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Thursday, September 13, 2012

Gold World News Flash

Gold World News Flash

Why Didnt Anyone See It Coming?

Posted: 13 Sep 2012 12:07 AM PDT

Bullion Vault


Gold Daily Reversal but Shy of Objective

Posted: 12 Sep 2012 10:28 PM PDT

courtesy of DailyFX.com September 11, 2012 07:03 PM Daily Bars Prepared by Jamie Saettele, CMT “Gold is nearing the objective defined from its breakout in late August. Using the triangle measuring technique…objectives for gold are 1703.56 and 1754.26.” The former was reached and exceeded but the latter level is in line with the 1760 area, which served as a pivot in December 2011 and February 2012.” Gold did carve out a key reversal Wednesday shy of the objective. Is that the end of the bull move? It’s enough for me turn neutral. Keep 1750/60 in mind as resistance if reached. LEVELS: 1705 1714 1723 1750 1761 1790...


Global Economic Plunge, Money Creation & Soaring Gold

Posted: 12 Sep 2012 10:01 PM PDT

Today Mish warned King World News that investors should prepare, "... for a big plunge in economic growth worldwide." Mish also said that despite the plunge in the global economy, "I expect to see gold breakout to the upside and I think we are starting to see that right now. The same thing is true for silver."

But first, here is what Mish, who runs the Global Economic Analysis site, had to say regarding the plunge in economic activity: "We are seeing a decline in the global economy. China has slowed down dramatically, so any commodity exporters which export to China are slowing down as well. We're already seeing this happen in countries like Australia. We are also starting to see the Australian housing market begin to crash."


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Gold Seeker Closing Report: Gold and Silver End Slightly Lower

Posted: 12 Sep 2012 10:00 PM PDT

Gold climbed $14.87 to $1746.97 in Asia before it fell back to $1725.19 in late morning New York trade and then bounced back higher midday, but it still ended with a loss of 0.01%. Silver rose to $34.065 in Asia before it slipped back to as low as $32.482 and then also rebounded, but it still ended with a loss of 0.6%.


John Williams – Sell-Off in Dollar Should Evolve into Hyperinflation

Posted: 12 Sep 2012 09:30 PM PDT

by Greg Hunter, USAWatchdog:

Economist John Williams of Shadowstats.com says, "You're likely going to see a dollar sell-off . . . That should evolve into hyperinflation." Williams predicts, "Hyperinflation is virtually assured because the Fed doesn't have any options left." Williams says people should get prepared because we are facing a "man-made disaster." Join Greg Hunter of USAWatchdog.com as he goes One-on-One with John Williams.

Silver Update 9/12/12 Funny Mentals

Posted: 12 Sep 2012 08:11 PM PDT

The Silver and Gold Price Dropped to $33.23 and $1,731.10 Respectively

Posted: 12 Sep 2012 06:33 PM PDT

Gold Price Close Today : 1,731.10
Change : -1.20 or -0.07%

Silver Price Close Today : 33.23
Change : -0.28 or -0.82%

Gold Silver Ratio Today : 52.09
Change : 0.39 or 0.76%

From 7 September through 16 September Franklin Sanders will be away for a family vacation and won't publish a daily commentary during that time, but will return on 17 September.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com
1-888-218-9226
10:00am-5:00pm CST, Monday-Friday

© 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't.

Silver in a Depopulated World

Posted: 12 Sep 2012 04:46 PM PDT

 How a New World Order of 1.5 Billion People Might Affect the Silver Price Now, let's assume that, if there were 1.5 billion people alive, production levels would stay the same, made robust by the rolling out of robotics into … Continue reading →


Hyperinflation is Virtually Assured – John Williams

Posted: 12 Sep 2012 03:42 PM PDT

By Greg Hunter's USAWatchdog.com

Dear CIGAs,

The Federal Reserve is talking about "unlimited QE," or money printing, to boost employment.  Economist John Williams says, "That's absolutely nonsense.  The Fed is just propping up the banks."  Williams says, "You're likely going to see a dollar sell-off . . . That should evolve into hyperinflation."   Williams,

Continue reading Hyperinflation is Virtually Assured – John Williams

Martin Armstrong–Hotel US-You Can Check Out Anytime You Like But You Can Never–Part One 12.Sept.12

Posted: 12 Sep 2012 03:19 PM PDT

www.FinancialSurvivalNetwork.com presents

Martin Armstrong is an iconic investor who has called more market tops and bottoms than just about anyone else out there. He believes that hyperinflation will not occur in the US so long as there's a functioning bond market. He believes that the government will be forced to drastically cut spending and cut back benefits. Social security will be cut, along with all major government programs. The bond vigilantes won't have it any other way. This will lead to a lost decade, with price inflation starting in 2014 and a real collapse occurring after 2015. Whether his vision will come to pass remains to be seen.

Go to www.FinancialSurvivalNetwork.com for the latest info on the economy and precious metals markets.


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Special VB Update - VB #17

Posted: 12 Sep 2012 03:17 PM PDT

Vultures (Got Gold Report Subscribers) please log in to the Subscriber pages and navigate to the Vulture Bargain Section to view a Special Report released Wednesday, September 12, 2012.   To continue reading, please log in or click here to subscribe to a Got Gold Report Membership

Resting on the Bernanke Decision

Posted: 12 Sep 2012 02:34 PM PDT

Often is the case that the dollar will reverse just before or within days of a major anticipated news event. If I'm right, today's potential bottoming tail candlestick just shy of the Fed's announcement tomorrow may be an ... Read More...



Here's Hilsenrath With What To Expect Tomorrow

Posted: 12 Sep 2012 02:32 PM PDT

First thing this morning we tweeeted:

We were off by 14 minutes, as today's "Hilsenrumor" appeared at 3:26 pm, giving the market its closing oomph.

