saveyourassetsfirst3

ECB Needs To Rescue German And French Banks More Than European Periphery
Will Silver See a Major Supply Squeeze and Massive Price Increase?
Iraq issues arrest warrant for ex-central bank chief, other officials
Best Doug Casey Speech Ever! An Anarchist, Economic Collapse & 7 Billion Chimpanzees
Everything’s Down But Treasuries and Gold Stocks?
Gold's New Battle With $1,764
Bullions Final Leg Down in Progress
Links for 2012-10-19 [del.icio.us]
EU Leaders Agree on Bank Supervisor
Dollar Index Disguises Global Inflation Threat
The World Gold Council Publishes Gold’s Q3 Summary
By the Numbers for the Week Ending October 19
Gold and Silver Disaggregated COT Report (DCOT) for October 19
Read carefully, Sinclairs post.....
Gold’s Fall Blamed On “Speculative Sellers”, European Politicians “Papering Over Differences”
Tights, Timing and Stop Losses
Gold's Fall Blamed on Speculative Sellers
Bill Murphy: Explosive Moves Coming In Gold?
A Pre-Election Precious Metal Price Cleanse

ECB Needs To Rescue German And French Banks More Than European Periphery

Posted: 20 Oct 2012 06:23 AM PDT

Whenever we talk about rescuing overleveraged Europe, it is always about Spain, Italy, Portugal, Ireland, and Greece - the European periphery loaded with debt that they cannot possibly repay.

But a closer look at the recent IMF data reveals that German and French banks need rescue more than anybody (Global Financial Stability Report, IMF October 2012 table 2.1).

The German and French banks' leverage is in excess of 40 to 1, i.e. for every 40 dollars or so of tangible assets, they hold only one dollar of tangible equity as the graph shows:

Even a small loss can wipe out all equity of these highly geared banks.

Such high leverage was evident only at some of the most troubled US banks during the Global Financial Crisis. The US banks have now reduced their leverage to more reasonable 14 times. Portuguese, Spanish and Italian banks' leverages hover around 20 times, while

Complete Story »

Will Silver See a Major Supply Squeeze and Massive Price Increase?

Posted: 20 Oct 2012 06:09 AM PDT

Author:

Ed Steer

Yesterday in Gold and Silver

Ed_GSD

October 20, 2012 2:09pm GMT

With a quiet Friday volume backdrop...and a slowly but steadily rising dollar index...I guess it should have been expected that the gold price would slowly lower during Far East and London trading.

But by the 8:20 a.m. Eastern Comex open, the gold price was only down about seven bucks from Thursday's close. Friday's New York 'high' came about an hour later...$1,739.60 spot...and was only a couple of bucks lower than Thursday's close.

Then, with 100% of the Friday's dollar index rally already factored into the PM prices, the engineered price decline began...and thirty minutes later the low of the day [$1,714.20 spot] was in. As I love to say at moments such as this, it was sooooo obvious, that even Stevie Wonder could see it.

The gold price recovered a bit from there...and that rally lasted until the 1:30 p.m. Comex close...and from that point it traded sideways as traders headed out the door for the weekend.

Gold closed the day at $1,720.50 spot...down $21.10 from Thursday's close. Volume [about 175,000 contracts] was not as heavy as one would expect, especially considering that this price decline took gold below its 50-day moving average for a few minutes. The reason I'm dwelling on this, is that we had a $16.90 decline in gold on Monday...and volume that day was 189,000 contracts. Very strange.

As usual, the silver price was much more 'volatile'...but the general price path was mostly the same...and the price action in New York was almost identical to the price action in gold during that time period. Silver had an intraday price move of over a dollar...and the absolute low of $31.83 spot came around 12:20 p.m. Eastern.

From that point, there was a tiny rally into the close of Comex trading...and the silver price didn't do much going into the 5:15 p.m. electronic close.

Silver finished down 75 cents, but volume was only 51,000 contracts.

The dollar index opened the day at 79.34...and then traded sideways until 2:00 p.m. Hong Kong time...7:00 a.m. in London. A tiny rally began, which picked up steam at 9:30 a.m. in New York...and was all done by a few minutes after 11:00 a.m. Eastern. From there it traded almost ruler flat into the 5:00 p.m. electronic close. The index finished at 79.63...up about 29 basis points.

