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Monday, March 5, 2012

Gold World News Flash

Gold World News Flash

Pento - Gold Will Surge 20% to 30% in the Next Twelve Months

Posted: 04 Mar 2012 07:05 PM PST

Never before in the history of planet earth have we seen such a synchronized counterfeiting scheme to monetize insolvent sovereign debt.


The Fractional Reserve Bullion Banksters Are DOOMED [a SGTreport Metals UPDATE]

Posted: 04 Mar 2012 04:44 PM PST

A SGTreport silver update. The Banksters prevented the Pan Asia Gold Exchange from ever doing damage to their fractional reserve bullion banking monopoly, they won't be so lucky a second time.

For the Andrew Maguire KWN interview, click Here.
For the Ned Naylor-Leyland TFS Metals Report interview, click Here.

In The News Today

Posted: 04 Mar 2012 03:33 PM PST

Jim Sinclair's Commentary

I miss Bert. He was tough.

 

Jim Sinclair's Commentary

2012 is the year that the US dollar loses major value due to the sundering utilization as the major international settlement currency. This is significant enough to take out .7200 on the downside in the antiquated USDX index. War need

Continue reading In The News Today

The U.S. Dollar Is Oversold

Posted: 04 Mar 2012 02:03 PM PST

The U.S economy is still trending, albeit at the moderate pace. The U.S. dollar is oversold against majors and might appreciate over the short-term. Read More...



According To Reuters, Soaring Energy Prices Are A Good Thing

Posted: 04 Mar 2012 01:48 PM PST

When it comes to reporting the news, Reuters ability to get the scoop first may only be rivaled by its ability to "spin" analysis in a way that will make a normal thinking person's head spin.  Such as the following piece of unrivaled headscrathing titled "The good news behind oil prices" whose conclusion, as some may have already guessed, is that "the surge in crude oil is looking more like a harbinger of better days." Let's go through the arguments.

From Reuters: The good news behind oil prices

  1. "the Iran-driven spike masks a broader underlying trend, and as long as military strikes are avoided, it appears to pose only a limited risk. In other words, there is a good news story."

Translation - Logic aside (namely that there is absolutely no connection between the precedent and antecedent sentences, but we'll let that slide) the fact that at least $140 billion has been removed from consumers' pockets YTD on an annualized basis (0.9% of GDP per $10 oil price increase), and has offset all the benefits from the payroll tax extension and then some, is not only irrelevant, but is apparently good news. Ignore that retail sales are abysmal for 3 months running, consumer spending has plunged and has already cost the US economy 0.3% in Q1 GDP, and all this happened even before the oil price surge, not to mention and European inflation is already above expectations on record Brent in Euros. All that matters is consumer confidence which is based on media "arguments" such as the one being deconstructed.

   2. "Equity prices have risen in lockstep with oil's advance. When the two rise together, it usually indicates a broad-based economic expansion."

Translation - Reuters appears to have forgotten those long ago days of, oh, 2011, when equity prices and oil rose in lockstep too.

Then everything came crashing down. And no, it does not indicate a broad-based economic expansion, although first-year journalism grads are excused for thinking that (if not so-called 'strategists' from Deutsche Bank) - what it does indicate is an exponentially rising central bank balance sheet which is seeping into and inflating asset prices across the board, in the process sowing even more seeds of runaway inflation when the velocity of money finally picks up.

   3. "The world's factories are churning out goods at a faster pace, a key indication of the economy's strength, meaning it is in better shape to handle a supply shock from Iran than a year ago."

Translation - ignore consistent sub-50 prints from Europe, a once again sliding Chinese economy, and a US Manufacturing ISM which was just barely above the lowest Wall Street expectation. Also ignore an abysmal Baltic Dry Index, and now sliding rail index. Just focus on the fact that the "world factories" are supposedly churning out goods at a faster pace, in some magical universe. Perhaps global channel stuffing, ala GM is considered an indication of the "economy's strength" - we are just a little more skeptical, and think it is a "key indication" that the economy is about to take the Chevy Volt out to pasture courtesy of a massive inventory glut.

   4. "We think that crude oil prices have risen more because of improving sentiment regarding global growth than because of geopolitical risk concerns," Deutsche Bank told clients."

Translation - Speaking of Deutsche Bank, here is the "The Trinity of Bull." Nuf said.

   5. "A sterner test will be whether consumers can absorb the higher costs at the gasoline pump, since their spending accounts for about two-thirds of all economic activity in developed economies. And that will depend upon wage gains."