By now everyone knows that the WSJ's Jon Hilsenrath is spoon-Fed information directly by the Fed. Even the Fed. Which is why everyone expected the Fed to ease last time around per yet another Hilsenrath leak, only to be largely disappointed, invoking the term Hilsen-wrath.

Sure enough, it took the market only a few hours to convince itself that "no easing now only means more easing tomorrow", and sure enough everyone looked to the August, then September FOMC meetings as the inevitable moment when something will finally come out.

So far nothing has, as the Fed, like the ECB, have merely jawboned, since both know the second the "news" is out there, it will be sold in stocks, if not so much in gold as Citi explained earlier.

Regardless, the conventional wisdom expectation now is that tomorrow the Fed will do a piecemeal, open-ended QE program, with set economic thresholds that if unmet will force Bernanke to keep hitting CTRL-P until such time as Goldman is finally satisfied with their bonuses or unemployment drops for real, not BS participation rate reasons, whichever comes first.

As expected, this is what Hilsenrath 'says' to expect tomorrow, less than two months from the election, in a move that will be roundly interpreted as highly political, and one which as Paul Ryan noted earlier, will seek to redirect from Obama's economic failures, and also potentially to save Bernanke's seat as Romney has hinted on several occasions he would fire Bernanke if elected. Here is what else the Hilsenrumor says. 

From the WSJ:

In the past, it has announced programs with big numbers and fixed completion dates — like a $1.25 trillion mortgage-buying program that stretched 12 months through March 2010 and a $600 billion Treasury bond-buying program that stretched eight months through June 2011.
The activist wing of Fed officials, which support aggressive responses to high unemployment, want a large and open-ended commitment to bond buying. For instance, the Fed could announce it would buy at least a certain amount of bonds over a specified time period and signal they could buy more later if the economy doesn't pick up.

Announcing an opening allotment over several months would blunt the ability of Fed policy hawks, who are skeptical of easing actions, to quickly call for the program to end. The hawks don't want another round of QE, but if there is going to be one, they would want a small up-front commitment to bond buying and the opportunity to pull the plug on the program if the economy picks up quickly.

A four-month opening allotment would get the Fed past the election and through a Dec. 11-12 policy meeting, at which point it could consider whether to continue. A five month commitment could get it to a January press conference and another round of forecast updates. A seven-month opening allotment would get it through the first quarter of 2013 and to a March 19-20 policy meeting. If it decides to make decisions on a meeting-by-meeting basis, the next meeting is Oct. 23-24, two weeks before the election.

It's hard to say how big a program the Fed would launch, here are some guideposts:

  1. The Fed is already purchasing $45 billion in long-term Treasury securities every month through the Operation Twist program and it plans to buy a total of $267 billion by year-end. That marks the lower bound of what Fed purchases will be for the rest of the year.
  2. If the Fed doubles the size of its current program by matching Treasury purchases with mortgage purchases, that would get its monthly purchases to $90 billion.
  3. Its controversial QEII program launched in November 2010 was smaller at $75 billion per month.
  4. Its first round of mortgage and Treasury purchases took place largely in 2009 and was designed to be immense to address the financial crisis. It amounted to more than $140 billion per month, an amount that seems likely to be far beyond the ambitions of what Fed officials are prepared to do now.

–WHAT TO DO WITH TWIST: Officials must decide what to do about the "Operation Twist" program if they launch a new bond-buying program. The Fed is funding the Twist purchases with money it gets by selling short-term Treasury securities. The Fed has two options:

  1. It could suspend the Twist program and replace it with a new bond-buying program in which it buys both Treasury securities and mortgage-backed securities, and funds those purchases with money that the Fed prints — rather than with proceeds from short-term securities sales. This would be more like the QE programs the Fed launched in March 2009 and November 2010.
  2. The Fed could continue the Twist program and launch a mortgage-bond-buying program by its side in which it buys mortgage bonds with newly printed money but continues to fund long-term Treasury purchases with sales of short-term securities.

In either case, the Fed would be launching a program which it considers to be more powerful than Operation Twist alone. One question for officials is which of these two complex approaches would be easiest to explain to the public? Another is which approach entails less risk of public backlash? Many critics worry that the Fed's money printing will someday cause inflation or another financial bubble. Many officials don't agree, but they're sensitive to the argument. The second option would involve less money printing and might help to blunt that criticism.

–COMMUNICATION: How the Fed describes its impetus for action, and its criteria for even more in the future, could matter a lot. Is it responding to a darkening outlook? Or has it decided to take more aggressive action because its patience with slow growth and high unemployment is running out and it has a new commitment to changing that?

If it emphasizes the former, it might just depress investors, households and businesses more and backfire. If it emphasizes new resolve, it could spur the public to change behavior in ways that lead to more economic growth but also risk more inflation.

Fed officials have long believed that their communications about monetary policy and the economy are as important as the actions they take, but they've struggled to strike the right message.

In a widely debated paper presented at the Fed's Jackson Hole meeting last month, Columbia University economist Michael Woodford argued that the Fed should signal more strongly that it is committed to an easy money policy until the economy meets benchmarks for more output. The Fed seems to be moving tentatively in this direction. Its discussion about open-ended bond buying is one potential example.
Another: Minutes of the July 31-Aug. 1 policy meeting showed officials considered offering a new assurance that short-term interest rates will stay low even after the recovery progresses.

–WHETHER TO LOWER ANOTHER RATE: The Fed now pays banks 0.25% interest on reserves they keep with the central bank. The Fed could reduce the rate it pays on reserves that aren't required of banks (known as excess reserves) a little bit to try to give banks more impetus to lend. However many officials are reluctant to do so because they're afraid pushing the rate any lower would disrupt short-term lending markets. It's unclear whether the Fed will do anything on this front, especially with so many other hard decisions on the table.