It nearly goes without saying that the big price declines in gold and silver had zero to do with the any currency movements yesterday. Both metals refused to decline in price during the New York trading session...and had to be shoved. Platinum and palladium prices had already begun to fall many hours earlier but, for whatever reason, gold and silver did not.

The gold stocks opened down a bit, but made an immediate attempt to rally, despite the fact there was considerable weakness in the equity markets. The stocks broke slightly into positive territory shortly after 10:00 a.m. in New York...and then headed lower...with the low tick coming just a few minutes before noon...gold's low tick of the day.

Then away they went to the upside...and by early afternoon were solidly in positive territory...where they stayed for most of the rest of the Friday trading day. The HUI closed up 0.28%...which I found astonishing...especially in light of what happened to the gold price in particular...and the equity markets in general.

Not only that, there was no sign whatsoever in the HUI chart of the big waterfall decline in the gold price that occurred between 11:25 and 11:55 a.m. Amazing!

The silver stocks finished mixed...another big surprise...and Nick Laird's Silver Sentiment Index closed down only 0.33%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 51 gold and 7 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday. The link to that activity, such as it was, is linked here.

There was a smallish increase of 9,692 troy ounce in GLD...and no reported changes in SLV.

The U.S Mint had a sales report on Friday. They sold 10,000 ounces of gold eagles...and 198,500 silver eagles. Month-to-date the U.S. Mint has sold 41,000 ounce of gold eagles...7,500 one-ounce 24K gold buffaloes...and 2,016,500 silver eagles. Based on these sales numbers, the silver/gold sales ratio is just over 42 to 1 as of the end of the week.

Over at the Comex-approved depositories on Thursday, they reported receiving 1,229,498 troy ounces of silver...and shipped only 195,008 ounces of the stuff out the door. Half of the silver received ended up in the JPMorgan Chase depository, which now sits at 24.81 million ounces. The link to that activity is here.

The Commitment of Traders Report wasn't quite what I was expecting...at least in silver.

What the COT numbers showed in silver was virtually no change in the Commercial net short position. I found this rather surprising for two reasons. The first was that during the reporting week, the silver price declined by a dollar...and second, the Commercial net short position in gold fell by a rather substantial amount. If you're looking for an answer why that is the case, I don't have one...and neither did Ted...at least an answer that satisfied me. So I'll be looking forward what he has to say about it in his weekend review to his paying subscribers later today.

The Commercial net short position in silver sits at 57,094 contracts, or 285.5 million ounces.

On a net basis the 'Big 4' traders, who I now believe to be JPMorgan Chase, the Bank of Nova Scotia, HSBC USA...and Citigroup, are short more than 44% of the entire Comex futures market in silver. But JPM and the Bank of Nova Scotia account for 90% of that short position, so HSBC and Citi each hold only tiny positions. Collectively, they are short 248.9 million ounces of silver, which represents a bit over 87% of the entire Commercial net short position....and the numbers in this paragraph are minimum numbers. I'm using the legacy COT report...and Ted uses the disaggregated report. That report shows more spread trades than the legacy report. Ted subtracts those as well, and that always ups the concentration level.

The '5 through 8' largest silver shorts are short an additional 8.6 percentage points of the Comex futures market. Add that on to more than 44% that the 'Big 4' are short...that makes the 'Big 8' short over 53% of the entire Comex futures market in silver.

And according to the charts from reader EWF, the raptors [all Commercial traders excluding the Big 8] only hold a tiny long position in silver...and the '5 through 8' traders added a small amount to their short position during the reporting week.

But by far the biggest hogs at the trough are JPMorgan Chase and Scotia Mocatta...and what they decide, will determine where silver prices go from here.

In gold, which fell less than $50 during the reporting week, the Commercial net short position dropped by a very chunky 19,605 contracts, or 1.96 million ounces...and is now down to 24.74 million ounces.

On a net basis the 'Big 4' traders are short 35.8% of the Comex futures market in gold...and the '5 through 8' traders are short an additional 14.1 percentage points. So the 'Big 8' are short 49.9% of the entire Comex futures market in gold...and using the numbers from the disaggregated COT report will put these eight trader over the 50% mark.

