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Closing Tables for Week Ending September 2
Things Look So Bad They Can Only Get Better
All Hands on Deck..Economy Imploding/DEFCON ONE imminent/gold and silver skyrocket
Why This Gold Boom Will Be So Much Bigger Than The Last One
ECB Doesn’t Rule Out “PIIGS” Gold as Collateral for Gold Backed Eurobonds
As Trade Volumes Soar, Exchanges Cash In
The Dollar as a Reserve Currency Is Awful, until You Consider the Alternatives!
Rocky Banks
Silver Stocks Lagging
Opening the mint to gold and silver - then and now
Matson - "I am always a long term bull" Idiot. Where has he been for the last 11 years. Idiot.
How is Your (Holiday) Economy Doing?
A Conversation With CEO Of First Majestic Silver
Gold Stocks Coiled Again
new here and love all the insight
The Inevitability of Reality
Friday ETF Roundup: VXX Surges On Bad Jobs Report, XLF Falls On Bank Worries
No Jobs For Labor Day
An interview with resource legend Rick Rule you don't want to miss
Today In Commodities: Lack of Employment
The Dow/Gold Ratio Shows Continued Buying In The Precious Metal Relative To Stocks
cnbc gld piece: reporter's gold bar NOT on gld list
Where gold could be headed next... and why
Freedom alert: A disturbing report from Jacksonville, Florida
Everyone is Talking about Gold
Chapman on QE3/gold/silver and the upcoming October equity disaster...and CNBC's version below
Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Almost 5% on the Week
COT Silver Report - September 2, 2011
Alasdair Macleod talks to James Turk

Closing Tables for Week Ending September 2

Posted: 03 Sep 2011 04:42 AM PDT

Just below is this week's closing table, followed by the CFTC disaggregated commitments of traders (DCOT) recap for the week ending September 2, 2011. CFTC data show that the traders the CFTC classes as Swap Dealers are a lot less confident in lower gold prices than they were a month ago and are close to their least net short gold positioning in our records.

If the images are too small click on them for a larger version.

Continued...

Table Comments: Dollar strength, Big Market weakness, but mining shares are stronger, refusing to answer the late week selloff for the Dow and S&P 500. Gold powers higher late week in all currencies – ending in a short covering surge on Friday ahead of the long weekend in the U.S. New highs for the HUI and a new high weekly close. GDXJ challenging implied resistance near 38.25. CDNX tracks with the HUI and gold, a bullish sign when Big Markets weaker. Small miners perhaps exiting their buyer's strike – for now. Staunch support formed for gold Wednesday near $1813. Resistance near $1,840 gives way in a Friday $56 romp higher, as gold closes above the 50% to 61.8% retrace zone of the previous week's $200 sell-down – bullish action if it continues.

Note continued short covering by commercial futures traders as of Tuesday for both gold and silver with gold near flat and silver a little lower – also bullish action, but the metals have rallied a good measure since then. Pay attention to the weekly low for gold and silver, which, at 4.3% and 4% higher respectively, suggests strong dip buying.

ICE commercial traders still net long the greenback index, but not aggressively. Open interest falling significantly Thurs/Thurs as both gold and silver rally suggesting commercial shorts still in retreat. Silver slightly outperforms gold, but the big news this week is the attempted breakout of the HUI to new all time highs. That suggests a positive liquidity event could be getting underway for mining shares.

Mr. Arensberg is winding up his vacation over the next week, but plans to update the linked charts for Vultures, (Got Gold Report Subscribers) by the usual time (18:00 ET) on Sunday, early Monday at the latest.

Gold and Silver Disaggregated COT Report (DCOT)

In the DCOT table below a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting shorter.

All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

(DCOT Table)

Gold was almost flat Tues/Tues, but note the large reduction in the reported net short positioning by the traders the CFTC classes as Swap Dealers. The recap shows that Producer/Merchants commercial traders, and Managed Money were both on the net sell side of gold futures up till Tuesday, joined by Non Reportables. Other Reportables, which include very large individuals and some firms trading for their own book and not for clients were net buyers.

In silver the usual Big Sellers were net buyers this past COT week, with Managed Money and the smaller traders both net sellers. Note the large reduction in the open interest for silver, suggesting a reluctance or lack of confidence on the part of the big hedgers and short sellers for lower silver prices ahead. It also suggests that a goodly amount of spec firepower remains on the sidelines for the second most popular precious metal. Indeed, Managed Money traders (hedge funds, CTAs, etc) are currently holding only about half their record net long positioning of 48,532 contracts set September 28, 2010 when silver was trading at $21.74.