AAPL Leads Stock Surge To New Highs

Posted: 12 Sep 2012 02:27 PM PDT

Broadly speaking, risk assets were not as dismal as equity markets today - holding on near the highs for much of the day. The late day surge higher in AAPL - that dragged everything higher - was a recoupling to risk-assets on the day as volume surged and average trade size picked up significantly. AAPL ended up at the record-high day's closing VWAP (around $672) perhaps suggesting some algo-driven liftathon to enable the bigger boys to exit the heavily-weighted-in-the-index name - and right in front of Bernanke's big day tomorrow, it seems odd - other than short-covering squeezes - to be positioning this heavily long. HYG once again soared (playing catch-up to HY credit spreads), VXX tumbled into the close as VIX dropped following the ESM decision (though was not as ebullient as stocks ahead of tomorrow's NFP). Treasuries just kept leaking higher in yield (now 5 to 30Y yields higher by 5-10bps on the weeks) - and crushing the spread to MBS. The USD was stable most of the day after early weakness, on EUR strength after the ESM decision, was unwound. A bump-and-dump in commodities ended generally unchanged aside from Silver which had its own mysterious flash-crash soon after the US day session close. Credit tracked stock generally on the day and was quiet. S&P futures take out (after-hours) the highs of the day/year/four-years (as contracts rolled). Need Moar QE.


S&P 500 e-mini futures took out the year's highs after hours and turned back modestly lower (but found support at yesterday's closing VWAP twice today)...[note the futures volume is rolling also]

 

Commodities were dominated by some crazy Silver action today...

 

AAPL liftathon coincided with Monday's VWAP close...

 

and risk assets in general did not sell off with stocks - which led to the program buying catch up into the close we suspect as correlations tried to square up ahead of tomorrow...

 

and from the early June lows, the last few days have seen somewhat of a capitulation in HY spreads - even relative to the exuberance of stocks - while VIX has pulled back a little...

 

Charts: Bloomberg and Capital Context

When Will Gold Price Finally Take Off Again?

Posted: 12 Sep 2012 02:19 PM PDT

Jeff Clark, Casey Research writes: Gold's pullback a year ago no doubt shook out a lot of nervous buyers. They got in on the rise, they got nervous on the pull back. They sold, and they lost. That's just the way the market works.


And Here’s Why Gold Will Remain Money

Posted: 12 Sep 2012 02:15 PM PDT

One of the longest-running myths in financial markets is going to damage a lot of portfolios: the myth that central bank money printing — in the context of a modern banking system — hikes the value of stocks.

Many academics still think printing lots of money — which is thought to permanently increase stock prices — will lead to some sort of trickle-down economy phenomenon. Ben Bernanke said as much in his famous November 2010 Op-Ed in The Washington Post: "Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

Since then, the S&P 500 has rallied from 1,200 to 1,430, mostly on the belief that stocks are a good substitute for bonds. Printing from the Fed and other central banks has front-loaded returns. Front-loading returns means the potential market gains will be depressed. In other words, the Fed's actions have temporarily pushed stock prices above intrinsic value, and when the Fed stops money printing, stocks could quickly fall back to intrinsic value.

Yale professor Robert Shiller created the "Shiller P/E ratio," which is the most-robust measure of the intrinsic value of the broad stock market. The Shiller P/E ratio is calculated as follows: Divide today's S&P 500 index by the average inflation-adjusted earnings from the previous 10 years. I look at 10 years of earnings and cash flow data in researching stocks to get a feel for how earning might look in the future. Most investors remain too focused on the quarter-to-quarter minutiae, which often leads to surprises at turning points in the earnings cycle.

The Shiller P/E of the S&P 500 is currently 23 — 50% higher than its long-term average. The average Shiller P/E ratio since 1880 is about 15. A move back to the average would take the S&P 500 back to 930. A move to bear market low valuations would take the S&P 500 back to roughly 400. Right now, it's 1,432.

The Fed can't grow the intrinsic value of stocks. Companies can do that only by earning returns above their cost of capital.

In the coming quarters, many companies that had been earning returns above their cost of capital will be earning lower returns. Free cash flow will follow returns lower. Look at Intel's latest revenue warning; look at FedEx's earnings warning. Profit margins have peaked in many industries. Manufacturing companies exporting to Europe and China will continue to suffer. Apple can hold neither the stock market nor the economy up.

Meanwhile, household budgets out in the real world are straining to the breaking point. This morning's data showed the US labor force participation rate at a terrible 63.5% — the lowest in 31 years.

So Ben Bernanke is responding to this silent crisis the only way he knows how…by pushing repeatedly on the "print money" button at the Federal Reserve. He calls is "quantitative easing," or QE. And it's my bet that QE3 is coming soon to a nation near you. With each successive round of quantitative easing, demand for gold and other stores of value will rise and demand for stocks will weaken.

As I observed in this column last Friday, "Fed officials have been all over the media for weeks, laying the groundwork for a third round of quantitative easing. By preparing markets for QE3, the Fed refuses to let real-world evidence get in the way of its beloved theories…Perhaps once the global paper money system is restructured, involving some sort of gold standard, sanity will return to the Fed and other central banks. Until we see more signs of sanity, hold a core position in gold, silver, and precious metal mining stocks. These asset classes will be the prime beneficiaries of future printing."

Regards,

Dan Amoss
for The Daily Reckoning

And Here's Why Gold Will Remain Money originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. ".