You can bet your last nickel that virtually every one of the 'Big 8' shorts in silver are the same LBMA market making members as the 'Big 8' shorts in gold...and they all work together to 'make' the market'...with the raptors riding along on their coat tails.

Here, in graphic form, are the short positions of the 'Big 4' and 'Big 8' as shown in days of world production needed to cover their respective short positions in all physical commodities traded on the Comex. The chart tells all. As always, I thank Nick Laird for providing it.

(Click on image to enlarge)

Without doubt, the Commitment of Traders report would show much more improvement in gold and silver's Commercial net short positions if it was calculated as of the close of business yesterday...but that data won't be available until next Friday's report.

Since the 20th of the month fell on a Saturday in October, The Central Bank of the Russian Federation updated their website with their September data. I must admit that I was disappointed to see that, officially, they didn't add to their gold reserves during that month. Maybe they're keeping their gold accumulation quiet, like China does. Anyway, here's Nick Laird's updated chart.

(Click on image to enlarge)

Here's another chart courtesy of Washington state reader S.A. This one is self-explanatory.

(Click on image to enlarge)

My daughter Kathleen sent me this too-cute-for-words photo of Mrs. Otter and one of her newborns the other day...which I thought was worth sharing.

Since this is my Saturday column, I get to empty out my in-box...and that's precisely what I plan on doing. I hope you can find the time over the weekend to read what interests you the most.

The monstrous and grotesque short positions held by the 'Big 4' traders are mostly still intact in both silver and gold.

A Golden Solution for Europe's Sovereign-Debt Crisis. Addison Wiggin: China And The Recipe For $12,000 Gold. Nugget photo excites Goldfields prospectors...and it will excite you too, dear reader!

Critical Reads

Meredith Whitney: Nobody Can Fix Citi — The Incredible Shrinking Bank

Ed_GSD

October 20, 2012 2:09pm GMT

Citigroup released its third-quarter earnings on Monday, and Pandit quit on Tuesday, and though the bank said his departure was voluntary, the timing has raised red flags.

Pandit reportedly clashed with the bank's board over strategy and operational issues. John Havens, the bank's chief operating officer, stepped down as well.

"Citigroup is 'the incredible shrinking bank,' and the least interest of the big four, in our opinion," Whitney wrote in a note, according to The Wall Street Journal.

"No CEO will be able to change these facts in the near term. It appears the board feels the same way, as they have appointed an unknown to the outside to the new CEO position, Mike Corbat."

This story showed up on the moneynews.com Internet site early on Thursday afternoon...and I thank West Virginia reader Elliot Simon for our first story of the day. The link is here.

Jamie Dimon: I Will 'Do Whatever it Takes' to Press for Fiscal-Cliff Solution

Ed_GSD

October 20, 2012 2:09pm GMT

Thursday, 15 members of The Financial Services Forum, a non-partisan financial and economic policy organization comprising the CEOs of 20 of the largest and most diversified financial services institutions doing business in the United States, sent a letter to President Barack Obama and Congress warning that interest rates could spike significantly if policymakers do not agree to stop the series of automatic tax cuts and spending hikes and replace them with a long-term plan to tame federal debt.

"The consequences of inaction — for stability in global financial markets, for economic growth, for millions of Americans still without work and for the financial circumstances of American businesses and households — would be very grave," the letter stated.

"But merely avoiding the fiscal cliff is not enough. We further urge you and your colleagues to enact legislation that truly restores the nation's long-term fiscal soundness."

This is the second story in a row from the moneynews.com website...and the second offering in a row from Elliot Simon. The link is here.

Welfare spending jumps 32% during Obama's presidency

Ed_GSD

October 20, 2012 2:09pm GMT

Federal welfare spending has grown by 32 percent over the past four years, fattened by President Obama's stimulus spending and swelled by a growing number of Americans whose recession-depleted incomes now qualify them for public assistance, according to numbers released Thursday.

Federal spending on more than 80 low-income assistance programs reached $746 billion in 2011, and state spending on those programs brought the total to $1.03 trillion, according to figures from the Congressional Research Service and the Senate Budget Committee.

That makes welfare the single biggest chunk of federal spending — topping Social Security and basic defense spending.

This story showed up on The Washington Times Internet site on Thursday...and I plucked it from the Friday edition of the King Report. The link is here.