Translation - There's myth. And then there is the truth is that in order to pad his reelection campaign, Obama has forced wage gains to be annihilated as proven yesterday, and even though the US economy has supposedly added 1.9 million people in the past 12 months, the aggregate tax withholdings - the most realistic indication of cash flow - are lower than a year ago, meaning that the low wage job additions have come at the expense of high wage losses. In other words: quantity of jobs up, quality of jobs way down. But how cares about details.

   6. "A warm winter and a 30 percent plunge over the past three months in prices for natural gas, the fuel used to heat most American homes, have cut the average household energy bill. And more people have jobs today, providing more of a cushion to absorb costlier gasoline."

Translation - a warmer than average winter has done nothing but pull consumption forward. As Goldman showed on Friday, this one-time climatic aberration will now result in a drag on the economy, as warmed weather unfortunately did not help money to grow on trees any faster.

   7. "The U.S. jobs report for February due out on Friday is expected to show 210,000 new jobs were added outside the farm sector, the third month in a row of gains above 200,000."

Translation - It is quite possible that adjusted, birth-death'ed jobs, pro forma of a labor force participation collapse will come in great. Or whether we will have another record surge in part-time workers? In fact if the LFP rate is under 58%, America will have a negative unemployment rate! The only question is just how many millions in "vapor" jobs will have to be added to the real number (2.9 million in January) to make the US economy appear to be growing on part-time fumes, 7 months ahead of the US breaching it debt ceiling again.

   8.  "Inflationary pressures would complicate the role of central banks, possibly quashing prospects for further monetary support for the recovery."

Translation - Wait, so recent journalism grads do know about the linkage between inflation and central bank balance sheets. But wait, why need monetary support? Isn't this whole article premised on the fact that the economy is in a sustainable recovery? Oh who cares...

But the best is Reuters uncontested conclusion: "But for now, rising oil prices largely are a growth story."

...

Sigh.

Follow performance of stock exchanges and currencies as priced in gold

Posted: 04 Mar 2012 12:43 PM PST

8:40p ET Sunday, March 4, 2012

Dear Friend of GATA and Gold:

A new Internet site may be of interest to gold investors. Golden-Markets.com aims to follow the performance of major world stock exchanges and currencies as priced in gold:

http://golden-markets.com/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf


Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals
Sign Combination Agreement

Company Press Release
Friday, March 2, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) and Ursa Major Minerals Inc. have signed a binding letter of agreement for a business combination through a proposed all-share transaction. In doing so Prophecy and Ursa have acted at arm's length and the transaction has been negotiated at arm's length.

Prophecy will issue one common share in exchange for every 25 outstanding common shares of Ursa. Ursa options and warrants will be exchanged for options and warrants of Prophecy on an agreed schedule.

Prophecy's offer represents a value of about $0.15 per each common share of Ursa based on Prophecy's share price of $3.70 as at March 1, representing a premium of 130 percent to Ursa's March 1 closing price of $0.065.

Prophecy is to subscribe for $1 million common shares of Ursa by way of private placement financing at $0.06 per share, subject to regulatory approval. Upon placement completion, John Lee and Greg Hall, current Prophecy directors, will be appointed to Ursa's board.

Prophecy thus will become a mid-tier resource company with a robust and
diversified pipeline of platinum nickel projects, including:

-- The fully permitted open-pit Shakespeare PGM-Ni-Cu mine close to Sudbury, Ontario, infrastructure with near-term production capabilities.

-- The flagship Wellgreen (Yukon) PGM-Ni-Cu project with more than 10 million ounces of Pt-Pd-Au inferred resource. Drilling is under way and a preliminary economic assessment study is pending.

-- Manitoba's Lynn Lake Ni-Cu project with more than 262 million pounds Ni and 138 million pounds Cu measured and indicated.

For the complete announcement, please visit Prophecy Platinum's Internet site here:

http://www.prophecyplat.com/news_2012_mar02_prophecy_platinum_ursa_major...

Bernanke Leaks, Spoils the Punch

Posted: 04 Mar 2012 12:38 PM PST

Bernanke Leaks, Spills the Punch

By Bruce Krasting

Jon Hilsenrath, at the WSJ, must have had a phone call with Ben Bernanke on Saturday. Accordingly, Jon put an article out just in time to influence the market on Monday morning. The headline says it all:

.

No doubt, Bernanke is watching the price of crude and the tape is telling him his inflation forecast is no good. The leak this evening is just Ben's way of hinting to the market that he understands where we are on inflation, and he is not going to stir the pot anymore than he has.

The WSJ article indicates that the Fed is on hold for at least three months, till June. Moreover, Bernanke can't do anything big on the monetary front within five months before a national election. Therefore, the next legitimate time for another LSAP/QE is in December of 2012.