Gold Daily and Silver Weekly Charts - Pre-FOMC Bear Raid

Posted: 12 Sep 2012 02:13 PM PDT


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Bonanza Discoveries That Will Drive Gold Stocks

Posted: 12 Sep 2012 01:55 PM PDT

New deposits and economic triggers will drive gold stocks, says Eric Coffin, the editor of HRA Journal. In this exclusive interview with The Gold Report, Coffin identifies the management characteristics of gold juniors that make money for investors.


"Desperate" Central Banks "Should Benefit Gold", German Court Backs Bailout

Posted: 12 Sep 2012 01:50 PM PDT

THE SPOT MARKET gold price touched a new six-month high at $1746 an ounce Wednesday morning, while stocks and the Euro also rallied following a ruling by Germany's Constitutional Court cleared the way for the creation of a permanent Eurozone bailout fund. "The price action remains bullish with support at $1700 and an upside target of $1790," says the latest technical analysis from bullion bank Scotia Mocatta.


$150 Silver & An Ocean Of Paper Money To Flood The System

Posted: 12 Sep 2012 01:45 PM PDT

Today acclaimed money manager Stephen Leeb told King World News, "There is no doubt that the Fed is going to print hundreds of billions of additional dollars." Leeb also said, "They (the Fed) will have created multiple trillions of dollars and it won't stop." Leeb also said that in this environment, "... silver is easily going to $150."

But first, here is what Leeb had to say about the situation in Europe: "I think the German high court decision was expected. It won't have any effect on Europe's ability to reflate. Bond purchases will take place, and Europeans now recognize they are all interrelated. If something happens to any of those big economies, Spain, Italy, etc., they all go down."


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Gold And Silver Rise, Germany Can Ratify ESM Bailout Fund With Conditions

Posted: 12 Sep 2012 01:41 PM PDT

Today’s AM fix was USD 1,742.75, EUR 1,352.23 and GBP 1,081.71 per ounce. Yesterday’s AM fix was USD 1,731.00, EUR 1,352.77 and GBP 1,081.33 per ounce. Silver is trading at $33.94/oz, €26.39/oz and &ound;21.17/oz. Platinum is trading at $1,649.00/oz, palladium at $674.70/oz and rhodium at $1,025/oz.


Central bankers are a Gold bug’s best friend

Posted: 12 Sep 2012 01:30 PM PDT

On Monday we reported the results of our recent survey, where the majority of you told us that your interest in gold had been sparked thanks to a loss of trust in central bankers. Bad news, because actually central bankers are the ones you should trust the most when choosing gold investment.


When Will Gold Finally Take Off Again?

Posted: 12 Sep 2012 01:30 PM PDT

By Jeff Clark, Casey Research Gold's pullback a year ago no doubt shook out a lot of nervous buyers. They got in on the rise, they got nervous on the pull back. They sold, and they lost. That's just the way the market works. But it's a shame, because when we look logically at gold's [...]


Under-The-Counter Coup D'etat

Posted: 12 Sep 2012 01:26 PM PDT

September 12, 2012 [LIST] [*]China at its most fragile since Tiananmen Square? World elites warned of "revolution"... [*]"What, me worry?" Pentagon channels Alfred E. Neuman in assessing whether China might dump its U.S. Treasuries [*]"You have to write positive reports or you get arrested": Chris Mayer with an alarming new episode in the Chinese stock fraud scandals [*]Court rules, traders yawn... How the ethanol rip-off is reaching new heights... Reader inquiries about gold overseas... and more! [/LIST] "We shouldn't be afraid of China's success," says Dr. Cheng Li. "We should be much more worried about China's failure." The headlines from China this week are all about the disappearance of a man named Xi Jinping. He hasn't been seen in public all month -- a bit odd for someone who is supposed to ascend to the Chinese presidency next month. The official story is he hurt his back while swimming. The intrigue may belie something far mo...


Gold Just Became Money Again

Posted: 12 Sep 2012 01:16 PM PDT

On June 18, the Federal Reserve and FDIC circulated a letter to banks that proposes to harmonize US regulatory capital rules with Basel III.

BASEL III is an accord that tells a bank how much capital it must hold to safeguard its solvency and overall economic stability.

It's a global standard on bank capital adequacy, stress testing, and market liquidity risk.

Here's the important bit:

At the top of the proposed changes is the new list of "zero-percent risk weighted items," which now includes "gold bullion," right after "cash."

That's the part to take notice of.

If the proposals are approved by regulators — and that seems likely since adoption of Basel III will be — then this is a momentous change for the gold market.

Now banks will be allowed to hold bullion in their vaults and count it among their Tier 1 assets — in other words, the least risky assets.

That by itself would be bullish for the gold price, as banks that recognize gold's unique characteristics seek to stockpile more of it.

But that's not the whole story…

Gold Regains Money Status

For one thing, Basel III also stipulates that a bank's Tier 1 holdings must rise from 4% of assets to 6%.

That means that banks may not only replace a portion of their existing paper with bullion, but may use it to meet some of the extra 2% as well.

In addition, this vote of confidence from the highest monetary authorities gives further impetus to the remonetization of gold.

In essence, what's happening is that from now on gold will be considered "money" in virtually the same way as cash or bonds.

And banks will be given the choice between holding more of their core assets in history's most reliable store of value vs. paper backed by nothing more than the promises of increasingly wasteful governments.

Finally, there is the impact on individual and institutional investors.

Jeff Clark, in Casey Research's BIG GOLD newsletter, has been guiding gold investors for years. In his view, this news looks set to really shake up the gold market, because as regulators and banks increasingly view gold as having safety on a par with the various paper alternatives, it is logical that they will also see the need to beef up their own holdings.

There are a number of positives for gold going forward.