Doug Noland: The Crash of '87...25th Anniversary

Ed_GSD

October 20, 2012 2:09pm GMT

The Fed's statement on October 20, 1987 commenced 25 years of serial (and escalating) booms and busts around the world. We're nowadays in the midst of "melt-up" Credit debasement, a "blow-off" top in global speculative excess, and complete policy capitulation in hope of holding the downside of the global Credit cycle at bay. For a few years now, I've referred to the "global government finance Bubble" as the granddaddy of them all. What started as excesses at the fringes of U.S. bank and junk bond finance back in the late-eighties eventually made its way to terminally infect Treasury and related debt at the core of our entire monetary system. Global excesses, having fueled precarious Bubbles in Japan, SE Asia, Europe and the emerging economies over the years, afflicted China with its estimated population of 1.3 billion. Today's historic Bubble phase risks the loss of market trust in sovereign debt. The current global "inflationist" policy regime risks being completely discredited. And the historic Chinese Bubble risks a precarious post-Bubble day of reckoning.

Unlike the 80's and 90's, there's no longer any attempt at a coordinated strategy to deal with global excesses and imbalances. Policymakers have thrown in the towel - and these days have no strategy beyond reflation and Bubble perpetuation. U.S. policymakers pay little more than lip service to incredible federal deficits. This, however, is actually more than is paid to the massive Current Account Deficits that have been the root cause of now deep structural global imbalances and economic impairment. More than 25 years later, our nation's policy prescription for unmatched global imbalances is even looser monetary policy and added stimulus for all nations, everywhere, all the time.

As always, Doug Noland's Credit Bubble Bulletin is a must read...and this one is no exception, as it shows how we got to where we are today in twenty-five years or less. The link is here.

Martin Sheen and Woody Harrelson set for 9/11 'truther' film September Morn

Ed_GSD

October 20, 2012 2:09pm GMT

Hollywood is to court controversy with a film that will challenge the official version of the events of 9/11, a previously taboo topic for the industry mainstream. Martin Sheen, Woody Harrelson and Ed Asner, who have all supported conspiracy theories about the terrorist attacks, have signed up to the movie, which is entitled September Morn.

Styling itself as a drama in the tradition of Twelve Angry Men, the film's advance publicity note hints at a cover-up, saying: "We the people demand that the government revisit and initiates a thorough and independent investigation to the tragic events of 9/11."

Details of the film, which is to be directed by BJ Davis and written by Howard Cohen, are expected to be revealed at an American Film Market conference in Los Angeles next week.

This story showed up on Wednesday on the guardian.co.uk Internet site of all places...and I thank reader 'David in California' for sending it. It's worth reading...and the link is here.

Best Doug Casey Speech Ever! An Anarchist, Economic Collapse & 7 Billion Chimpanzees

Ed_GSD

October 20, 2012 2:09pm GMT

This is the 62-minute speech that Doug gave at Libertopia 2012 in San Diego last Saturday. I haven't had the time to listen to all of it and, like you, it will go on my 'ta do' list this weekend. It was posted over at the youtube.com Internet site on Monday...and the link is here.

Iraq issues arrest warrant for ex-central bank chief, other officials

Posted: 20 Oct 2012 06:09 AM PDT

Iraq issues arrest warrant for ex-central bank chief, other officials

Iraqi authorities issued arrest warrants for the former central bank chief and other bank officials after a probe into corruption, a spokesman for the high judicial council said on Friday.

Iraq's cabinet on Tuesday ousted director Sinan al-Shibabi over a parliamentary charges bank officials were abusing dollar sales. His dismissal will do little to ease investor worries the government is undermining the bank's autonomy.

Abdul-Sattar al-Birqdar, a spokesman for the judiciary council confirmed an arrest warrant issue was issued against Shibibi and some other officials. But he did not give any details about the charges they face.

Best Doug Casey Speech Ever! An Anarchist, Economic Collapse & 7 Billion Chimpanzees

Posted: 20 Oct 2012 06:09 AM PDT

Best Doug Casey Speech Ever! An Anarchist, Economic Collapse & 7 Billion Chimpanzees

Everything’s Down But Treasuries and Gold Stocks?