Bernanke's leak to Hilsenrath is not really new news. I have been saying that Ben is "done" for some time. This confirms it.

I don't expect this development to significantly move markets. I see it as being mildly dollar supportive (other bigger factors are at play). It should put a floor under bond yields, but I don't see this as a reason to sell bonds. It might very well take some froth out of the stock markets. I don't see it affecting the price of crude one way or the other (again, bigger factors will drive crude).

Ben and Jon aren't taking away the punch bowl just yet. We have a very long road ahead of ZIRP, and already bloated Fed balance sheets. I think the Fed is keeping the punch bowl full, but not putting any alcohol in it. Bernanke's new punch might quench your thirst, but it won't get you high.

.

Note:

Said it before, I'll say it again. I'm disgusted that Bernanke uses Hilsenrath and the WSJ as his go-to place to leak monetary policy. Bernanke made a big deal about improving transparency at the Fed recently. He just blew any credibility that he might have gained. Nothing has changed. Ben B. is a leaker.

.

China expands yuan export settlement to all qualified companies

Posted: 04 Mar 2012 12:28 PM PST

By Jim Jia
Bloomberg News
Friday, March 2, 2012

http://www.bloomberg.com/news/2012-03-02/china-expands-yuan-export-settl...

China expanded a trial of yuan settlement for exports to all companies qualified for foreign trade from a list of designated participants, the nation's central bank said on its website yesterday.

The change is aimed at promoting trade and the Chinese currency's cross-border use, the People's Bank of China said, citing a combined directive with the ministries of finance and commerce, the customs and taxation bureaus, and the China Banking Regulatory Commission. A circular on the new policy attached to the announcement is dated Feb. 3.

Premier Wen Jiabao is encouraging the wider use of the yuan in international trade and investment to curb reliance on the U.S. dollar while maintaining some controls on funds flowing in and out of China. Officials have said they want to gradually achieve the yuan's full convertibility under the capital account by 2015.


ADVERTISEMENT

Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals
Sign Combination Agreement

Company Press Release
Friday, March 2, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) and Ursa Major Minerals Inc. have signed a binding letter of agreement for a business combination through a proposed all-share transaction. In doing so Prophecy and Ursa have acted at arm's length and the transaction has been negotiated at arm's length.

Prophecy will issue one common share in exchange for every 25 outstanding common shares of Ursa. Ursa options and warrants will be exchanged for options and warrants of Prophecy on an agreed schedule.

Prophecy's offer represents a value of about $0.15 per each common share of Ursa based on Prophecy's share price of $3.70 as at March 1, representing a premium of 130 percent to Ursa's March 1 closing price of $0.065.

Prophecy is to subscribe for $1 million common shares of Ursa by way of private placement financing at $0.06 per share, subject to regulatory approval. Upon placement completion, John Lee and Greg Hall, current Prophecy directors, will be appointed to Ursa's board.

Prophecy thus will become a mid-tier resource company with a robust and
diversified pipeline of platinum nickel projects, including:

-- The fully permitted open-pit Shakespeare PGM-Ni-Cu mine close to Sudbury, Ontario, infrastructure with near-term production capabilities.

-- The flagship Wellgreen (Yukon) PGM-Ni-Cu project with more than 10 million ounces of Pt-Pd-Au inferred resource. Drilling is under way and a preliminary economic assessment study is pending.

-- Manitoba's Lynn Lake Ni-Cu project with more than 262 million pounds Ni and 138 million pounds Cu measured and indicated.

For the complete announcement, please visit Prophecy Platinum's Internet site here:

http://www.prophecyplat.com/news_2012_mar02_prophecy_platinum_ursa_major...


Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


ADVERTISEMENT

Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf

The Mystery Behind Rising Oil Prices Solved

Posted: 04 Mar 2012 12:20 PM PST

From Michael Pento:

 

The Mystery Behind Rising Oil Prices Solved

Everything I've been warning about regarding the fallout from global central bankers' love affair with inflation is coming to fruition. Consumers are once again dealing with the fact that the cost of filling up their gas tank is eating a significant portion of their disposable income. The price of a barrel of oil is now soaring above $100 a barrel; just as it always has done when the Fed has gone on one of their counterfeiting sprees. And it's not just dollars that have been eroding in value because the price of oil in Euros is now at a record high. The sad truth is that with each iteration of QE, either in the U.S. or around the globe, it has sent oil prices skyrocketing, inflation rising and the economy into the tank.