Though it remains speculation on our part, we believe that the net result of Basel III and associated adjustments to US regulations will be an increased recognition of gold's safe-haven status across all markets.

And that translates into higher global demand for the metal next year, and a concomitant increase in its price.

If you haven't done so already, it's time to get informed on gold and begin adding it to your portfolio.

Regards,

Doug Hornig
for The Daily Reckoning

Gold Just Became Money Again originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. ".

Under-The-Counter Coup D’etat

Posted: 12 Sep 2012 12:23 PM PDT

September 12, 2012

  • China at its most fragile since Tiananmen Square? World elites warned of "revolution"…
  • "What, me worry?" Pentagon channels Alfred E. Neuman in assessing whether China might dump its U.S. Treasuries
  • "You have to write positive reports or you get arrested": Chris Mayer with an alarming new episode in the Chinese stock fraud scandals
  • Court rules, traders yawn… How the ethanol rip-off is reaching new heights… Reader inquiries about gold overseas… and more!

  "We shouldn't be afraid of China's success," says Dr. Cheng Li. "We should be much more worried about China's failure."

The headlines from China this week are all about the disappearance of a man named Xi Jinping. He hasn't been seen in public all month — a bit odd for someone who is supposed to ascend to the Chinese presidency next month. The official story is he hurt his back while swimming.

The intrigue may belie something far more serious in the estimation of Dr. Cheng: A revolution in the country that's America's biggest foreign creditor.

While the financial media fritter away precious airtime and bandwidth today speculating about the outcome of the Federal Reserve meeting in Washington, D.C., we figure we should make the most of your 5 Mins. and examine something big that's flying under the radar. Here goes…

  "The rifts within the upper echelons of Chinese Communist Party are worse than they were during the buildup to Tiananmen Square," says Cheng, a China expert and research director of the Brookings Institution.

Cheng shared his thoughts last week at an elites-only event called the Ambrosetti Forum, held each year on the shores of Lake Como in Italy. His remarks got scant attention, other than from Ambrose Evans-Pritchard of the U.K. Telegraph.

All the talk of a "hard landing" in China? Irrelevant unless viewed in a political context. "You cannot forecast the Chinese economy unless you have a sophisticated view of the political landscape and the current succession crisis," said Dr. Cheng.

"All the top officials are trying to get their money out of the country," he added. "This level of corruption is unprecedented in the history of China and unparalleled in the world."

And this man works in Washington!

Cheng isn't the only one fearing revolution: Chinese Premier Wen Jiabao seconds Cheng's concerns. Without successful political structural reform, he told the National People's Congress this year, "the new problems that have cropped up in China's society will not be fundamentally resolved, and such historical tragedies as the Cultural Revolution may happen again."

Scholars estimate up to 1.5 million people were killed during the decade-long Cultural Revolution. Something to bear in mind if you're planning a trip to Beijing…

  "China has few attractive options," says a Pentagon report, "for investing the bulk of its large foreign exchange holdings out of the U.S. Treasury securities."

The Defense Department has issued its first-ever "threat assessment" analyzing the $1.164 trillion in U.S. Treasuries held by China, and the possibility Beijing would "suddenly and significantly" dump its holdings.

Conclusion: The scenario poses no national security threat. It "would have limited effect and likely do more harm to China than to the United States." Indeed, such a move "would fundamentally change the international finance and business community's perception of China as a reliable and respected economic and financial partner."

Note: Congress ordered up this report. Dare we suggest it might have been tailored to its target audience of professional spendthrifts looking for an excuse to justify their endless borrowing?

  Note well: China is loading up on gold at a much faster clip than it's accumulating Treasuries.

Chinese imports of gold via Hong Kong totaled 75.8 metric tons in July – up 12% month-over-month and nearly double year-over-year. The monthly chart continues to astound…

Zero Hedge helpfully reminds us that China added $12.4 billion to its stash of Treasuries during the first half of 2012… compared with $25 billion worth of gold imports over the same time span: "For the first time in history, China has imported twice as much gold as it has 'imported' U.S. Treasuries."

In that context, it's worth revisiting a State Department cable released a year ago this week by WikiLeaks, quoting from Chinese media:

"The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or euro.

"Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."

Meanwhile, the Pentagon and the pundits act as if gold is a mythological creature, reserved only for the childish minds of cockeyed eccentrics.

Peering back through the Pentagon's report, China does have one "attractive option" aside from U.S. debt. And a trillion dollars could buy a whole lot of it.

130  "Cash Squeeze Tightens Abroad Sections of China," one headline reads this week. "Fragile China," another says.

The Financial Times reports that a third of publicly traded Chinese companies reported cash outflows for the second quarter.

"Local governments have amassed piles of debt," Chris Mayer writes, keeping the China dart flying. "The FT says these debts represent one-quarter of Chinese output. Yet China continues to announce ambitious plans to build railways and highways.

"But one of the most-damning things I've come across on China hit my desk over the weekend."

Chris encountered the story of a "researcher in China whom police arrested — and detained — because he works for a fund manager who writes negative reports on Chinese companies. (The researcher is a Canadian citizen, by the way, yet sits in a Chinese jail on flimsy evidence and no due process whatsoever. I can't believe the Canadian government lets that stand.)"

The gentleman appeared to cross the line by taking shots at Silvercorp Metals — which is traded on the New York Stock Exchange.

  "Chinese companies have had lots of fraud issues, as you may know," Chris goes on. "Investors have uncovered discrepancies and outright frauds in U.S.-listed Chinese companies. This sent the stock of many such companies tumbling.

"This in turn, hurt these companies' ability to tap Western markets for more money, which hurts their ability to pay local taxes. And that hurts the local governments who labor under a pile of debt. It's all an ugly, corrupt circle."