Posted: 20 Oct 2012 04:48 AM PDT

Gold's New Battle With $1,764

Posted: 20 Oct 2012 04:44 AM PDT

By Bruce Pile:

Back in February of this year, I wrote "The State of the Gold Bull and the $1764 Price" here at Seeking Alpha. It was an explanation of the significance of Gold at $1764 per the analysis of Jim Sinclair, thought by many to be the most accurate forecaster for gold on earth. This reputation is impressive as it spans not only the current bull market but the one in the '70s as well. To go over his remarkable calls of the past, you can peruse my February article. Here, I will just look at where we are now in Sinclair's amazing projection.

In the above article, I was anticipating a major resistance developing to block gold's rise at this critical swing point of $1764 because Sinclair had predicted just this development clear back in July, 2011 - way before gold had gone anywhere near this level! In my February article's

Complete Story »

Bullions Final Leg Down in Progress

Posted: 20 Oct 2012 12:15 AM PDT

Gold Scents

Links for 2012-10-19 [del.icio.us]

Posted: 20 Oct 2012 12:00 AM PDT

2012 Presidential Comedy Show | Gerald Celente Trends Blog
2012 Presidential Comedy Show
Financial Collapse 2013 ~ The End of The Bretton Woods System | Gerald Celente Trends Blog
Financial Collapse 2013 ~ The End of The Bretton Woods System
Financial Collapse 2013 ~ The End of The Bretton Woods System | Gerald Celente Trends Blog
Financial Collapse 2013 ~ The End of The Bretton Woods System
William Cooper Claimed Lindsey Williams Was A Freemason | Gerald Celente Trends Blog
William Cooper Claimed Lindsey Williams Was A Freemason
The CIA / Mormon Mafia & The October Surprise ~ Webster Tarpley | Gerald Celente Trends Blog
The CIA / Mormon Mafia & The October Surprise ~ Webster Tarpley
Money as Debt ~ The Rothschild Mafia Paul Grignon | Gerald Celente Trends Blog
Money as Debt ~ The Rothschild Mafia Paul Grignon
Money as Debt ~ The Rothschild Mafia Paul Grignon | Gerald Celente Trends Blog
Money as Debt ~ The Rothschild Mafia Paul Grignon
Money as Debt ~ The Rothschild Mafia Paul Grignon | Gerald Celente Trends Blog
Money as Debt ~ The Rothschild Mafia Paul Grignon
The Best way to exploit a Society is through a Monopoly ~ Monopoly Men | Gerald Celente Trends Blog
The Best way to exploit a Society is through a Monopoly ~ Monopoly Men
The Hidden World of the Knights Templar ~ Brian Allan & The Rosslyn Frequency | Gerald Celente Trends Blog
The Hidden World of the Knights Templar ~ Brian Allan & The Rosslyn Frequency

EU Leaders Agree on Bank Supervisor

Posted: 19 Oct 2012 11:59 PM PDT

gold.ie

Dollar Index Disguises Global Inflation Threat

Posted: 19 Oct 2012 11:02 PM PDT

USA Gold

The World Gold Council Publishes Gold’s Q3 Summary

Posted: 19 Oct 2012 09:35 PM PDT

By the Numbers for the Week Ending October 19

Posted: 19 Oct 2012 08:10 PM PDT

This week's closing table is just below.

If the image is too small click on it for a larger version.

Gold and Silver Disaggregated COT Report (DCOT) for October 19

Posted: 19 Oct 2012 04:59 PM PDT

Time is short to register for New Orleans. Details below.

HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below.

(DCOT Table for Friday, October 19, 2012, for data as of the close on Tuesday, October 16. Source CFTC for COT data, Cash Market for gold and silver.)

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

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

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (by 18:00 ET).

On another note we are looking forward to speaking again this year at Brien Lundin's fabulous New Orleans Investment Conference (NOIC) next week. For those of you who have had the pleasure of attending past NOIC's we need not tell you what a superb conference it is. In our own view, the annual NOIC confab is the one can't miss conference of the year.

We don't know how he does it, but Brien manages each year to bring in top financial and resource-related talent. The world is facing very vexing and potentially game changing challenges today and in the near future. Navigating the stormy global seas and protecting our wealth and purchasing power just ahead will be the challenge of a lifetime if the signals we see developing continue.