But our nation's Treasury Secretary continues to display how very little he understands about markets and the economy. Timothy Geithner said last week that there is "no quick fix" to higher oil prices and that there's no easy solution for spiraling energy prices. What he does recommend is a long-term approach, "…to encourage Americans to be more efficient in how they use energy." My guess is what Mr. Geithner means by "encouraging Americans to be more efficient" is to make sure our economic growth is anemic.

In contrast to what Geithner believes, there are two things he, the Fed and the Obama administration could do today to bring oil prices down below $75 per barrel in less than 30 days. First, is to raise the Fed Funds rate to 1% and repeal Bernanke's pledge to keep interest rates at zero until the end of 2014. The second is for the president to proclaim that the U.S. does not support, in any way, a preemptive military attack on Iran. These two simple measures would dramatically strengthen the dollar, backing out at least $25 from the crumbling currency premium; and removing the $15 war premium built into the price of oil.

But seeing as neither of those things is likely to happen, we can look to recent history for what we can expect from soaring oil prices. In the summer of 2008, oil prices hit an all-time record high of $147 per barrel and gas prices hit a record $4.16 per gallon. This helped send the global economy into the Great Recession. Then in Q1 of 2011, QEII sent oil prices back to $114 per barrel and gas back above $4 a gallon. Predictably, U.S. GDP once again plummeted, falling from 2.3% in Q4 2010, to 0.4% in the following quarter. Today, oil prices are back to $110 per barrel and gas prices are surging back to $4 per gallon. Expect a slowdown in the economy similar to what occurred every other time gas prices hovered around the $4 level. We received a taste of that slowdown with the release of the Durable Goods and ISM manufacturing report. Orders for U.S. durable goods fell in January by the most in three years and capital goods expenditures, less aircraft and defense fell 4.5%. And the Institute for Supply Management's factory index fell to 52.4 in February from 54.1 a month earlier.

The main reason why oil prices are rising is the same reason why food and import prices are soaring as well. Paper currencies across the world are losing their purchasing power against real assets that cannot be increased by fiat. Of course, the Pollyannas on Wall Street will tell you that oil is rising because of a rebounding economy. However, the facts are that gasoline demand is down 6% YOY, while oil inventories are at a six month high. If the global economy was indeed recovering why is the demand for gas at the pump falling? In reality, the global economy is very weak and the U.S. is very far removed from a sustainable recovery.

Japanese GDP dropped 2.3% in Q4 and the European Union is in recession, with last quarter's GDP falling 0.3%. And Greece has entered into a depression with GDP down 7% last quarter and falling sharply. Emerging market economies will be hard pressed to keep up their ebullient growth rates when the developed world's demand for foreign made goods is collapsing.

Meanwhile, the U.S. continues to run trillion dollar annual deficits and the unemployment rate is 8.3%. Inflation is destroying the nation's desire to save and invest, as the economy is suffering through a protracted period of stagflation. But perhaps the worst situation of all is that the Fed's free-money policy has set the economy up for the biggest interest rate shock in history. It's really not much of a mystery why investors have fled to gold and oil as an alternative to owning paper, which can only offer a negative return after inflation.

JP Morgan's Blythe Masters Is the 2011 Queen of Commodities - Sharkboy and LavaGirl

Posted: 04 Mar 2012 11:45 AM PST


This posting includes an audio/video/photo media file: Download Now

Gold Far From Bubble Phase: Marc Faber

Posted: 04 Mar 2012 10:57 AM PST

The Gold Report


More on Warren Buffett and Gold

Posted: 04 Mar 2012 10:42 AM PST

Iacono Research


Dr. Nu Yu: Further Drops in Gold, Silver & Stock Markets Look Likely ? Here?s Why

Posted: 04 Mar 2012 10:40 AM PST

The price trends for gold, silver, the USD and the broad stock market continue to unfold within pre-determined patterns. Presently all indications are that: [LIST] [*]gold and silver*could go much lower than currently, [*]the broad stock market*should weaken 3-5% over the next few weeks exhibiting higher instability in the process, [*]the USD Index*should strengthen somewhat and [*]the 30-Year US Treasury Bond index is expected to*remain in its*horizontal channel pattern (trading range). [/LIST]Let me show you these progressions in a number of diagrams based on well founded technical analysis of the various situations. Words: 770 So says Dr. Nu Yu*(http://fx5186.wordpress.com)*in edited excerpts from his original article which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright i...


VB Update Notes for March - April 2012 - Patience

Posted: 04 Mar 2012 10:17 AM PST

HOUSTON –  On Wednesday, February 29, the last day of the month and first notice day for gold and silver futures the gold market was rocked for an overly large snap correction, clipping gold for nearly $100 at one point and clobbering silver as much as $3.00.  We can attribute the beginning of the correction to disappointment selling when it became clear that Fed Chairman Ben S. Bernanke didn't say anything in his Humphrey Hawkins testimony that indicated another round of QE was imminent or even in the cards.  That was the start of it, but it ended up snowballing as sell stops and trailing stops were triggered.  It was another vertical plunge for the precious metals seemingly out of nowhere.   