What can we learn from this? "If you are in China," Chris writes, "you have to write positive reports or you get arrested. That's the message here. There is no respect for independent research in China. There is no value on transparency. In fact, the organs of the state work against such things.

"So in a reversal of my normal preference for 'boots on the ground' research, I say you can't trust anything coming out of China. Oh, and if you own Silvercorp, dump it. Avoid China as a general rule.

"Of course, this has broader implications, as we've talked about before, especially for commodity markets (because China is such a large consumer of commodities). If the Chinese market is really propped up by government stimulus, then commodity markets are too.

"This warning does not apply to precious metals," Chris concludes, "which I think are moving higher."

  Stocks are flat today — the blue chips up a bit, small caps down a bit.

Traders could barely rouse themselves to react to a breathlessly anticipated court ruling from Germany. The nation's highest court refused to block German participation in the eurozone's permanent bailout fund. It's full speed ahead for the bailouts of debt-ridden eurozone countries.

  You might think this blessing for new money printing would put the hurt on the euro this morning… and you would be wrong.

At last check, the euro is up to $1.2905. That's pushed the dollar index decisively below 80 for the first time in four months.

 Gold is treading water today at $1,732. Silver, however, is backing off a bit — currently at $33.05.

  "Corn prices are officially through the roof," writes Laissez Faire Today's Jeffrey Tucker, "spiking to record highs.

"The implications are quite radical, especially given the food price riots around the world last time this happened. Everyone blames the drought," Jeffrey observes, "as if the market can't normally handle a supply change.

"The real problem," he goes on, "is that the corn market is fundamentally misshaped by government interventions that have made a mess of this and many more markets. The distortions are never contained, but spread and spread.

"Corn is the single most important commodity for retail food," Richard Volpe, an economist for the USDA told the Los Angeles Times. "Corn is either directly or indirectly in about three-quarters of all food consumers buy.

"Fine, then, answer me this, Mr. Government Economist Man," Jeffrey scoffs. "Why is 40% of the corn crop being burned up in our gas tanks?"

Unfortunately, they're both right. Corn is now in three out of four food products, fueling obesity's 300% jump since 1970 by jacking up Americans on high-fructose corn syrup. Meanwhile, each year we make ethanol out of enough corn to fatten up more than 400 million more people for an entire year.

All the while, by one estimate, ethanol consumes six times more energy than it produces. It clogs up your gas tank with continued use. And if greenhouse gases are a concern for you, ethanol generates twice the emissions of plain ol' gasoline.

[Infographic excerpt from LearnStuff.com]

The question: Why is corn being used as fuel if it's so inefficient, costly and bad for the environment? "The answer is a Soviet-like, stupid-like government mandate," Jeffrey responds, clearly bitter about the issue.

"It is actually relatively new," Jeffrey explains. "It came about in 2005 and 2007. It mixes nearly all the gas we can buy with a sticky product now in rather short supply.

"Of all the government regulations I've looked at in detail over the last 10 years, the ethanol mandate is, by far, the worst. There are no grounds on which it is defensible," Jeffrey concludes. "None!" There is, however, a workaround: Check out Jeffrey's essay in full.

"What's the point of storing your gold where the feds can't get it?" writes a reader after the subject of overseas gold storage came up on Monday.

"Once any sort of confiscation happens, how do you think you are going to be able to access the wealth you have stored in any way that the 'feds' won't be able to intercept?"

The 5: Daily Reckoning contributor Terry Coxon tackled this one a few months back: We won't fix it if it ain't broke.

"A new attack on gold ownership probably wouldn't be a point-for-point reenactment of 1933," he writes. "There are many weapons for mugging gold investors. It could be a prohibition on gold ownership coupled with a prohibition on sales of gold to foreigners. The only one left to buy would be the government, and being the only bidder, it would be a very low bidder.

"It could be a commandeering of privately owned gold," he continues, "with token compensation like the $15 per day paid for jury duty. It could be a super tax, say 90%, on gold profits, which would get the job done slowly… or quickly if it were accompanied by a mark-to-market rule. Or it could be something none of us has thought of yet.

"Owners of gold stored outside the U.S. would be a minority of a minority. Their gold wouldn't be the low-hanging fruit — it would be higher up in the tree and more trouble to get to. That's why, in a casino sense, gold overseas is a different bet and a better bet than gold at home."

"Would PHYS be a better vehicle for buying gold than GLD for the express purpose of keeping it out of the U.S.?" asks one reader looking for a safety zone.

"PHYS holds physical gold (no contracts), and it is sitting in vaults in Canada — not in the U.S.

I'm guessing it's not totally safe from a U.S. government snatch-and-grab, per se — since we are on such good terms with Canada, they'd likely roll over and give to it Uncle Sam if he asked — but are there any advantages that we would have with PHYS in this situation?"

The 5: We like PHYS if you insist on an exchange-traded product… for the reasons you cite. We like, well, physical metal even better. And among the bewildering array of bullion sources, we especially like the Hard Assets Alliance. We've known the folks there for years, and they've lined up an impressive list of locations where you can have them store your gold (or silver or platinum or palladium.)

While we believe that PHYS hit the nail on the head for backing it up with real, hard assets, we still believe Hard Assets Alliance takes the cake. Unlike PHYS, with Hard Assets Alliance, you have a growing list of countries to have your gold stored in for you. For more information, click the link and it'll tell you everything you need to know. To learn more about the unique advantages of the Hard Assets Alliance, check this out. Please note we may be compensated once you fund your account… but we wouldn't bring the opportunity to your attention if we didn't believe in it.

Cheers,

Dave Gonigam

The 5 Min. Forecast

P.S. Treasuries are taking a hit this week; the yield on the 10-year note is up to nearly 1.75%. That's great news for readers of Options Hotline: Their bearish bond market play is up 19% in only two days.

