadly that is what is going on in the rare earth elements sector these days.
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might come a period where we don’t remit anything to the Treasury for a couple of years. That would be I think a worst-case scenario.” You need to understand that all of the Treasuries purchased by the Fed will soon be ‘under-water’ which would result in the Fed being insolvent. This new twist allows the Fed to pass losses to the Treasury via interest payments (or lack of) on the US Treasury Bonds (i.e., paid by the US citizens). In simple terms, the US citizens are now the holders (back-stop) for the massive amounts of debt, debt that CANNOT be paid under any circumstance. That means the next insolvency crisis, which is a certainty, will be one of a sovereign nature. This fact changes significantly how the markets will react.
Investors returned to the refuge of gold Friday while fleeing riskier holdings like stocks and the euro. "Egypt has got markets nervous," said Sterling Smith, market analyst at Country Hedging. "That is naturally a good environment for gold." Protesters continued to rally in the streets for a fourth straight day against Egyptian President Hosni Mubarak, triggering worries that the unrest will spread to other Middle Eastern nations. Yemen and Tunisia have already been rocked with protests…
Sovereign Contagion Model – Pro & Institutional
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