20120304-silver

20120304-gold

Hourly Silver and Gold silver charts pulled  Thursday, March 1, 2012, one day after the sudden correction for gold and silver.  Just below is a montage of other markets similarly affected by the mini-flash crash.  

20120304-montage

Simple point:  More markets than just gold and silver were involved in the strange action on "Bizarre Wednesday."  

To continue reading, please log in or click here to subscribe to a Got Gold Report Membership.

Guest Post: The Exter Pyramid And The Renminbi

Posted: 04 Mar 2012 10:03 AM PST

Submitted by Mao Money, Mao Problems

The Exter Pyramid and the Renminbi

The pyramid is the strongest structure known to Man. The weakest structure is the inverted pyramid. There is an economic theory called the Exter Pyramid to describe the financial system. It is an inverted pyramid ranking assets by risk. Gold, the safest asset, holds its place at the tip of the pyramid. Riskier assets, such as cash, deposits, bonds, stocks, real estate, non-monetary commodities, etc., take their respective place above gold.

When the pyramid gets top-heavy, it has to re-adjust itself by reducing the value of the riskier assets and increasing the value of gold and other less risky assets. Although finding the true value of the total Exter Pyramid for a country is extremely difficult, we can use readily available data from a few asset classes to understand a basic structure.



America's basic Exter Pyramid was worth USD 28.4 trillion (CNY 178.92 trillion), including gold. China's basic Exter Pyramid was worth CNY 126.1 trillion (USD 20.02 trillion) including gold. (In the charts above, gold was shown as a negative number for visual effect. The value of gold is based on the official holdings at that time multiplied by the current market price.) If you factor in GDP, the closeness of those numbers seems very odd.


The instability of the Exter Pyramid shows the relationship between the gold base and everything piled on top of it. The higher the ratio, the more upward pull there is on the value of the base, and the more downward pull there is on the value of the upper levels. After peaking out at 769.65 to one in July 2001, China's financial assets to gold reserves ratio has fallen to 353.34 to one in December 2011. America's ratio went up to 300 in the late 1990s, early 2000s before dropping down to 64.72 in December 2011. This would explain why gold has been in a bull market while stocks have been a bear market.

We can also look at cash to upper levels. China's ratio of financial assets to cash was 21.51 to one and America's was 25.59.

There is no correct ratio, we can only compare two or more economies and see which one is higher or lower. A higher number means eventually there will be an increase in value of the base (gold) and a decrease in the value of the upper levels (everything else). In this case, a re-adjustment (which is happening) will cause the revaluation of value to be highest in gold in China, then gold in the U.S., then cash in the U.S., and then cash in China. Since the price of gold is linked world-wide, that would mean a drastic change in the value of the rénmínbì. If the real value of each countries' stock markets and gold reserves were to not change, the CNY would have to devalue 90.01% to equilibrate. That would mean an exchange rate in the range of CNY 64.1386 to one U.S. dollar. If the Chinese stock market were to adjust to the same proportion of the Exter Pyramid as the U.S. stock market at the end of 2011, then the exchange rate value of the rénmínbì would have to be CNY 35.8691 to one U.S. dollar.

Although the Exter Pyramid is difficult to measure, we can easily compare basic asset classes across economies. There is no correct ratio, but if we compare the U.S. and China, we can see that China's basic pyramid is considerably more top-heavy than America's basic pyramid. The only way to bring them to equilibrium would be to drastically devalue the rénmínbì against the U.S. dollar.

 

 

P.S. from ZH

There is another explanation for what is going on that does not involved devaluating the CNY: it very well could be that just like in early 2009, China will any minute announce that it has built up a massive gold stockpile over the past 2 years which has gone on undisclosed.

Recall from April 2009 Reuters:

Shanghai/Beijing: China disclosed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

 

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

 

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing's ability to buy secretly and its ambitions for spending its nearly $2 trillion (around Rs100 trillion) pile of savings. And not just in gold: copper and other metals markets are booming thanks to China's barely visible hand.

 

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China's buying power—and give it yet more reason to diversify into gold, oil and metals.