Just below is our chart of the Swap Dealers positioning for COMEX gold futures. Remember that their position is expressed as a negative number because it is and has been net short for a very long time. As the Swap Dealers increase their net short bets, the blue line falls and as they decrease their net short bets, the blue line rises.

How interesting that with gold very close to its all time nominal highs, that the more mercenary Swap Dealer commercial futures traders are still getting the heck out of their net short gold positioning. Indeed in the four reporting weeks since August 2, as gold surged up to above $1,900, then sharply corrected, but ended up a net $175.97 or 10.6% higher at $1,835.20, the Swap Dealer commercial traders covered or offset a whopping 69,575 contracts or 76% of their net short positioning, from 91,694 contracts net short August 2 to just 22,119 contracts net short Tuesday, August 30.

Believe it or not, the Swap Dealer commercials are only 11,042 contracts more net short than their least net short positioning in our records, which was 11,077 contracts net short set on December 2, 2008 with gold then trading at $783.39 in the teeth of the 2008 panic. In other words, as of Tuesday, the Swap Dealers' confidence in lower gold prices just ahead wasn't much higher than after gold had gotten clobbered by the rush to liquidity in the depths of the 2008 panic.

The difference, of course, is that the 2008 "least net short" positioning followed a big reduction in the price of gold. Today's "near least net short" positioning is following a big short covering surge in the price of gold.

Bottom Line: The Swap Dealers seem to have lost confidence in lower gold prices for now if their futures positioning is any guide.

Things Look So Bad They Can Only Get Better

Posted: 03 Sep 2011 02:30 AM PDT

By Calafia Beach Pundit:

To judge by the level of Treasury yields, the outlook for the U.S. economy has never been so bad. At 0.2% and 0.9%, respectively, 2- and 5-yr Treasury yields are lower today than they have been at any time during my lifetime. Far lower. Lower even than they were at the end of 2008, when the market was priced to years of deflation, a global depression, the default of as many as half the companies in the country within the next 5 years, and a global financial collapse. Wow.

The only thing that makes sense of these extremely gloom-and-doom yields that we are witnessing today is that the market is pricing in a massive default of European sovereign debt that in turn would result in the collapse of the Eurozone banking industry, and such an implosion might bring down the entire global economy. In other words, we have a market

Complete Story »

All Hands on Deck..Economy Imploding/DEFCON ONE imminent/gold and silver skyrocket

Posted: 03 Sep 2011 02:09 AM PDT

Why This Gold Boom Will Be So Much Bigger Than The Last One

Posted: 02 Sep 2011 10:39 PM PDT

¤ Yesterday in Gold and Silver

As I mentioned in The Wrap last night, the gold market was comatose until shortly before the London open...and the rest, as they say, is history.

There was another spike up shortly after London opened...and from 9:00 a.m. in London, until the Comex open at 8:20 a.m. Eastern time, the gold price tacked on an additional ten bucks.

As soon as Comex trading began...and the jobs numbers were made public at 8:30 a.m...the gold price added another twenty bucks...and by 9:00 a.m. Eastern time, gold was up about $55 from Thursday's close. The price slid a hair from that point until just a few minutes before the Comex trading session closed at 1:30 p.m...but tacked on over ten dollars in the electronic trading session that followed, closing the day virtually on its high...up $58.80 spot. Volume was surprisingly light.

The silver price action was very similar, however it was obvious that the price wanted to move much higher after the Comex open, but someone was there to make sure that the price didn't get too frisky to the upside. Silver closed up $1.75 spot on the day, but would undoubtedly finished higher if had been allowed free rein. Volume wasn't overly heavy.

Here's the dollar chart for the week that was...and it's price action certainly had no influence on the precious metals over the last five business days.

Here's the HUI for the week that was. The ino.com feed is missing all of Thursday and part of Friday's data...but the HUI finished up about 4.6% on the week. Although the HUI finished up 2.39% on Friday, it would have done better if the general equity markets hadn't tanked.

The silver stocks did very well for themselves...and that's certainly reflected in Nick Laird's Silver Sentiment Index, which was up a robust 3.11%

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 213 gold, along with 18 silver contracts, were posted for delivery on Tuesday. In gold, the big short/issuer was the Bank of Nova Scotia with 197 contracts...and the big long/stopper was JPMorgan [205 contracts] in its client account. The action is silver isn't worth a comment. The link to the action is here.