This year's event is billed: "Profits and Safety During Global Chaos." An apt title if you ask us. We believe people would do well to listen to the council and advice that this year's faculty will be sharing with NOIC attendees, just ahead of Governor Romney's landslide victory.

This year's faculty includes: "Sarah Palin, Dr. Charles Krauthammer, Rick Santelli, Dr. Marc Faber, Peter Schiff, Doug Casey, Rick Rule, and Stephen Leeb. Plus: Bob Prechter, Brent Cook, Adrian Day, Lawrence Roulston, Louis James, Marin Katusa, Mark Skousen, Steven Hochberg, Frank Holmes, Ian McAvity, Mary Anne and Pamela Aden, Gene Arensberg, Thom Calandra, Scott Gibson, Keith Schaefer, Robert Meier, Bill Murphy, Chris Powell and more.

As my favorite uncle used to say, the best thing one can buy in hard times is good advice. By positioning in advance of an event a precious few stand to profit from the coming challenges, not get mauled by them. Spending time with just one of these important thinkers, analysts, newsletter writers, financiers, and brilliant commentators would be well worth the price of admission, but at the NOIC we get to hear and interact with all of them for one low price.

There will also be a large number of resource related companies exhibiting there and your editor will be giving a tour of several chosen by the organizers.

The conference gets started next week on Wednesday, October 24 and runs through Saturday, the 27th. We understand there may still be an opening in the very elegant host hotel, the New Orleans Hilton Riverside, which has a terrific view of the Mississippi River and is just a short walk from New Orleans' storied French Quarter with all its sights, sounds, great food and quaint classic architecture. If not still available, there are other nearby hotels.

We hope you will join us there this year and if you do, we hope to meet and speak with you. Don't be a stranger if you see us in the exhibit hall, in the lobby or outside the main ballroom.

One last thing. In years past the NOIC has sold completely out well in advance of the event, so don't wait till the very last minute to register. Just click on the link below to secure your spot at the conference and in the host hotel today. You'll be very glad you did.

See you all in N'awlins!

Reserve for the New Orleans Investment Conference here:

New Orleans Investment Conference

Read carefully, Sinclairs post.....

Posted: 19 Oct 2012 04:46 PM PDT

You must note how central banks are either buying or protecting their gold reserve positions now. This is total about face two years ago. There is another change coming which is a replacement monetary system and the need for some asset on central bank's balance sheets to have positive value, especially in the USA. Soon all that is required is a change in spread management by the gold banks and you will have whatever price the gold banks want from $3,500 to $12,400.....

Studying and buying his compendiums since gold was around $300 oz, much has been learned and solid defenses put up.Those few that listened and acted will survive, many will (if not already) become very wealthy. To all the others, there is still time to dig deep,fill up the sandbags and fortify but only if you are convinced and convicted. Even with a new monetary system in place, commerce will continue.

Gold’s Fall Blamed On “Speculative Sellers”, European Politicians “Papering Over Differences”

Posted: 19 Oct 2012 04:37 PM PDT

Gold's Fall Blamed On "Speculative Sellers", European Politicians "Papering Over Differences"

THE SPOT gold price traded lower to $1732 an ounce Friday morning in London, near one-month lows, while stock markets and the Euro also fell as a two-day European summit came to a close with several issues unresolved.

The gold price in Euros meantime sank to its lowest level since the end of August at €42,647 per kilo (€1326 per ounce).

Heading into the weekend, the Dollar gold price looks set for its second successive weekly fall, the first time this has happened since May.

"We hold selling by speculative financial investors responsible for the price slide," says today's Commodities Daily note from Commerzbank.

"In recent weeks they had strongly built up their positions and may now be seeing themselves forced to take profits given the faltering upswing."

The silver price also fell this morning, hitting a six-week low at $32.26 per ounce. Most other commodities saw gains, with the exception of copper which sold off, while US, UK and German government bonds all rallied.

Leaders meeting at the two-day European Union summit in Brussels, which concludes today, took a step towards the creation of a single Eurozone banking supervisor Thursday.

An agreement was reached that will give the European Central Bank supervisory powers over the approximately 6,000 financial institutions in the single currency area.