Here Are The Winners In An Oil Price Shock

Posted: 04 Mar 2012 09:38 AM PST

On Friday, we quantified the biggest losers in the case of a sustained oil price shock, and were not surprised to find that the US leads the way with about a 0.9% hit to GDP for every $10 rise in crude prices (compared to about 0.4% for the entire world). Today, via Goldman we look at the flipside and while acknowledging that in absolute terms the world will suffer should crude prices sustain their move higher, there will be relative winners. From GS' David Kostin: "Our oil convergence monitor tracks the relative performance of the Energy sector vs. S&P 500 against the price of oil (measured by the 2-year oil swap). Currently, Energy equities are about 1.5 standard deviations cheaper then the oil price would suggest (based the relationship over the past three years (see Exhibit 4). The divergence has remained stable during the last two weeks although the Energy sector outpaced the S&P 500 by 160 bp during February (5.9% vs. 4.3%). Outside Energy, the Metals & Mining and Engineering & Construction industries show the highest sensitivity to oil prices." What is strange is that the biggest loser by far to an oil shock is the Consumer Discretionary sector, which continues to plough on, completely oblivious of absolutely everything, even as the Dow Transports have decoupled from the broader market, purely in hope that the iRally will continue and lift all boats with it, when in reality every incremental dollar spent for iTrinkets saps the already tapped out US iConsumer even more, with less marginal purchasing power left for other discretionary purchases. Then again, good luck trying to talk any sense into the central bank playground known as the stock market, which will do whatever it wants for as long as it wants, until it doesn't.

The U.S. Dollar and Oil Hold Clues About the Future

Posted: 04 Mar 2012 09:24 AM PST

The past few months have been a difficult environment for anyone that was bearish. The next few months may prove to be difficult for everyone regardless of directional bias. Read More...



No physical selling to match paper gold smash, von Greyerz tells KWN

Posted: 04 Mar 2012 08:48 AM PST

4:45p ET Sunday, March 4, 2012

Dear Friend of GATA and Gold:

Matterhorn Asset Management's Egon von Greyerz tells King World News that last week's plunge in gold was entirely a manipulation of the paper futures market price without any corresponding selling in the physical market. Von Greyerz stresses that to immunize themselves against such manipulations, gold investors must buy only real metal and store it outside the banking system. The more gold investors do that, he says, the sooner the manipulations will be defeated. In any case, he adds, gold's trend remains strongly up. The interview is 12 minutes long and you can listen to it at the King World News Internet site here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/3/3_Eg...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Silver fundamentals better than gold

Posted: 04 Mar 2012 06:54 AM PST

with silver, we are probably somewhere midway through the cycle & have another 10 years to go. Other than that, I think it is up & up from here.


Flash Crash – Gold, Silver & Bonds

Posted: 04 Mar 2012 06:49 AM PST

Martin Armstrong's latest report can be found here

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Broad Market Recap for Currencies, Metals and Stocks

Posted: 04 Mar 2012 04:43 AM PST

The US dollar index staged a bullish engulfing candle last week putting in a bounce off the 50% retracement level and then pushed upwards in chart action staging an advance that pushed gold and silver lower.


US Dollar compared to Comex Gold Chart

Posted: 04 Mar 2012 04:40 AM PST

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] The chart I am presenting is due to a special request from a reader that I put one together. It is an interesting method of seeing in visual form the steady decline in the value of the US Dollar against Gold. A careful inspection of the chart will reveal that there are certain periods during which the price of gold has moved higher while at the same time the US Dollar index was moving higher. It is during those intervals when the gold price has risen strongly when priced in terms of the various major world currencies that comprise the USDX. The following chart is a picture of America's decline. As much as it deeply saddens me to say it, the US Dollar chart looks absymal. ...


What caused the pullback in Gold Prices

Posted: 04 Mar 2012 04:12 AM PST

We saw see a pull back in Gold Prices right after...

[[ This is a content summary only. Visit my website http://goldbasics.blogspot.com for full Content ]]


This posting includes an audio/video/photo media file: Download Now

Geopolitical – Week of 3.4.12

Posted: 04 Mar 2012 02:15 AM PST

John Dizard: Gold flash crash rouses suspicions of witchcraft

Posted: 04 Mar 2012 02:08 AM PST

Another patronizing journalist who will never try putting hard, specific questions to central banks, even though, as he implicitly acknowledges in his final paragraph, they plot to run the world in secret. All that is just to be taken for granted ... at least by journalists like himself.

* * *

Gold Flash Crash Rouses Suspicions of Witchcraft

By John Dizard
Financial Times, London
Sunday, March 4, 2012

http://www.ft.com/intl/cms/s/0/21be0aa8-62cd-11e1-9245-00144feabdc0.html

As they say, a paranoid is someone who suspects nine of the five conspiracies against him. Last week was a feverish one for the more sensitive gold specu ... investors, with a "flash crash" on Wednesday interrupting what had been a stately procession since December to ever-higher highs. Since gold people believe their positions represent not just an investment, but virtue itself, the losers smell witchcraft, and particularly evil Fed witchcraft at that.