In the seven weeks since editor Steve Sarnoff began putting out explicit sell alerts, he's recommended six sells for an average 70% gain, in a holding time of only 21 days.

Don't feel bad if you missed out. As Steve says, "There's always opportunity in options." His next recommendation comes this Sunday.

Bonanza Discoveries That Will Drive Gold Stocks: Eric Coffin

Posted: 12 Sep 2012 12:22 PM PDT

The Gold Report: Eric, why is there a bear market for metal mining companies in a season of bulls? Eric Coffin: Post-recession, there was a good bounce for commodity stocks. Two problems have slowed things down during the last year. One was fear of the fiscal cliff as the politicians in Washington argued about raising the debt ceiling. Banks were blowing up in Europe. Most important, weakening numbers out of China scared off a lot of investors, particularly from the base metals. There are simply a lot of people concerned about the economy in general, and, specifically, the growth economies where metals are keys to industrial development. On the gold and silver side, the real issue is that gold is over $1,700/ounce (oz) and silver is now over $30/oz. It sounds as if I'm being ironic, but I'm not. At the start of this major cycle, gold prices were $300/oz. It was not the price-earnings (P/E) ratio that was determining the value of a lot of mining companies, it was the P/E ratio plus a...


Rob McEwen: Gold Should be in Your Portfolio...and It's Going to $5,000

Posted: 12 Sep 2012 12:09 PM PDT

"It was more than obvious [at least to me] that a heavy hand showed up in these markets at, or just before, the London p.m. gold fix" ...


Felix Moreno de la Cova: Golden stability vs. fiat chaos

Posted: 12 Sep 2012 11:54 AM PDT

1:50p ET Wednesday, September 12, 2012

Dear Friend of GATA and Gold:

Writing at GodMoney, economics student Felix Moreno de la Cova begins setting out the arguments for gold's superiority as money over fiat money. He writes:

"Gold is a finite and scarce element. There is a limited amount and it is costly and difficult to extract. Gold production typically adds 1-2 percent annually to the existing gold stock. Even in the largest gold rushes, such as mid-19th-century California, global gold production never exceeded an annual range of 3-4 percent.

"In contrast, the fiat electronic dollar can be created out of thin air in unlimited quantities and at almost infinite speed. Electronic dollars can be destroyed just as fast. There are no physical, logistical, real-world limits to how fast or how many dollars can be created. So even before policy, political will, and central bankers' whims are considered, the reality is that the money supply has the potential to expand much more rapidly under a pure fiat currency system."

Which is why, of course, governments have been so determined to control the price of gold by both open and surreptitious means, lest more attention be called to the arbitrariness and indeed the potential nothingness of fiat money.

De la Cova's commentary, "Golden Stability vs. Fiat Chaos," is posted at the GoldMoney Research page here:

http://www.goldmoney.com/gold-research/felix-moreno-de-la-cova/golden-st...

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

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Prophecy Platinum Intercepts Best Pt+Pd+Au Grades Yet
at Wellgreen Project in Yukon Territory: 5.36 g/t

Company Press Release
Tuesday, September 11, 2012

VANCOUVER, British Columbia -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) announces more results of its 2012 drill program on the company's fully-owned Wellgreen platinum group metals, nickel, and copper project in southwestern Yukon Territory, Canada. Four surface holes and four underground holes all intercepted significant mineralized widths, ranging from 28.5 meters (WS12-201) and up to 459.5 metres (WS12-193). Highlights include WU12-540, which returned 8.9 metres of 5.36 grams per tonne platinum, palladium, and gold; 1.73 percent copper; and 1.01 percent nickel within 304.5 meters of 0.66 g/t platinum-palladium-gold, 0.20 percent copper, and 0.27 percent nickel.

The surface drill program started in June and has completed 16 holes (assays pending for 12 holes) with two rigs now on site. The surface program continues to progress at a steady pace.

Prophecy Chairman John Lee commented: "Wellgreen is a very large nickel, copper, and platinum group metals project with near-surface high-grade zones. High-grade intercepts will be incorporated into resource modeling and mine planning in the pre-feasibility study. We expect further positive drill results from Wellgreen shortly."

Wellgreen features a low 2.59-to-1 strip ratio, is situated at an altitude of 1,300 meters, and is only 15 kilometers from the two-lane paved Alaska Highway. Those factors significantly minimize the project's indirect costs.

For the complete company statement with full tabulation of the drilling results, please visit:

http://prophecyplat.com/news_2012_sep11_prophecy_platinum_drill_results....


Join GATA here:

Toronto Resource Investment Conference
Thursday-Friday, September 27-28, 2012
Toronto Sheraton Centre Hotel
Toronto, Ontario, Canada
http://www.cambridgehouse.com/event/toronto-resource-investment-conferen...

New Orleans Investment Conference
Wednesday-Saturday, October 24-27, 2012
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
http://www.neworleansconference.com/

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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:

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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:

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GoldMoney adds Toronto vaulting option


In addition to its precious metals storage facilities in Hong Kong, Switzerland, and the United Kingdom, GoldMoney customers now can store their gold and silver in a high-security vault operated by Brink's in Toronto, Ontario, Canada.

GoldMoney also has recently partnered with Rhenus Freight Logistics to offer another gold storage option in Switzerland. The Rhenus vault is in the secured zone of Zurich Airport and offers customers superb security as well as the ability to inspect their gold.

Storage at the new vaults in Canada and Switzerland is available at GoldMoney's lowest fees. Customers can select their storage location when placing their buy order.

GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults.