The GLD ETF reported no changes yesterday...but the SLV ETF added 1,136,365 troy ounces of silver.

The U.S. Mint had a small sales report yesterday. They sold 3,000 ounce of gold eagles and 52,000 silver eagles.

While on the subject of silver sales from the U.S. Mint...the silver eagles sales are only part of what the mint produces in silver products every year.

Reader Ron Copley from Carmel, Indiana sent me the following sales records for other silver products the mint produces. Here are some of the incredible statistics he sent my way last night...and I thank him for this.

Sales of the 5-ounce 'America the Beautiful' coin series used up 175,065 ounces of silver in August...and 1,902,000 ounces year-to-date. And the proof U.S. Silver Eagle had sales of 133,460 in August...and they have sold 726,921 year-to-date.

So you can toss that 2,628,921 ounces of silver usage on top of the 29,045,000 silver eagles that the U.S. Mint has produced as of yesterday.

It was another huge day over at the Comex-approved depositories on Thursday. They didn't receive an ounce of silver, but shipped 1,446,799 troy ounces out the door. Most of the action was at Brink's, Inc. and HSBC USA. The link is here.

The Commitment of Traders report showed improvement in the Commercial net short position in both silver and gold...but Ted Butler was expecting better numbers than were reported..and I must admit that I was expecting better as well.

In silver, the bullion banks reduced their net short position by 1,951 contracts, or 9.75 million ounces. The Commercial net short position now sits at 225.7 million ounces. The '4 or less' bullion banks are short 198.3 million ounces...and the '5 through 8' bullion banks are short 38.8 million ounces. The eight bullion banks are short 237.1 million ounces...about 12 million ounces more than the entire Commercial net short position.

In gold, the Commercial net short position declined by 13,081 contracts...about 1.31 million ounces. The Commercial net short position is now down to 21.7 million ounces. The '4 or less' bullion banks are short 14.4 million ounces of gold...and the '5 through 8' bullion banks are short 5.2 million ounces. These eight bullion banks are short 19.6 million ounces of gold...which is 2.1 million ounces less than the Commercial net short position.

It's been a while since gold's Commercial net short position has been this low...and I'd guess that there's not much room left to the downside in gold. There's a bit of room to the downside in silver, as I've seen much lower Commercial net short positions that this, but JPMorgan et al would have to engineer a new low silver price for this move down [which would be well below $37 spot] to get more serious long liquidation. I wish them luck.

But the big take-away from these COT numbers is the fact that the open interest is falling as gold and silver prices are rising. As Ted Butler has pointed out many times, short covering by the Commercial traders has been the prime driver of this big rally in both metals...and it's entirely possible that Friday's big rally was largely short covering as well. We'll find that out in next Friday's COT report.

Since this is my weekend column, I can empty my in-box today...and, fortunately, I don't have that many stories in total...and you should be able to fit them all in this weekend.

Other than the fact that the entire world's economic, financial and monetary systems are circling the drain at an ever-faster rate with each passing week...everything is just fine.

Jim Rickards sees explicit devaluation of dollar and flight from GLD. Fiat Money: The Root Cause of Our Financial Disaster. Don't Answer the Doorbell.

¤ Critical Reads

Zero Job Growth Latest Bleak Sign for U.S. Economy

August brought no increase in the number of jobs in the United States, a signal that the economy has stalled and that inaction by policy makers carries substantial risk.

The government report on hiring, released on Friday, prompted another round in a relentless diminution of economic expectations. The unemployment rate, at 9.1 percent, did not change last month, and the White House said it was expected to stay that high through at least 2012.

This story came from yesterday's edition of The New York Times...and is courtesy of Roy Stephens. The link is here.

View full GSD edition

Worldwide factories falter as orders fade

Factory activity worldwide stalled last month as new orders tumbled, heightening fears that the global economy may be heading for another recession and driving stock markets lower.

Surveys of company purchasing managers showed manufacturing contracted in the euro zone for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan where new export orders fell sharply.

The rest of the details in this Reuters story don't get any better. I borrowed this from yesterday's King Report...and the link is here.

View full GSD edition

Bear Market Rules Apply

Here's a very short piece by Carl Swenlin of decisionpoint.com fame, that was posted over at financialsense.com yesterday.