What does the gold crash mean, if anything? Was it the result of a conspiracy by short sellers, or, conversely, does it presage another crisis, as gold price declines did in mid-2008 and September of last year?

The $90-plus an ounce sell-off, from a high of $1,790 early in the London trading day came during Federal Reserve chairman Ben Bernanke's testimony/grovelling to Congress last Wednesday. Taking into account the further declines in after-hours trading, the 6 per cent plus hit cut this year's gold gains by about half.

... Dispatch continues below ...


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Golden Phoenix Discusses Royalty Mining Growth Strategy
on '21st Century Business' on Fox Business Network

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The chairman had just finished saying that the decline in the unemployment rate was "somewhat more rapid than might have been expected," and, shortly after, that "... it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery."

To most, these sound like bland, rather than momentous, statements. However, the day's news cycle, and market tacticians, needed an event to excuse more churning of the customers' accounts, so Mr Bernanke's testimony was taken to mean that the Fed was postponing the start of a new round of quantitative easing of monetary policy. So less cheap money to support risk, and less future inflation.

Apparently, someone, or, rather, two someones with proprietary trading algorithms decided it was time to sell the futures equivalent of 31 tonnes of gold on the Chicago Mercantile Exchange. The crash happened between 10:40 a.m. and 10:54 a.m. eastern US time, with the biggest part of the decline taking place between 10:43 and 10:44, with a further drop in the couple of minutes before 10:54.

Wall Street's religion is chart-reading. But which chart? The one with Japanese candlesticks and outside days? The one with moving average crossovers? Or, for those traders who finished school, applications of cross-asset-class generalised autoregressive conditional heteroskedasticity models?

Nicholas Glinsman, a hedge fund manager in Taubate, Brazil, says: "These large (gold) sell-offs on big volume usually precede market liquidity events." ["Liquidity event" in this context means a widespread lack of ready money to cover immediate obligations.] "In anticipation of those, people have to raise cash somewhere, and that's by selling something in which they've made a lot of money. This happened last September (before the worst part of the European crisis), and, more dramatically, from July of 2008 up to the Lehman crisis of October 2008."

There is something to this. I remember how dollar-short European banks' sales led to a counterintuitive gold price decline in the middle of a panic.

David Goldman, a highly innovative New York fixed-income strategist, has tested a wide range of gold price time series correlations. He makes a strong case that the metal's closest relative (for now) is the yield on US Treasury Tips, the inflation indexed bonds.

"Tips and gold are high-correlated," he says. "They are both deep out of the money options on catastrophic changes in the price level." However, because Tips pay par at maturity (unlike some of their European counterpart inflation linkers), they also protect against deflation. This payoff on either inflation or deflation is so valuable that at the moment the 10-year Tips trades at a negative yield.

As Mr Goldman points out, the two asset classes are so close that they trade very tightly on a minute-by-minute or tick-by-tick basis, as well as over longer time periods. I don't think there are people trading the Tips/gold basis with offsetting long and short positions. However, there are probably long-only portfolio allocators who are rapidly changing their relative positions in Tips and gold.

Geeky enough for you yet?

This persistent pattern of high correlation makes Mr Goldman sceptical that last week's gold flash crash is anything more than a couple of clumsy hedge funds unloading excessively large positions. As he points out, it took an eternity, from 10:54 a.m. Eastern Time all the way to 11.20 a.m., for the Tips market to follow the gold price down. And when Tips did sell off, they did so far more gently. "The Tips market tells us this wasn't all that significant. If it were a general change in perception, then you have seen more happen (faster) in Tips."

My own view is that the Fed, like any bureaucracy, has tons of plans but doesn't really know what it will do next. When QE3 happens, it will be in reaction to immediately preceding outside-the-model events, justified with tortuous rationalisations.

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Shakeout Before Major Move in Gold And Silver Prices

Posted: 03 Mar 2012 09:13 PM PST

One would believe that from recent action this week particularly in the precious metals sector that "Dear Me, The Sky Is Falling!". In reality, very little has changed in the specter that is haunting the global economy.

There is an old French saying, "The more things change, the more they remain the same."  Observe that the Germans are ambivalent about bearing more gifts to the Greeks. Portugal, Italy, Spain are still in fiscal trouble. The vaunted employment figures omit the millions of our citizens who are living on unemployment benefits. What about the millions of bread winners over 50 years of age who have given up the search for employment.