It's easy to open an account, add funds, and liquidate your investment. For more information, visit:

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MF Global On Steroids

Posted: 12 Sep 2012 11:46 AM PDT

There is no way over, under, around or through the fact that no progress will be made as long as the world is divided up between the rulers and the ruled and the ruled accept their lot...There has never been any shortage of those who want to rule. The problem has always been with the vast majority who are content to be ruled. Today's global outcry for the manufacturing of more and more "money" out of thin air is an eloquent testimony. It shows that most people have no understanding of freedom, markets or money. Lacking such understanding - and having no desire to gain it - most people have accepted government as their masters.  - Bill Buckler, The Privateer
Before I get to the subject of the title, I wanted to just say that it's spiritually rewarding for me to make an assertion about something and then to be rewarded by being right once all the facts come out.  Last week Henry Blodget, unconvicted violator of securities laws, tried to pump up Facebook stock by saying that the Company's decision to buyout and retire employee stock at $19/share that was held back from the IPO was a stock buyback and signaled to the market that the stock was cheap.  I immediately called b.s. on that and suggested that it was nothing more than a disguised form of required W2 compensation tax-withholding: LINK

Turns out I was right and Blodget once again revealed his true nature as corrupt pump-n-dump stock analyst.  You can read about the details here:  LINK  In brief, FB's little manipulative maneuver there represents a required 45% State and Federal tax withholding on employee compensation that took the form of restricted stock units rather than a standard paycheck.  Henry, veritas liberabit vos, the truth will set you free...

 With regard to my title, Bloomberg published an article Sunday night which described the new Wall Street gimmick called "collateral transformation:"  LINK  A big problem in the financial markets in Europe and in the U.S. is the scarcity of high quality "collateral" that can be used as margin "equity" against derivatives positions.  For the average retail brokerage customer, collateral is in the form of cash or a percentage of the value of stocks held in an account.  There are very strict regulations in place and actually enforced with retail broker accounts.

 It's a whole different ballgame when it comes to multi-billion dollar bank repo transactions and multi, multi-billion dollar OTC derivatives transactions.  With repos, which give large banks short term liquidity funding, banks originally had to post Treasuries as collateral. Same with OTC derivatives. Over time, because of the growing demand and scarcity of Treasuries and Euro-sovereign bonds due to the growth in OTC derivatives and expansion of repo programs,  the Fed and ECB began to allow "lower quality" forms of collateral like mortgage-backed securities.  In fact, the ECB now allows an even wider basket of collateral.  And of course, now the Central Banks and clearing houses allow the use of gold as collateral.

 But the market continues to be hampered by a lack of collateral.  And if banks and big investors can't post collateral for margin calls, the whole global Ponzi house of cards will collapse.  In order to address this, Wall Street had to figure out a way to repackage crap assets so they could be utilized as collateral that could be posted against extremely risky OTC derivatives positions. Ergo, "collateral transformation."  Just let that term roll around your tongue and the right side of your brain for a few moments.  It's such a grandiose and exalting term.  Like, the geniuses on Wall Street are going to metamorphize good collateral out of bad.

 The way it works is that "collateral transformation" desks at the big bank will take crappy assets from big investors who are required to post more collateral against losing derivatives positions and exchange them for Treasuries.  The crap assets will be assessed some kind of discounted value, so if you need $100 million in Treasuries to post as collateral, you might have to come up with $120 million of "assessed" value in the crap assets.  Does this sound at all familiar?  Hint: AIG, Bear Stearns, Lehman, etc.   

 In reality, "collateral transformation" is just fancy name for hypothecation.  In other words the big Wall Street banks will find Treasury bonds that can be posted as collateral and charge the counterparty a nice fee for this.  Theoretically the Treasuries can't come from customer accounts, but we saw with MF Global just how rigid this law turned out to be.  This is adding another layer of hypothecation in the financial market Ponzi scheme, only the collateral being posted to "back" the hypothecated Treasuries will crater in value in a bad market and there will be massive losses.  The fact is, Wall Street has taken the MF Global/JP Morgan model for collateral posting and injected it with steroids.  You can thank the Obama Government for enabling and allowing this.

One last point, if you read through the Bloomberg report, you'll note that Calpers (the California public pension management firm) has $224 billion under management, of which $30 billion is in the form of OTC derivatives.  I'm not really sure why Calpers has OTC derivatives in its pension portfolios, but OTC derivatives are completely inappropriate and unsuitable for pension funds.  I would be terrified if I were a Calpers pension fund stakeholder.  That aside, Calpers proudly announced that it will side-step the costs of "collateral transformation" by using Treasuries from its own in-house portfolios.  Again, this is a horrifying idea.   To play this out:  let's say you have your money in a Calpers Treasury fund;  Calpers needs to post more collateral against a losing OTC derivatives position in one of its super-duper high risk/high return funds;  Calpers will take Treasuries from your fund (hypothecate them) and use them as collateral for the other fund;  if the OTC derivative blow up, the counter-party to the trade keeps the Treasuries and your Treasury fund loses the Treasuries.

Now, this is an example in isolation, and ultimately if it were only on instance, the super-duper fund would have to compensate the Treasury fund for the loss.  But OTC derivatives blow-ups don't happen in isolation.  There is a very high degree of systemic correlation and the blow up in the Calpers trade will likely be accompanied by a daisy-chain of similar trades blowing up system-wide.  And then we have what happened in 2008 x 10...

Collateral transformation....remember portfolio insurance in the mid 1980's?  Remember the "flawless" derivatives hedging utilized by Long Term Capital in 1998?   The housing bubble/OTC derivatives bust in 2008?  These financial market disasters continue unabated and get worse successively.  "Collateral transformation" - I wonder when the "I can turn lead into gold" myth will be revived....
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