On August 17 the S&P 500 Index 50-EMA crossed down through the 200-EMA, declaring by our definition that the long-term trend was down and that we were in a bear market. When this happens, we remind ourselves that "bear market rules apply," and that we should expect negative outcomes more often than positive ones.

This is a small handful of very short paragraphs...and the chart is worth the trip all by itself. I thank reader U.D. for sliding it into my in-box very late last night...and the link is here.

View full GSD edition

As Trade Volumes Soar, Exchanges Cash In

The latest financial market convulsions have been tough for almost everyone, including traders caught on the wrong side of another big swing and pained everyday investors watching their dwindling holdings go down and up — and down again.

But there is a silver lining to even this latest market horror show, at least for the exchanges where the financial instruments change hands.

Businesses like the New York Stock Exchange and the Chicago Mercantile Exchange skim cents off each stock or contract bought or sold over their trading floors or computers. With the daily volumes of financial market contracts sent surging through their systems by nervous traders and investors up by billions, the latest trading rush is directly polishing their bottom line.

This 2-page story appeared in the August 27th edition of The New York Times...and I thank reader Phil Barlett for sending it along. The link is here.

View full GSD edition

Leak at WikiLeaks: A Dispatch Disaster in Six Acts

Some 250,000 diplomatic dispatches from the US State Department have accidentally been made completely public. The files include the names of informants who now must fear for their lives. It is the result of a series of blunders by WikiLeaks and its supporters.

Everyone who knows a bit about computers can now have a look into the 250,000 US diplomatic dispatches that WikiLeaks made available to select news outlets late last year. All of them. What's more, they are the unedited, unredacted versions complete with the names of US diplomats' informants -- sensitive names from Iran, China, Afghanistan, the Arab world and elsewhere.

SPIEGEL reported on the secrecy slip-up last weekend, but declined to go into detail. Now, however, the story has blown up...and is one that comes as a result of a series of mistakes made by several different people. Together, they add up to a catastrophe. And the series of events reads like the script for a B movie.

You can't make this stuff up...and I thank reader Scott Pluschau for sending it along. The story is posted over at the German website spiegel.de...and the link is here.

View full GSD edition

Euro Rescue Debate: Schäuble Pushes for New EU Treaty

The debt crisis has been a tough test of endurance for Europe. To better face such challenges in the future, German Finance Minister Wolfgang Schäuble wants to forge a new European Union treaty, the mass-circulation daily Bild reported Friday.

According to the report, Schäuble clarified his plan during a closed-door meeting of leaders of his conservative Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union (CSU) on Thursday evening. Shifting greater powers over economic and financial policy to Brussels is necessary, he said according to the paper, "even though we know how difficult a treaty change will be."

Schäuble also acknowledged that such reforms would create a significant divide between the 17 European Union countries that use the euro and the remaining 10 that do not.

This story, posted over at the speigel.de website yesterday, is another Roy Stephens offering...and the link is here.

View full GSD edition

A story missing from our media: Iceland's on-going revolution

An Italian radio program's story about Iceland's on-going revolution is a stunning example of how little our media tells us about the rest of the world. We may remember that, at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.

As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers

ECB Doesn’t Rule Out “PIIGS” Gold as Collateral for Gold Backed Eurobonds

Posted: 02 Sep 2011 10:39 PM PDT

ECB Doesn't Rule Out "PIIGS" Gold as Collateral for Gold Backed Eurobonds

This is the partial headline from a piece posted over at zerohedge.com yesterday. It's based on a Reuters story yesterday that bore the headline "Gold Sales Would Not Solve Europe's Debt Troubles". Here are the first three paragraphs from the Reuters story...

Europe's most indebted nations are under heavy pressure from their richer neighbours to sort out their finances, but they are unlikely to mimic the impoverished gentlefolk of old by selling off the family silver -- or in their case, gold -- to do so.

More than 750 tonnes of gold are currently sitting in the state coffers of Portugal, Greece, and Spain alone, equal to about 17 percent of the 2010 annual supply of bullion from mining and sales of scrap.

As Trade Volumes Soar, Exchanges Cash In

Posted: 02 Sep 2011 10:39 PM PDT

As Trade Volumes Soar, Exchanges Cash In

But there is a silver lining to even this latest market horror show, at least for the exchanges where the financial instruments change hands.