Germany has previously argued that only the largest institutions should come under ECB supervision. Under the agreement, day-to-day oversight for smaller institutions will remain in the hands of national bodies, although the ECB will have powers to intervene in any bank.

There is no agreement however on the direct recapitalization of banks by the European Stability Mechanism. Leaders agreed in principle to the idea of using bailout funds to recapitalize banks in July 2011, although the creation of a single banking supervisor has since become a prerequisite for that.

Thursday's agreement "papers over significant differences over the direct recap" one unnamed EU official told the Financial Times.

"The direct recap is going to be much more difficult."

A French source briefed Reuters to say they expect direct recapitalization could be as early as the first quarter of next year, although a German government source told the same newswire it is "very unlikely" to happen soon.

The summit's conclusions published Friday contained no mention of Spain or Greece.

"Here's an idea that almost certainly wasn't discussed at Thursday night's European summit," adds a story in Friday's Wall Street Journal.

"Using countries' gold reserves to lower the borrowing costs of Eurozone governments."

The WSJ report refers to a proposal by the World Gold Council that some Eurozone nations could reduce bond yields if they pledged gold as collateral.

"As a real asset, the use of gold as collateral is not inflationary," says economist Andrew Lilico in a paper by consultancy Europe Economics commissioned by the World Gold Council, "any more than would be the use of historic buildings or military equipment or islands or any other of the forms of collateral that have been proposed for distressed sovereigns."

Although it appears the proposal was not discussed at this week's EU summit, a draft paper on the subject has been published on the European Parliament website.

Over in India meantime, traditionally the world's biggest source of gold demand, gold bullion imports in the final three months of the year are set to rise for the first time in six quarters following recent gains for the Rupee, Bloomberg reports.

"The appreciation in the Rupee has caused the gold price to correct from the record levels and this correction is seen as an opportunity by many to get into gold," says fund manager Chirag Mehta at Quantum Asset Management.

"With the festival season and marriage season starting now, demand will gain further momentum."
Gold imports could rise as high as 200 tonnes this quarter, according to All India Gems & Jewellery chairman Bachhraj Bamalwa, up from an estimated 157 tonnes in Q4 2011.

In South Africa, Gold Fields has said all but 1500 of the 15000 gold mining workers threatened with dismissal have returned to work. Those who have not have been fired.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tights, Timing and Stop Losses

Posted: 19 Oct 2012 04:00 PM PDT

On Tuesday we sought financial advice from religion. Today, it's flying trapeze artists.

The first thing to know about them is that they always use a net. In fact, trapeze artists will practice a trick by repeatedly landing in the net, until they get it right. Only then will the catcher bother to make a trip up the rope ladder to hang in the catch trapeze and pluck the swinging flyer out of the air.

Flyer (left) and Catcher (right)

Spectators only get to see the end result of plenty of bouncing around in the net and the occasional net rash.

Because the flyers are used to landing safely on their back in the net as a matter of course, it's not a disaster when they miss the catch. They simply land in the net as usual. The investment version of this is the stop loss.

It's a predetermined point at which you cut your losses. Your pride takes a bigger hit than your money. But you get used to it and it becomes an acceptable part of investing. By limiting your losses and letting your gains run, or 'fly', you end up with a good result overall.

Just like flying trapeze nets, stop losses can be a pain in the neck if you don't use them quite right. But they're designed to protect you from the catastrophic loss that could occur. One man who's mastered the stop loss is Slipstream Trader Murray Dawes. He uses stop losses for all the trades he recommends to his subscribers. The results are similar to our Tuesday night trapeze classes. Several small drops to the net for the eventual spectacular trick coming off.

Murray's trading track record beats our aerial one. But the key point is that when you use stop losses, because the wins are so much bigger than the losses, the overall return you get is excellent. And, as Murray would hasten to add, your risk of an unexpected, and therefore unacceptable, loss is very low.

Because of Murray's trading technique, the Slipstream Trader model portfolio, which shows how a subscriber's account might fare, resembles stairs. The dollar value trundles sideways or slightly down, as some trades hit their stop loss limit, and then takes off as a string of Murray's trades pay out.

Then it's back to waiting for another opportunity. By the way, Murray reckons a period of gains has been building up in this long term range bound market. Gains for those who know how to play them, that is. For the rest of us, Murray's prediction spells trouble.