Our facile economists and politicians are masters at "spinning" data to suit their thesis. So the mob is mesmerized and all is right with the world. Gold Stock Trades posits that there is much in the world's sovereign economies that requires healing.

The Professors are saying that our economy has recovered. Look they say on the one hand unemployment is declining, housing is turning the corner and our economy is on the verge of happy days are here again.

On the other hand, the academics are saying that the unemployment situation is a question mark, the housing recovery may or may not be in recovery mode and that stimulus is being shelved. Today we have witnessed the old Orwellian game of double-speak and double-think.

Our economists are in a bind. The so called positive advances in our economy has resulted from the very stimulus that they say to the public is no longer needed. Does this mean that the moribund banks of Europe who have just requested and accepted a second round of printed currency valued around $700 billion will return it to the Central Bankers?

The PhD's in economics coming from our best universities can continue to stimulate by devices and means beyond the comprehension of mere mortals. We can be told that stimulus is passe but the reality is it will continue to be done before our very eyes. Do investors really think that they would accept declining fiat dollars and tissue paper treasuries in exchange for solid gold and silver?

The recent selloff is just one of the many shakeouts that somehow manages to occur when precious metals are about to take off.  For weeks we have stated that we were on the verge of a breakout at $35 in silver, $4 copper and $1800 gold. Coincidence??? Gold Stock Trades thinks not.

In 2012, we have recently witnessed a dramatic 18% move in gold from $1525 to approximately $1800 gold and silver has made an impressive 30% move from $27.5 to $37.50 since the beginning of the year.  It is characteristic in gold and silver to witness short term volatile pullbacks at the beginning of major moves to shakeout the short term speculators looking for overnight riches and who lack patience and fortitude.

Weeks such as these occur periodically as attempts to delay the inevitable. The trajectory of precious metals remains firmly upwards. The 50 day moving average has not been violated by today's action and remains sloping upward. Indeed, this selloff may be providing a secondary entry point to add to precious metal positions. This pullback may have a few more days to run so patience and fortitude may be indicated.  The U.S. dollar and long term treasuries have bounced into strong resistance and should turn lower. Remember, there aren't any roads that don't have a pothole.

While the recent decline in gold and silver was precipitous, nevertheless, technical damage if any was minor. There were only 200 more declines than advances in the overall Dow Jones Industrials. Let the summer soldiers and the sunshine patriots run away as they catch their first whiff of gunpowder in 2012.

We remain steadfast in our advocacy of wealth in the earth equities.  Its not what Bernanke said, its what he didn't say. Some investors may have been waiting for him to hint at a QE3. He didn't go down that road this time. This may have created a certain amount of concern. Perhaps it was desired by the Fed to quell what they thought was excessive speculation and a possible runaway move in the precious metals market.

In conclusion, it may be that Bernanke's actions was a diversionary tactic. On the other side of the Ocean, The European Central Bank (ECB) injected more than $700 billion into over 800 banks throughout Europe. This brings the total to over $1 trillion dollars. It may be entirely possible that the Federal Reserve acquiesced in this action by the ECB through the long arm of the International Monetary Fund, which usually acts as a cat's paw.

Call it what you will, quantitative easing, monetary stimulus, liquidity injection, long term refinancing option, operation twist…the net result is the printing of paper money and the debasement of currency. This may only accrue to the benefit of wealth in the earth assets and precious metals.

We are just seeing another attempt by our monetary authorities to delay the inevitable and kick the can down the road. We may be assured precious metals and natural resources will resume its the long march upward sooner rather than later.

Gold Stock Trades will be presenting a workshop at PDAC, one of the largest mining investment shows in the World this Sunday March 4th from 10-10:25 AM at the Metro Toronto Convention Centre in Room 801. Come listen to our latest forecasts and the potential catalysts which could send gold, silver, uranium and critical metal miners higher in 2012 and beyond.

Busy? Then You Might Have Missed These Top 10 Articles of the Week

Posted: 03 Mar 2012 07:21 PM PST

We all live extremely busy lives and often fail to keep up with the most*informative articles posted on the internet. munKNEE.com searches the internet for*such articles out there and posts the best of the best in an edited and abridged format each and every day for the sake of clarity and brevity to ensure a fast and easy read. Below are links, with introductory paragraphs, to the 10 most popular for this past week in descending order. You’re busy so save time by*just reading those that interest you most and Sign-up for Automatic Receipt of Articles*as they get posted on munKNEE.com – Your Key to Making Money! Words: 1150 Here are the 10 most read with 1 honourable mention: 1. Fractal Gold Projection of $3,500 into Mid-year Remains Intact! Our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for ...


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