The Dollar as a Reserve Currency Is Awful, until You Consider the Alternatives!

Posted: 02 Sep 2011 10:32 PM PDT

Money And Markets

Rocky Banks

Posted: 02 Sep 2011 09:45 PM PDT

The banking crisis of 2008 alerted us to the risk of a systemic collapse of the banking system. Today these fears again seem very real, with concerns over the European banks and the share prices of ...

Silver Stocks Lagging

Posted: 02 Sep 2011 05:23 PM PDT

Zealllc

Opening the mint to gold and silver - then and now

Posted: 02 Sep 2011 05:00 PM PDT

Matson - "I am always a long term bull" Idiot. Where has he been for the last 11 years. Idiot.

Posted: 02 Sep 2011 03:10 PM PDT

QUOTE OF THE FUCKING YEAR: "I dont want to buy gold and put it in my sock drawer."

How is Your (Holiday) Economy Doing?

Posted: 02 Sep 2011 03:01 PM PDT

I'm a bit surprised that anyone can be surprised by the lousy jobs numbers for August. Consumers are worried and too many economists have been trying to draw trend lines through noise in retail spending data and call it proof that a recovery in under way. Broad measures of unemployment are stuck in the upper teens, big companies are continuing to shed jobs, small businesses on the whole are pessimistic, state budgets are under pressure and federal deficit spending is set to be reined in. With housing in most markets not having bottomed, the overwhelming majority of consumers having taking a wealth hit, businesses not investing and government not taking up the slack, where exactly is growth supposed to come from? The tooth fairy?

The government and private sector confidence generation apparatus hasn't made much headway against the ugly combination of a post financial crisis hangover (known more formally as a balance sheet recession) and poor policy responses (yes, Virginia, while the authorities did keep the financial system from imploding, the failure to clean it up and provide for adequate stimulus to offset private sector deleveraging were and continue to be massive errors).

But why has the media been so clueless? Cynics might argue that they are paid to be clueless, and there is more than a bit of truth in that. However, I suspect at least as powerful is that the overwhelming majority of reporters live in New York or Washington DC, two cities relatively unaffected by the downturn. DC is awash in lobbyist dollars and New York has been kept afloat by super low interest rates and other sops to the banks.

While readers provide some vignettes on how the rest of the country is faring, I got a real wake up here in central Maine. Even though yours truly has a bias to see the glass as half empty rather than half full, things here are visibly worse than in the last two years, meaning in the wake of the crisis.

I've gone to the Casco Bay area (Portland is at the south end of Cacso Bay) around this time of year for over 20 years, including the particularly bad 1990-1991 recession, which seemed to hit this economy harder than most of the US. Some indicators:

1. The roads are just not busy enough. We rent a house in a major vacation area. The traffic level is notably lighter than in the past. We expected to see this in 2008 or 2009 and didn't much then.

2. Normally we avoid Freeport entirely till after Labor Day. Freeport is the home of LL Bean and has become a America shopping town of sorts, with lots of aspirational middle class outlet stores (Calvin Klein, Nike, J. Crew) and is typically mobbed in the summer and still pretty busy right after Labor Day. One of my relatives was in desperate need of a book fix, so mid-week we relented and went to a used book store on the edge of Freeport and could tell the roads in and out were way underpopulated relative to the norm. We decided to venture in today so the nieces could shop, and Freeport was a ghost town.

3. We always go further up the coast to Boothbay Harbor, and often take a cruise. There were notably fewer options on offer. Again, this is one of the biggest weeks of the year, and suggests the tour operators have cut back their schedules from past years.

And consider this too: given the strength of the Canadian dollar, you'd expect Canadians coming to the US to be a partial offset to any fall in domestic holiday spending.

I hope readers will give me their observations about how the economy is faring, both based on activity where they live, and for those who have gone on holiday in the US in the last month, what you've observed elsewhere.

A Conversation With CEO Of First Majestic Silver

Posted: 02 Sep 2011 02:36 PM PDT

By Michael Bryant:

This is an exclusive interview with Keith Neumeyer, President and Chief Executive Officer at First Majestic Silver (AG).

Q: The overall mining industry has experienced inflationary pressures throughout the first half of 2011, how do you plan to control costs and maintain margins going forward?