Of course, stop losses and trapeze nets aren't perfect. Our fellow classmate decided to land on her face in the net instead of on her back. That's pretty much what happens to investors when prices 'stop gap'. If the price of your shares bypass your stop loss altogether, say overnight, and drop below your stop loss, you can make a bigger loss than you bargained for.

Unfortunately, stock markets don't come with safety lines like flying trapeze rigs do. So it helps to have an experienced instructor like Murray at hand when deciding exactly where to place the stop losses.

Timing to Avoid the Kiss

Timing is the biggest factor in investing and flying trapeze. Our takeoff from the flying trapeze board, where you begin your swing, is much too fast. We just drop instead of hop, which puts us ahead of the right timing. The result can be 'kissing the catcher'. That's a mid air full frontal head butt with all your weight behind it as you drop.

If You Got It Right

The other thing that can happen is you fall towards the catcher instead of meeting him at the peak of his own swing. That's called 'travelling'. As you drop, the catcher has to carry your downward momentum instead of you both completing a smoothly arched swing together. The jerky result often ends in the catch becoming unstuck and the flyer skimming across the net and then rolling up the vertical net called the apron.

Investors can complete a perfect trick, but if their timing is wrong they'll get burned too. Investing in a fantastic company in 2007, just before the financial crisis, wasn't a great idea.

Murray Dawes never buys shares at the top of what he calls a 'widening distribution', because it's bad timing. And dividend investors can dramatically alter their long term returns by waiting for a better price.

Patience is another timing problem. Back when the Daily Reckoning's founder, Bill Bonner, first issued his trade of the decade for 2000-2010 (buy gold, sell stocks), he had to put up with being more or less wrong for most of those years. But it came good in the end, to say the least. Gold did well, shares did badly. It's pretty tough to stick with a trade for a long time though.

Doing Your Own Thing

One of the great things about flying trapeze and investing is that they're not competitive. At least not inherently. Everyone can achieve a good result that they're happy with, even if that result is completely different for different people. And you can share in others' success.

That creates a very different environment to playing ball sports or trying to run an Italian restaurant on Lygon Street. You don't see the coaches and chef's sharing their secrets. But investors and trapeze artists do all the time. ('Use your arms...knees, knees, KNEES!')

Whether you are an investor or a trapeze artist, how well you do is all about whether you're realistic with yourself. What kind of risks are you willing to take? How much time do you want to spend on perfecting your technique? What does your past performance really look like? What colour tights suit you? These are all questions investors and trapeze artists face alike.

If you think you can face them, why not try a beginner's flying trapeze lesson, or subscribe to one of our investment newsletters? Or both.

Until next week,

Nickolai Hubble.
The Daily Reckoning Weekend Edition

ALSO THIS WEEK in The Daily Reckoning Australia...

South Africa's Rivers of Gold
By Dan Denning

But are prices still rising for gold? This questions always seems to come up when we're about to speak at the Gold Symposium. Each of the last few years, gold has made new highs in US dollar terms around the time of the show. This creates a lot of buzz, and leads all of us gold bugs to believe we're geniuses. Yet as we mentioned at the top, gold prices aren't feeling the Bernanke love.

Discordian Religious Advice for the Investor
By Nick Hubble

One of the things you'll notice if you take a look at history is that the Law of Eristic Escalation holds true. The Law states that the 'imposition of order = the escalation of chaos'. The more you try and keep things orderly, the less orderly they become. The trick is not to try to impose order in the first place. You have to cultivate your taste for disorder instead.

The Fed's New Stooge
By Bill Bonner

The whole spectacle would be only absurd if it weren't also very amusing. The Fed can't actually bring forth more resources, more real capital, more skill, more jobs or more output. They can only put out more paper money... give it to their friends... thus cheapening the money that everyone else holds...So, the policy does exactly and only what Mr Mantegna accuses it of doing. But once you get going in a hopelessly wrongheaded direction, keep going!

An Australian Property Boom and Bust all at Once
By Greg Canavan

If you're confused, don't worry. Australia's housing market has some major structural problems. In an efficient housing market, higher prices (reflecting strong demand) should bring about an increase in supply. But that hasn't happened. In fact, supply of new housing is very poor, given the decade long surge in Australian property prices.