A: That's correct, the entire industry has experienced higher costs of everyday items such as chemicals, energy, petroleum and labor. However, we've benefited from higher silver prices at a much faster rate and therefore our cash margins have grown much more substantially which helps minimize the extra costs. In addition, to help combat the continued threat of higher costs (if in fact they continue), we are upgrading a number of items at our operations. First, we recently installed a new automated cyanide feeder at La Encantada that reduces the rate of cyanide consumption by over 30%. This same system will be installed at each of

Complete Story »

Gold Stocks Coiled Again

Posted: 02 Sep 2011 01:22 PM PDT

Gold has roared an assertive "here I am" as a wider group of investors realized the problems in the financial system were worse than they previously thought. It is hard to let go of a concept when you are taught something and believe it for a long period of time. This is especially hard when your model fits the world nicely over this time span. I have not written this article to be condescending I sincerely understand how hard it is to let go of a newly broken concept that has worked in the past. I believe this is the hurdle that is gradually breaking down and changing sentiment in the precious metals sector. Gold stocks are now freshly coiled and raring to go up.

I have watched the journey from 2001 and have read comments over the years that speculated about what price level would finally ignite strong interest from the general public. It was going to be the old yearly closing price record and then the 1980 high, then $1000. The key is not actually a number it is sentiment and for gold this takes the form of fear. Things have had to get so bad that the old belief systems had to be challenged in the minds of people who have made money by investing in other asset classes in the past. They had to reach a tipping point where gold answered their concerns. More and more investors are reaching the conclusion that they need gold and silver in their portfolios.

As gold commentators we are no longer reporting on the tell-tale signs and cracks in the landscape, or looking for potholes in the road ahead because we are all staring at the event now. We are no longer trying to explain that this will happen because it is happening, so the educational focus of my service also has to change with current circumstances. My time will be better spent talking about portfolio strategy and gold stocks now to maximize profits.

Some basics about relative share prices might be a good place to start. Gold was A$518 in August 2001 just after the bottom of the gold bear. The XGD at the time was so unloved that some gold stocks were selling for less (smaller market cap) than the cash they held in the bank as deposits. It languished in apathy at around 1000 points at the time. The sentiment was as low as you could ever see because gold was seen as dead and buried.

By August 2005 we saw A$575 gold as the AUD had rallied from US52.5c to US75.5c. Gold was trading at US$434. Cost of production had risen and margins were thin, however even some meagre interest in gold stocks had driven the XGD to a more realistic level of 2700. Sentiment was changing rapidly in August 2005, in a similar manner to right now. Gold was set to rally and the market knew gold stocks were undervalued here in Australia and North America. Here is where we were then, in the red circle. Gold had hardly moved but it was at the beginning of a significant rise.

Now fast forward to August 2007 and gold had risen to US$673 (A$821) and the AUD had risen to US81.2c. The XGD had risen to 4870 and was set to run hard to 6900 in November that year as gold rallied to the old 1980 record of US$850. The XGD made two further peaks at the same level in January and then March 2008 as gold ran to US$933 and US$1,033. The gold stocks were selling off, failing to push the XGD up through 6900 because the early buyers were taking profits. To keep this in perspective we just tested that old 6900 level as new support a few weeks back. Cost of production had been rising sharply at the time however sentiment was high on gold stocks.

Then came the rest of 2008 and you can see that "horrible correction" in gold if you look hard enough. The huge crash in the monthly RSI gives that move away as gold plummeted to US$681 in the October of 2008. November 2008 saw a reversal and recovery to US$816 per ounce and the AUD was US65.4c giving a local gold price of $1,247. The XGD had recovered slightly from panic lows up to an extremely cheap 3678.

Equities recovered as the world financial debt bubble was brought back from the brink for another round of pump priming and it was severe. Mega trillions were added to the system as new debt, to bail out banks and buy all sorts of distressed assets. This emergency action did avert a deep dive into the abyss there is no doubt about that. However the problem was not solved so we were destined to continue down the current course.

The XGD never really recovered from this time when compared to gold. August 2009 saw the XGD at 4940, August 2010 saw 6900 again and August 2011 has now registered 7700 as it comes to a close. Gold has moved from A$1127 in August 2009 to A$1400 in August 2010 and is now at A$1676 after this recent correction. You would think I would create a relative index to analyse this and I have. However there are more important matters than straight mathematics and scientific ratios at work here and to print them would not clarify the picture, quite the opposite. Things have changed significantly.

Cash costs were rising into late 2007 however this abated to some extent in the 2008 meltdown. Costs have continued to rise however gold has risen far more quickly. Despite massive reinvestment and ore feed utilizing lower grade ore to maximise mine life and all related mining issues we are now seeing robust margins from even the higher cost producers. If we are back at August 2005 in relative terms then the following rally will be explosive. My deeper research points out that there is a high probability that we are, time will tell very soon but all the signs are there again.

I have not seen excellent sentiment and gold stock behaviour like this since mid-2005. As gold rises in all currencies, faster than their fluctuations against each other, more and more investors are drawn to gold. The Greek 10 Years bonds have blown out to 17.54%, the spread is 8.82% worse than a year ago. How does anybody finance themselves at that rate and remain solvent? Portugal is at 11.9% for their 10year bonds, fortunately Italy and Spain have settled down thanks to intervention – for now. I have been following this aspect of the global economy in my Newsletters from the start, and in articles like this for even longer.

This crisis has not been resolved and growth is weak on the global front. Even weak growth is being celebrated in the markets by equity investors. The growth is not keeping pace with inflation and not enough to create jobs growth. The Fed speech was excellent, didn't spend a cent and at the same time gave the impression they could be relied on. Middle of the road what a high wire act that is in this market climate, I take my hat off to them.

I have undertaken a significant study of gold in my latest Newsletter (for subscribers only) that examines seasonal influences on the XGD throughout the gold bull to date. I can state here that the last 6 August's have been at the beginning of a strong rise over the following 6 months. Even in 2008 after stocks crashed into those November lows we saw a higher level than August of 2008 by February 2009. The key to making money from this rise has been in stock selection and portfolio management.

In my latest Newsletter I also examine some deeper charting concepts. They have helped me to maintain our Educational Portfolio in profit, even in the bottom days of recent corrections despite starting it in February of this year. We are now up around 20% to date in the past few months; therefore our leverage will be fantastic on any significant rise in the XGD.

We have just a few remaining days before our Membership costs rises a little back up to normal levels and we have introduced a sample area for new Members to get a taste of our Educational Portfolio and Newsletters (5 recent issues) for just A$25 if you have interest. This is very cheap research and quite extensive. This is perfect for self-managed Super fund operators as it focuses on education. It shows weightings and stock choices that have been winners lately, and are expected to perform well in the coming share run. This is not the time to be out of gold stocks the fun is just beginning again.

Good trading / investing.
Neil Charnock
www.goldoz.com.au
GoldOz has now introduced a major point of difference to many services. We offer a Newsletter, data base and gold stock comparison tools plus special interest files on gold companies and investment topics. We have expertise in debt markets and gold equities which gives us a strong edge as independent analysts and market commentators. GoldOz also has free access area on the history of gold, links to Australian gold stocks and miners plus many other resources.
Neil Charnock is not a registered investment advisor. He is an experienced private investor who, in addition to his essay publication offerings, has now assembled a highly experienced panel to assist in the presentation of various research information services. The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are his current opinion only, further more conditions may cause these opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.

new here and love all the insight

Posted: 02 Sep 2011 12:09 PM PDT

i've been reading a lot of posts here and thankyou for all the great insight,last month i bought 10 10oz bars of silver and all is doing well (aug7th) and is very happy with the physical ,thankyou for all the great posts (keep positive):yes:

The Inevitability of Reality

Posted: 02 Sep 2011 10:20 AM PDT

The housing gloom virus is spreading to mainstream newspapers. And property spruikers are revising their 'property always goes up' rallying cry. Now the market is 'steadying', faces 'stabilisation', feels 'softer' and prices are 'flat'.

Editor Kris Sayce points out in our sister publication Money Morning that 'flat' means declining if you actually look at the numbers in the Age.

Perth recorded the largest fall in house prices, down by 2.7 per cent, over the quarter. It was followed by Brisbane, down 2.1 per cent; and Darwin and Adelaide, each falling 1.9 per cent. Melbourne and Sydney again proved to be the most resilient of the state capitals; Melbourne's low fall of 0.9 per cent was followed by Sydney's, down by 1.1 per cent.

But let's take a look ahead rather than back. From the Age again:

Separate building approval figures show just 7600 private sector houses were approved in July, almost unchanged from June and down 12 per cent over the year. About 2900 houses were approved in Victoria, down 10 per cent on a year earlier.

These figures add weight to our view that the housing sector is going backwards at a rapid pace," CommSec economist Savanth Sebastian said.

"Homes sales have hit 10-year lows, house prices have been tracking lower for six months and housing credit is at the weakest levels since the late 1970s," he said.

So the housing sector isn't expecting things to be pretty either. Over at the RBA, they are one-step ahead according to the Australian:

RBA deputy governor Ric Battellino said today there were concerns that buyers who bought into the market in 2009, when the federal government grant was increased, may have over-committed themselves

Yes, remember those first-home buyers who had to 'get on the property ladder'? They will soon be found at the bottom of the pile of people who fell off.

To get an idea of what might transpire over coming years, consider what happened in the US, UK and Ireland, just to name a few, when house prices stopped rising. (Here we mean the real definition of 'flat', not the property spruikers definition.)

Property investors suddenly stopped believing their houses were appreciating in value. (Something that is inherently odd to your editor, as houses don't grow.) And it became difficult to justify making a loss year after year on the expenses of owning the property.

Suddenly the true value of the investment asset emerges - it will have to fall in price dramatically before it can return a profit (rent minus the costs of owning, which include paying back the debt).

So the very tax advantage that sucked gullible property investors into the market will be their downfall. Investing in a loss-generating asset may be tax deductible, but that asset obviously isn't much of an investment.

That's what the Americans, Brits and Irish figured out. Then the real selling began, unleashing mayhem on financial markets.

When Australians figure out that a loss-making investment isn't a good one ... well ... they will lose a key part of their national psyche. Perhaps they will no longer be Australian?

Here is another odd phenomenon about housing bubbles. Gold, which is in a bubble according to many property spruikers, has had margins go up with the price. That is, as the price went up, it cost more to hold a position in gold futures. Property investments are the opposite.

The higher house prices go, the less risk banks perceive in lending. That meant they felt comfortable reducing required deposit ratios in the housing boom of the US, UK and Ireland. The initial cost of buying went down as the price went up.

This just adds fuel to the fire. And whenever things slowed, the government stepped in with all sorts of grants and tax breaks, further reducing the costs of 'getting on the property ladder'. The Sherlock Holmes of property investing, Intelligent Finance mortgage broker Justin Doobov, comments: 'I have a suspicion that the grants tend to push the price of a property up by the value of the grant.'

Well done, Justin!

This may be a particularly bad time to be over-optimistic about property.

Ratings agencies, governments and private institutions continue to forecast recoveries that are unlikely to emerge. In fact, many economists who predicted the 2008 economic woes are explaining why recession is a virtual certainty in the US. Some say it has begun already. Factor in Europe's sovereign debt woes and China's attempts to slow down and you get a dismal outlook for Australia.

The 'reputable' forecasters above (people think ratings agencies, governments and big banks are more reputable than people who are consistently correct) base their projections on recoveries that happened back in the day when more debt could be borrowed to spur 'growth'. Too much debt is the problem now. It has to be paid back, or defaulted upon, before growth can re-emerge.

Very few countries are actually in debt repayment mode. But there are some encouraging signs in some countries. The UK for example. The Telegraph reports how the rebalancing of the economy away from debt is taking place:

While our economy as a whole has grown by 2.5pc, the financial sector has shrunk by 4pc. Take the financial sector out of the equation, and economic growth in the rest of the economy during the recovery has actually been above its average rate of the last two decades.

This is precisely what a healthily deleveraging economy should look like. (The British government is still borrowing though.) What forecasters don't seem to understand is that this 'good' process of debt reduction necessarily has a dampening effect on GDP. So slow or negative GDP growth may be a sign the economy is healing. It shouldn't be interfered with. Especially when those interferences involve more borrowing.

In times like these, it is important to remember that the market will correct misallocation of capital in the end. People who shouldn't have borrowed money will be foreclosed upon. Banks that should have failed but were bailed out will pull governments down with them. The bankers that would have lost their jobs if the banks hadn't been bailed out will lose them anyway. Houses that shouldn't have been built will be bulldozed. The inequality that was not corrected by a financial crisis, after years of inflation, will be corrected. And so on.

As you will have guessed by the links, these corrections are already underway.

Hole or no Hole?

The debate over Jackson Hole continues. As is typical of economic arguments, this one has little to do with economics. Instead, the argument is about whether Jackson Hole is in fact a place or not.

To settle the ongoing hullabaloo, here is a map courtesy of Google Maps: