Saturday, October 12, 2013

Gold World News Flash

Gold World News Flash


Campaign to kill PM sentiment one for the text books

Posted: 11 Oct 2013 11:00 PM PDT

by Bill Rice, Jr., Silver Seek:

Campaign: "Kill – and/or dramatically reverse – PM sentiment"

Target Audience: Anyone who has ever invested in precious metals or might consider investing in precious metals in the future.

Message: If you invest in precious metals you are dumb as a goat (and will lose large amounts of whatever wealth you might have possessed before making this stupid investment).


Goal/technique to achieve goal:
Reinforce this message to target audience through consistent actions in paper market exchanges with support from frequent anti-precious metal stories produced and disseminated by mainsteam media.

Read More @ SilverSeek.com

The Fed Could Simply CANCEL $2 Trillion of Government Debt

Posted: 11 Oct 2013 10:24 PM PDT

Congressman Alan Grayson and former congressman Ron Paul are two of the fiercest warriors against an out-of-control Federal Reserve.

Paul has campaigned to dissolve the Fed for 35 years, and wrote an entire book called "End the Fed". Grayson has  repeatedly slammed the Fed, and absolutely demolished it ... to its face.    Paul and Grayson also co-sponsored a bill to audit the Federal Reserve. (Their desire to rein in the Fed is supported by numerous top economists.)

So when the two of them support a Fed-related solution to the "government shutdown" crisis,  I listen.

Congressman Grayson writes:

A simple solution to the impasse is as follows: Federal Reserve Chairman Ben Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government's debt.

 

This wouldn't solve the debt problem entirely. The Federal Reserve doesn't own all U.S. government debt; it owns only roughly $2 trillion of it. (Well $2,076,927,000,000.00, as of last Wednesday, but who's counting?)

NPR has a helpful graphic showing the various holders of U.S. government debt, including the Fed:

pm-gov_debt_v-624Source: NPR

Congressman Grayson continues:

Yet canceling this debt would give the government substantial room under the debt ceiling to manage its finances. It would end the debt ceiling standoff in Congress, and it would prevent a default.

 

The debt held on the balance sheet of the Federal Reserve can be canceled without any significant consequence, because it is a bookkeeping artifact corresponding to the money supply. In essence, the government owes this money to itself. If I owe money to myself, I can cancel that debt at will and without consequence, essentially taking it out of my left pocket and putting it in my right pocket.

 

Last year, the Federal Reserve declared a "profit" of roughly $91 billion, much of which came from interest payments from the U.S. Treasury. The Federal Reserve then quickly remitted nearly all of this profit right back to the U.S. Treasury.

 

The Federal Reserve does this every year. Reducing or eliminating this unearned "profit" actually will provide a more realistic view of federal finances.

Grayson gives credit to Paul for coming up with the idea:

I am a Democrat, and known as a progressive. But this idea was put forward a few years ago not by me, or by a member of my party, but by Republican Representative Ron Paul.

 

He thinks, as do I, that the Federal Reserve's dramatic expansion of its balance sheet is simply a way of financing the government by printing money. The Fed isn't really "buying" Treasury bonds, it is just letting the government finance its deficit by adding to the money supply.

Indeed, Paul introduced a bill in 2011 which would have led to the cancellation of $1.6 trillion in federal debt held by the Fed.

Grayson continues:

While canceling the Treasury debt held on the Federal Reserve balance sheet might be considered unorthodox, it is no more unorthodox than the quantitative easing that has added much of this debt to the Fed's balance sheet.

Indeed, quantitative easing - the radical program the Fed has engaged in for years, which doesn't help the economy,   benefits the the super-elite and hurts the little guy, and more than offsets any savings from budget cuts in other areas - is largely performed through buying U.S. debt ... $45 billion each month.

Grayson concludes:

In any event, preventing a financial meltdown, with its attendant risks of interest rate and price spikes as well as staggering employment losses, is certainly central to the Federal Reserve's mandate of ensuring price stability, maximum employment and moderate, long-term interest rates.

 

Bernanke could alleviate the debt ceiling crisis simply by canceling the debt held on the Fed's balance sheet.

This may sound like a fringe idea. But the Financial Times noted in  an article last year entitled “Will central banks cancel government debt?”:

It is obvious that governments are struggling to find the correct balance between controlling public debt ... and boosting the rate of economic growth. The former objective requires more budgetary tightening, while the latter requires the opposite. Is there any way around this? One radical option now being discussed is to cancel (or, in polite language, “restructure”) part of the government debt that has been acquired by the central banks as a consequence of quantitative easing (QE). After all, the government and the central bank are both firmly within the public sector, so a consolidated public sector balance sheet would net this debt out entirely.

 

***

 

Adair Turner, the chairman of the UK Financial Services Agency, and reportedly a candidate to become the next governor of the Bank of England, made a speech last week that said more unorthodox options, including “further integration of different aspects of policy”, might need to be considered in the UK. Two separate journalists (Robert Peston of the BBC and Simon Jenkins of The Guardian) said that Lord Turner’s “private view” is that some part of the Bank’s gilts holdings might be cancelled in order to boost the economy. Lord Turner distanced himself in public from this suggestion on Saturday. However, the notion will now be widely discussed.

 

***

 

Similar proposals have however been widely debated by economists in the past. This goes back at least as far as the works of Abba Lerner in the 1940s on “functional finance” and the role of fiat money. More recently, the Modern Monetary Theorists have reawakened Lerner’s ideas.

Maguire – The “Vampire Squid” Is Busy In The Gold Market

Posted: 11 Oct 2013 08:50 PM PDT

from KingWorldNews:

On the heels of a plunge in the price of gold and silver, today London metals trader Andrew Maguire spoke with King World News about the takedown in gold and silver, and he told KWN the "Vampire Squid" is very busy in the gold market. He also spoke about what is taking place in the gold market today and why.

Maguire: "People make the mistake of focusing on these tiny moves, and the chop within a range, when they should really stand back as ask, 'Where are we? Who is in this market, and why?' (This is) especially true on a day like today….”

Tim Gardiner continues @ KingWorldNews.com

College graduate: Obamacare has ‘raped my future’

Posted: 11 Oct 2013 08:20 PM PDT

by J. D. Heyes, Natural News

I can’t think of a time when a law merely “collapsed” on itself, but if there is one law that could possibly collapse enough to invite major reforms or repeal, it might just be the gargantuan, liberty-stealing and massively expensive Obamacare.

Slowly but surely, Americans are discovering what a nightmare the so-called “Affordable” Care Act is turning out to be. Mostly, Americans are discovering a) that Obamacare is not “affordable” but incredibly (and, in many cases prohibitively) expensive; and b) the law’s promises are matching up to reality.

After $6,000 in deductibles, of course

In a letter posted online that has gone viral, one University of Michigan graduate said that Obamacare has “raped” her future.

Read More @ NaturalNews.com

David Morgan: “During The Last Bull Market, Alot Of People Gave Up At $100 Gold”

Posted: 11 Oct 2013 08:03 PM PDT

I had the chance to reconnect this week with David Morgan, publisher of The Morgan Report. It was a fascinating conversation, as David began studying the silver market at age nine and has since become known as, "The Silver Guru".

During the interview, David spoke towards first-hand observations made during the 70's metals bull market, and the conviction it takes to remain positioned while most others have thrown in the towel. Those with a clear understanding of the fundamentals according to David, are most able to participate in the ultimate market "acceleration point".

Commenting on the short-term technical picture, David noted

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

The Worst since Lehman

Posted: 11 Oct 2013 08:00 PM PDT

by Andy Hoffman, MilesFranklin.com:

In the words of the great Kelly Bundy of Married with Children, "the mind wobbles."  NEVER has America been so dysfunctional, and NEVER has the entire world been so hopelessly tethered to futility.  Historically, "empires" have decayed when populations grow "fat and lazy."  Today, however, the ENTIRE WORLD is doing so – care of the dollar-anchored fiat currency system that is so comprehensively destroying it.

On the surface, the lethal combination of MONEY PRINTING, MARKET MANIPULATION, and PROPAGANDA has so badly distorted perception, the average person has either "shut themself off" or morphed into a blithering fool.  Speaking to my parents is no different; as call it age if you like, but they have not the slightest interest in current events – or frankly, knowledge of them.  The debt ceiling?  Government shutdown?  Syria?  Obamacare?  Not a clue, although they'll happily say Obamacare is a "good idea" because everyone should have health insurance.

Read more @ MilesFranklin.com

Marc Faber Blasts "A Corrupt System That Rewards Stupidity"

Posted: 11 Oct 2013 06:39 PM PDT

Authored by Marc Faber, originally posted at The Daily Reckoning blog,

For the greater part of human history, leaders who were in a position to exercise power were accountable for their actions. If they waged wars or had to defend their territories from invading hostile forces, they frequently lost their lives, territories, armies, power and crowns. I don't deny that some leaders were irresponsible, but in general, they were fully aware that they were responsible for their acts and, therefore, they acted responsibly.

The problem we are faced with today is that our political and (frequently) business leaders are not being held responsible for their actions. Thomas Sowell sums it up well:

"It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong."

When political leaders or economic policymakers are seen to fail, the worst that will happen to them is that they won't be re-elected or reappointed. They then become a lobbyist or an adviser or consultant, and give speeches, earning in the process a high income on top of their pension.

Similarly, many corporate executives and fund managers who have no personal stake in the business that employs them will receive generous pensions even if they fail to do their job properly and are dismissed. (This doesn't apply to hedge fund managers, most of whose wealth is invested in their funds.) In other words, probably for the first time in history, we have today a system where leaders are not only not punished for their failures, but are actually rewarded…

Recently, Warren Buffett said that the Fed was the world's largest hedge fund. He is wrong. The world's largest hedge funds are owned by people who are risk takers with their own money, since they are usually the largest investors in their funds. The academics at the Fed are playing with other people's money.

However, if we consider that the Fed, led by its chairman, is the most powerful organization in the world — because by printing money, it can finance the government (fiscal deficits) and wars, manipulate the cost of money (interest rates), directly intervene in the economy by bailing out failing institutions (banks) or countries (Greece, etc.), intervene in the foreign exchange market and even influence elections — then the question arises whether it makes sense that so much power should be given to Fed members, who are "group thinking" academics and most of whom have never worked in the private sector. In my opinion, the enormous power of the "academic" Fed is a frightening thought. My friend Fred Sheehan recently quoted from Johann Peter Eckermann's conversation with Goethe, Feb. 1, 1827. We talked about the professors who, after they had found a better theory, still ignored it. From Eckermann and Goethe:

"'This is not to be wondered at,' said Goethe; 'such people continue in error because they are indebted to it for their existence. They would have to learn everything over again, and that would be very inconvenient.'

 

"'But,' said I, 'how can their experiments prove the truth when the basis for their evaluation is false?'

 

"'They do not prove the truth,' said Goethe, 'nor is such the intention; the only point with these professors is to prove their own opinion. On this account, they conceal all experiments that would reveal the truth and show their doctrine untenable. Then the scholars — what do they care for truth? They, like the rest, are perfectly satisfied if they can prate away empirically; that is the whole matter.'"

Fortunately, there is an institution that exercises control over the academics at the Fed; it is called the market economy. As I have just explained, the Fed is an immensely powerful organization, but over time, the market economy is a more powerful force that can outsmart the academics because it is adaptive and dynamic. Just consider the following. Since the implementation of QE1 at the end of 2008, money supply has exploded, but the "real" economy has hardly responded.

I know that the neo-Keynesians will argue that the Fed didn't expand its asset purchases sufficiently. But then, as I've mentioned before, Mr. Bernanke opined at a press conference held on Sept. 13, 2012:

"We do think that these policies [QE3] can bring interest rates down — not just Treasury rates, but a whole range of rates, including mortgage rates and rates for corporate bonds and other types of important interest rates."

And what has happened? Interest rates have increased. According to David Rosenberg, it is actually the fifth-worst sell-off in the 10-year Treasury note since the 1960s. Whereas we can all agree that many factors other than the Fed's policies have had an impact on the economy (regulation, Obamacare, etc.), it is crystal clear that the Fed's QE3 and QE4 policies have completely failed in their stated objectives. This is now an instance where the market economy has badly humbled the professors at the Fed.

When the Fed announced QE1 in late 2008, it was clear to me that monetary inflation would lead to some price increases somewhere in the system. My initial thought was that QE1 would boost gold and commodities (in December 2008, oil touched a low of $32 per barrel) as well as equities around the world, which were at the time extremely oversold. But it didn't cross my mind that money printing would most benefit gaming stocks and the high-end luxury sector of the economy (art, vintage cars, wines, high-end real estate, etc.).

But in hindsight, it is clear that monetary inflation doesn't flow equally into all sectors of the economy; in the current conditions, it has boosted the wealth and incomes of the most affluent people (unlike in the 1970s, when negative interest rates in real terms boosted wages and consumer prices).

According to the Pew Research Center:

"During the first two years of the nation's economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%. From 2009-11, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896."

The Pew Research Center further notes:

"The Census Bureau data also indicate that among less-affluent households, fewer directly owned stocks and mutual fund shares in 2011 (13%) than in 2009 (16%), meaning a smaller share enjoyed the fruits of the stock market rally. Likewise, fewer had individual retirement accounts (IRAs) or Keogh accounts (22% in 2011 versus 24% in 2009), and the same share had 401(k) or Thrift Savings Plan accounts (39% in both years).

 

"Among affluent households, there was also a decline in the share directly owning stock and mutual fund shares during this period (59% in 2011 versus 62% in 2009), but a slight increase in the share with IRAs or Keogh accounts (70% versus 68%) and a larger increase in the share with 401(k) or Thrift Savings Plan accounts (65% versus 61%)."

I should add that if we took just the richest 0.2% of all households in the world, their capital appreciation since 2009 would be far higher than the 28% wealth increase of households in the upper 7% of the wealth distribution (most likely in excess of 100%). During the press conference that followed the Fed's decision not to proceed with a "taper," Mr. Bernanke was asked why most Americans saw no income and wealth growth. The money counterfeiter responded that this was not the Fed's problem.

Clearly, it has never occurred to the professors at the Fed that Fed policies favor only large asset holders and, by creating bubbles, destroy the assets of the majority. Thus, two factors have benefited the gaming industry.

First, the Fed's monetary inflation has boosted the wealth of the world's most affluent people through rising asset prices and the U.S. current account deficit, which shifted money to Asia and to resource producers (mostly oil producers) because money printing boosted oil prices. Wealthy Asians, Russians and Middle Easterners have a higher gambling propensity than Westerners and make up a large share of high rollers.

Second, we had highly expansionary fiscal policies, which permitted entitlement programs to expand and ordinary people to gamble in casinos. Gambling in casinos and online has, of course, been encouraged by the public's loss of faith in the stock market, which they perceive to be rigged.

Alan Newman, who writes the excellent Crosscurrents newsletter, recently commented that "the charade endures" and that "the markets are not fair. Equal treatment is a myth. While the SEC would insist that all investors are equal, it is patently clear some 'investors' are more equal than others."

Preparing for The Big One - U.S. Dollar Revolt

Posted: 11 Oct 2013 05:41 PM PDT

”Federal Reserve Chairman Ben S. Bernanke has been tap dancing on a land mine since 2008.  He has avoided detonating an intensified banking-system crisis, so far, but the cost has been that of locking the Fed into near-perpetual quantitative easing and monetization of U.S. Treasury debt, with horrendous implications for future domestic inflation and U.S. dollar debasement…. the Fed has locked itself into quantitative easing for some time to come, irrespective of any jawboning to the contrary….

China stews as it tries to reduce reliance on U.S. dollar

Posted: 11 Oct 2013 05:32 PM PDT

US Debt Standoff Provokes Ire Among China's Officials

By Simon Rabinovitch
Financial Times, London
Friday, October 11, 2013

http://www.ft.com/intl/cms/s/0/bb3c5d88-3242-11e3-91d2-00144feab7de.html

SHANGHAI -- Washington's debt brinkmanship has provoked deep anger in Beijing and bolstered its resolve to lessen the world's reliance on the dollar, according to current and former Chinese government advisers.

Political leaders in the US have intensified talks about their fiscal standoff, fuelling hopes that Washington will raise its debt ceiling before next week's deadline.

However, the prospect of last-minute negotiations will test already-frayed nerves in China, the biggest foreign holder of US government debt.

... Dispatch continues below ...



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"You can't hijack the global economy through political struggles. It's not responsible," says Yu Yongding, a member of the Chinese Academy of Social Sciences, a leading government think-tank.

"We are angry but are not panicked. The consequences are bad for the reputation of the US because the credibility of debt is so important," says Mr Yu, who is also a former adviser to the central bank's monetary policy committee.

In public, Chinese officials have been restrained in their comments about the US debt debate. Li Keqiang, China's premier, has said Beijing is paying "great attention" to the issue.

Opinions expressed in private have been more blunt. "They are pretty peeved. That is the short answer," says an adviser to the central bank, speaking on condition of anonymity.

In the short term, Mr Yu and other top Chinese academics say, Beijing's hands are tied. With $1.3 trillion invested in US Treasuries, any sudden move to sell those holdings would by itself shake global markets and undermine the value of China's remaining US assets -- the very outcomes that the country's currency reserve managers want to avoid.

"Just thinking about the size of the portfolio, it's very hard to do," says Zhu Ning, deputy director of the Shanghai Advanced Institute of Finance. "They want to do it slowly, to not stir up the frontrunners in the market."

Over a longer period, this slow approach appears to have allowed China to make strides in diversifying away from the dollar.

An analysis of US Treasury data indicates that the portion of dollar assets in China's foreign exchange reserves fell to 49 per cent as of the end of June 2012 -- the most recent available figures -- down from 69 per cent three years before.

"We need to continue to diversify. Even without this latest debt debate, it would still be necessary to diversify," says Zhu Baoliang, an economist in the State Information Center, a research unit of the National Development and Reform Commission, a powerful planning agency.

Although China has reduced the portion of its foreign exchange reserves invested in dollar assets, it has put more of those dollar assets into US government bonds since the global financial crisis. US Treasuries accounted for about 62 per cent of China's official dollar holdings in 2009 but 72 per cent last year, according to an analysis of US data.

"We started investing more in US government debt because it seemed so safe and less in agency bonds (especially government-sponsored mortgage finance companies Fannie Mae and Freddie Mac). Now we should look at options outside US government debt," says Tang Jie, a researcher at Renmin University.

Beyond shifting its investment portfolio away from the US, China's other priority is to lessen the dollar's influence in global finance, an objective that it has pursued since early 2009 when it launched its strategy to internationalise the renminbi.

Watching the world's biggest economy use the threat of a debt default as a bargaining chip in domestic politics will reinforce that strategy, Mr Yu says. "It's a good lesson that the global economy should cut its reliance on the US dollar and we should not forget the importance of reforming the international monetary system."

Without a fully open capital account, internationalisation of the renminbi will be difficult to achieve, but Beijing still has managed steady progress so far. The renminbi's share of global currency trading volumes has jumped from 0.9 per cent in 2010 to 2.2 per cent in 2013, according to Swift, the global payments company.

As the storm clouds gathered over Washington on Thursday, Beijing made another small move to increase international use of the renminbi, signing a swap agreement with the European Central Bank.

The timing may only have been coincidental, but the significance was clear: It was one more step in China's long journey to cut its exposure to the dollar.

* * *

Join GATA here:

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Visitors Center, Holy Trinity Parnell
Auckland, New Zeland
Sunday, October 13, 2013

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Gold Investment Symposium 2013
Luna Park Conference Center, Sydney, Australia
Wednesday-Thursday, October 16-17, 2013

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The Silver Summit
Davenport Hotel, Spokane, Washington
Thursday-Friday, October 24-25, 2013

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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:

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Help keep GATA going

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Don't hold your breath: U.S. watchdog readies tighter commodity limits rule

Posted: 11 Oct 2013 05:19 PM PDT

By Douwe Miedema
Reuters
Friday, October 11, 2013

WASHINGTON -- The U.S. derivatives regulator is finishing a new rule to curb speculators with large positions in commodity markets that is in parts tougher than the previous version, two sources with direct knowledge of the plan said.

Commodity Futures Trading Commission Chairman Gary Gensler is rushing to get a revamped rule out before his term runs out in December, said the sources, even while agency lawyers are preparing to defend the original position limits rule that was knocked back by a U.S. court last year.

... For the full story:

http://www.reuters.com/article/2013/10/11/us-commodities-speculation-exc...



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and which stocks to buy now

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Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets.

To learn about this report, please visit:

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Join GATA here:

Louis Boulanger Now Seminar
Visitors Center, Holy Trinity Parnell
Auckland, New Zeland
Sunday, October 13, 2013

http://www.gata.org/files/GATAInNewZealand.pdf

Gold Investment Symposium 2013
Luna Park Conference Center, Sydney, Australia
Wednesday-Thursday, October 16-17, 2013

http://gold.symposium.net.au/

The Silver Summit
Davenport Hotel, Spokane, Washington
Thursday-Friday, October 24-25, 2013

http://www.cambridgehouse.com/event/silver-summit-2013

Mines and Money Australia
Melbourne Conference and Exhibition Centre
Tuesday, October 29-Friday, November 1, 2013

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New Orleans Investment Conference
Sunday-Wednesday, November 10-13, 2013
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana

https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080...

* * *

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

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

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

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



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Jim Grant Warns America's Default Is Inevitable

Posted: 11 Oct 2013 05:08 PM PDT

Authored by James Grant (of Grant's Interest Rate Observer), originally posted at The Washington Post,

There is precedent for a government shutdown,” Lloyd Blankfein, the chief executive officer of Goldman Sachs, remarked last week. “There’s no precedent for default.”

How wrong he is.

 

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.

Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts. The consequences of such a disruption could — as everyone knows by now — set Wall Street on its ear. But after the various branches of government resume talking and investors have collected themselves, the Treasury will have no trouble finding the necessary billions with which to pay its bills. The Federal Reserve can materialize the scrip on a computer screen.

Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.

Hamilton’s dollar was defined as a little less than 1/20 of an ounce of gold. So were those of his successors, all the way up to the administration of Franklin D. Roosevelt. But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.

By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.

Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.

The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”

The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.

Yet the U.S. government continued to find trusting creditors. Since the Nixon default, the public’s holdings of the federal debt have climbed from $303 billion to $11.9 trillion.

If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.

“Less and less,” is the Federal Reserve’s announced goal. Under Chairman Ben Bernanke (with the full support of the presumptive chairman-to-be, Janet Yellen), the central bank has redefined price “stability” to mean a rate of inflation of 2 percent per annum. Any smaller rate of depreciation is an unsatisfactory showing to be met with a faster gait of money-printing, policymakers say.

In other words, the value of money has become an instrument of public policy, not an honest weight or measure. In such a setting, an old-time “default” is impossible. How can a creditor cry foul when the government to which he is lending has repeatedly said that the value of the money he lent will shrink?

The post-1971 dollar derives its value from the stamp of the government that issues it. Across the seas, this imprimatur is starting to look a little tenuous. Lend us your dollars for 10 years, the Treasury proposes. We will pay you the lordly interest rate of 2.7 percent per annum. And at the end of those 10 years, we will hand you back your principal, which will almost certainly buy less than the money you lent.

This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.

What to do? Let us face facts: We have defaulted in the past. Let us confront the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.
 

Peter Schiff On The Debt Ceiling Delusions

Posted: 11 Oct 2013 05:01 PM PDT

Submitted by Peter Schiff via Euro Pacific Capital,

The popular take on the current debt ceiling stand-off is that the Tea Party wing of the Republican Party has a delusional belief that it can hit the brakes on new debt creation without bringing on an economic catastrophe. While Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats, and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth.

If Republicans were to inexplicably prevail, and the federal government were to cut spending so that its expenditures matched its tax revenues (a truly radical idea) the country's financial mess would be laid bare. The government would have to weigh the relative costs and benefits of making interest payments on Treasury debt (primarily to foreign creditors) or to trim entitlements promised to U.S. citizens. But those are choices we will have to make sooner or later anyway. In fact we should have dealt with these issues years ago. But generations of mechanistic debt ceiling increases have allowed us to perpetually kick the can down the road. What could possibly be gained by doing it again, particularly if it is done with no commitment to change course?

The Democrats' argument that America needs to pay its bills is just hollow rhetoric. Paying off one's Visa bill with a new and bigger MasterCard bill can't be considered a legitimate payment of debt. At best it is a transfer. But in the government's case, it doesn't even qualify as that. Treasury debt is primarily bought by the Fed, foreign central banks, and major financial institutions. None of that will change with a debt ceiling increase. We will just go to the same people for greater quantities. So it's like paying off your Visa card with a bigger Visa card.

According to modern economists, an elimination of deficit spending will immediately cause a dollar for dollar decrease in GDP. For example, if the government stopped sending food stamp payments to poor people, then grocery stores would lose business, employees would be laid off, and the economy would contract. But this one dimensional view fails to appreciate that the purchasing power of the food stamps had to come from somewhere. The government can't create something from nothing. Taxation transfers purchasing power from people living in the present to other people living in the present. In contrast, borrowing transfers purchasing power from people living in the future to people living in the present. The good news for politicians is that future people don't vote in current elections (and current voters don't seem to appreciate the cost to their future selves of current policy).

The Obama Administration has congratulated itself for turning around the contracting economy that it inherited from President Bush. But even if you take the obscenely low official inflation statistics at face value, we only grew at an anemic 1.075% annual pace from 2009 to 2012 (far below the between 3% and 4% that the U.S. averaged post World War II). Sadly, this growth pales in comparison to the accumulation of new debt that we are borrowing from the future.

U.S. GDP is measured at roughly $15 trillion per year. 2% growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth. If the deficit were subtracted from GDP, America would be shown to be stuck in a severe recession that Washington can't acknowledge. But such a reality is more consistent with the dismal job prospects and stagnant incomes experienced by most Americans.

The belief that deficits add to the economy, and that debt can be dealt with in an imaginary future (that never seems to arrive) is the foundation upon which the President can chastise the Republicans as irresponsible suicide bombers. Using this logic, he can argue (with a straight face) that borrowing is the equivalent of paying. That the President can make this delusional argument is not so surprising (no lie too great for the typical politician to attempt). What is alarming is that the media and the public have swallowed it so willingly. As they call for limitless increases in borrowing, Democrats have offered no plan to reduce the current debt and they are unwilling to negotiate with Republicans on that topic. Yet somehow they have been perceived as the party of fiscal responsibility.

While the Republicans have a dismal track record of their own when it comes to budgetary management, it can't be disputed that the minor dip in that rate of increase in spending that resulted from the recent Sequester, happened only because they dug in on the issue. Without the 2011 debt ceiling drama, there is no chance that any spending would have been touched.

Democrats had warned that the $85 billion in sequestration cuts slated for fiscal year 2013 (about 2% of the Federal budget) would be sufficient to bring on economic Armageddon. But guess what? We survived. Recently, Senate Majority Leader Harry Reid continued with such rhetoric by declaring that there are no more cuts to be found anywhere in the $3.8 Trillion dollar federal budget. (Apparently he missed last week's 60 Minutes piece on the spreading epidemic of federal disability fraud.)

We have to acknowledge what even the Republicans haven't fully grasped. We are in such a deep debt hole that there is no solution that does not involve serious economic pain. Tea Party Republicans rightly believe that government spending is a drag on economic growth. As a result, they conclude that immediate spending cuts will help with the "recovery". But they are confusing real economic growth with the delusional expansion created by deficit spending (which is actually damaging the real economy). If they cut the deficit, this phony economy may likely implode and cause widespread distress.

So even though a reduction in government borrowing and spending does help the economy, it won't feel very helpful tomorrow. The more we borrow and spend today, the more we will suffer tomorrow when the bills come due. Ironically, cutting government spending now helps the economy by allowing the economic adjustment to happen sooner rather than later. But this type of long-term thinking is very difficult for politicians to consider.

Unfortunately our debts don't leave us much in the way of choices. We can choose to pay now or try to pay later. But the longer we wait the steeper the bill.

Fed and Treasury are now so desperate they don't care about getting caught

Posted: 11 Oct 2013 04:17 PM PDT

12:16p NZST Saturday, October 12, 2013

Dear Friend of GATA and Gold:

Disappointing as the price action in gold is, it also represents progress for our side insofar as the Western central banks and the U.S. government in particular -- the Federal Reserve and Treasury Department -- are now so desperate to support the U.S. dollar and hold the parasitic banking system together that they don't care anymore about getting caught in their gold market interventions and, really, their interventions to rig all major markets.

From CNBC Friday:

* * *

Gold's Plunge Blamed on One Massive Sell Order

By Alex Rosenberg
CNBC
Friday, October 11, 2013

http://www.cnbc.com/id/101106134

Gold lost $25 in two minutes on Friday morning as the gold market experienced a massive surge in volume that triggered a halt in the middle of the plunge. The move took gold down to a three-month low and was felt across the commodity markets. And incredibly, a single sell order could be the culprit.

"It appears to have been an order to sell 5,000 gold futures contracts at market," Eric Hunsader of Nanex told CNBC.com, when asked to explain the swift move at 8:42 a.m. EDT. "About 2,700 went off and tripped the stop logic, halting gold futures for 10 seconds while liquidity replenished. When enough liquidity returned (after 10 seconds), the balance of about 2,300 completed. ...

"Five thousand lots is huge," commented Rich Ilczsyzn, the founder of iiTrader and a CNBC contributor. "We don't know if it's a mistake or not."

* * *

Mistake? Ha! What a dunce.

Nobody understands it better than London metals trader Andrew Maguire, who talked to King World News about it.

"The Fed does not operate directly in the market," Maguire tells KWN. "They operate through two primary 'agent' banks. The bullion banks in turn time naked short gold sales in the futures market to coordinate what the Fed is doing in the more opaque foreign exchange markets.

... Dispatch continues below ...



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"This is where the bullion banks become visible, because the bullion banks are provided with visibility into the market book. So they have an insider knowledge, and they can easily discern where it's best to surgically add large synthetic supply. This is not anything to do with the physical market.

"This is synthetic supply, to force the paper market participants to capitulate longs. And the trading profits go straight into the bullion banks' hands. It also draws in other participants to go short."

Maguire's King World News interview is excerpted here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/11_M...

Turd Ferguson of the TF Metals Report sees JPMorganChase's hand in gold's decline, as the bank is having to deliver metal this month. When Morgan has to deliver, Ferguson says, the price falls, and vice versa:

http://www.tfmetalsreport.com/blog/5144/four-score-and-ten-days-ago

At the Got Gold Report, Gene Arensberg sees bullion banks spouting the usual disinformation so that they might trade to the contrary:

"I think people are focused on the very short term while the gold market itself is focused much longer term and is beginning to discount a new bull leg for commodities in general and gold in particular. I would wager that the Goldman, Credit Suisse, and Morgan Stanley analysts have only gone public at the very tail end of their bearish trades in order to cover them. They are likely buying into this decline in other words or soon will be."

Arensberg's commentary is here:

http://www.gotgoldreport.com/2013/10/gold-friday-sell-down-attempt-again...

Neither is Swiss gold fund manager Egon von Greyerz fooled. Von Greyerz tells King World News: "Physical demand is incredibly strong, but, in spite of that, gold is not going up. So there is clearly major intervention in paper gold, a market which is 100 times bigger than the physical markets. Can they push gold lower to test the lows again? In my view this is very unlikely."

Von Greyerz's commentary is excerpted at KWN here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/11_G...

In another King World News interview, even Art Cashin of UBS, a CNBC commentator, remarks at length on way he's getting suspicious of the gold market.

Cashin tells KWN: "While I am far from being a conspiracy theorist, I could see where some of the people involved in that asset class would be concerned because we've had several incidents of very large sales. And they all seem to come at approximately the same time in the relatively early morning in New York, usually before the stock market has opened. ... Why would you suddenly dump a large amount of gold? Why wouldn't you try to piecemeal it out over the day? ... Is somebody trying to send a message? Is somebody trying to influence the market?"

Uh-duh, Art!

His interview is posted at King World News here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/11_A...

Meanwhile India acts as if it never gained its independence in 1947. The country remains the slavish tool of its central bank and thus of the colonializing West. Meeting his masters this week at the offices of the International Monetary Fund in Washington, the new governor of the Reserve Bank of India, Raghuram Rajan, obediently raised the possibility that the Indian government could sell its gold to pay its foreign debts, as if gold isn't always part of a nation's foreign exchange assets available for trade, or as if, say, India couldn't also turn the Taj Mahal into a brothel for visiting central bankers.

"We bought over $60 billion is gold last year," Rajan said at an IMF forum. "Sixty billion dollars accounts for three-fourths of our current account deficit. If push comes to shove, we can pay the world in gold."

The world might like that a lot better than depreciating rupees -- or, for that matter, euros and dollars. Indeed, the Indian people themselves might like a chance to trade their rupees for their government's gold, now that the government has forbade them from buying gold from abroad.

Rajan's comments are reported from Washington by the Press Trust of India here:

http://businesstoday.intoday.in/story/raghuram-rajan-on-indian-economy-c...

More and more people are grasping what GATA has been saying for 14 years -- except, of course, for the mainstream financial news media and monetary metals mining companies themselves. While central banks can create money to infinity, that's not their greatest asset. Their greatest assets are the mainstream financial news media and the monetary metals mining industry's willingness to die quietly.

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

* * *

Join GATA here:

Louis Boulanger Now Seminar
Visitors Center, Holy Trinity Parnell
Auckland, New Zeland
Sunday, October 13, 2013

http://www.gata.org/files/GATAInNewZealand.pdf

Gold Investment Symposium 2013
Luna Park Conference Center, Sydney, Australia
Wednesday-Thursday, October 16-17, 2013

http://gold.symposium.net.au/

The Silver Summit
Davenport Hotel, Spokane, Washington
Thursday-Friday, October 24-25, 2013

http://www.cambridgehouse.com/event/silver-summit-2013

Mines and Money Australia
Melbourne Conference and Exhibition Centre
Tuesday, October 29-Friday, November 1, 2013

http://www.minesandmoney.com/

New Orleans Investment Conference
Sunday-Wednesday, November 10-13, 2013
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana

https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080...

* * *

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

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

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

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

Gold and America's Fake Default

Posted: 11 Oct 2013 04:03 PM PDT

There's no denying that precious metals are falling even as the US debt-limit deadline draws so near, you can see that it's wearing a wig. Read More...

Art Cashin - Danger For The US & Strange Happenings In Gold

Posted: 11 Oct 2013 03:10 PM PDT

Today 50-year veteran Art Cashin warned King World News about the enormous dangers the United States faces, which could wind up creating tremendous turmoil around the globe. Cashin, who is Director of Floor Operations at UBS ($650 billion under management), also spoke with KWN about strange happenings in the gold market.

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

Silver and Gold Prices Closed Lower with the Gold Price Ending at $1,268.20

Posted: 11 Oct 2013 03:01 PM PDT

Gold Price Close Today : 1268.20
Change : -28.70 or -2.21%

Silver Price Close Today : 21.260
Change : -0.640 or -2.92%

Gold Silver Ratio Today : 59.652
Change : 0.433 or 0.73%

Silver Gold Ratio Today : 0.01676
Change : -0.000123 or -0.73%

Platinum Price Close Today : 1372.90
Change : 3.00 or 0.22%

Palladium Price Close Today : 713.05
Change : 5.45 or 0.77%

S&P 500 : 1,703.20
Change : 10.64 or 0.63%

Dow In GOLD$ : $248.37
Change : $ 7.27 or 3.01%

Dow in GOLD oz : 12.015
Change : 0.352 or 3.01%

Dow in SILVER oz : 716.70
Change : 26.02 or 3.77%

Dow Industrial : 15,237.11
Change : 111.04 or 0.73%

US Dollar Index : 80.166
Change : 0.432 or 0.54%

Franklin is travelling this week, but he wanted y'all to receive today's prices, below.
God willing, He will return on Monday, 14 October 2013.

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

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2013, 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 or 18 ounces of silver. or 18 ounces of silver. US $ and 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.

Silver and Gold Prices Closed Lower with the Gold Price Ending at $1,268.20

Posted: 11 Oct 2013 03:01 PM PDT

Gold Price Close Today : 1268.20
Change : -28.70 or -2.21%

Silver Price Close Today : 21.260
Change : -0.640 or -2.92%

Gold Silver Ratio Today : 59.652
Change : 0.433 or 0.73%

Silver Gold Ratio Today : 0.01676
Change : -0.000123 or -0.73%

Platinum Price Close Today : 1372.90
Change : 3.00 or 0.22%

Palladium Price Close Today : 713.05
Change : 5.45 or 0.77%

S&P 500 : 1,703.20
Change : 10.64 or 0.63%

Dow In GOLD$ : $248.37
Change : $ 7.27 or 3.01%

Dow in GOLD oz : 12.015
Change : 0.352 or 3.01%

Dow in SILVER oz : 716.70
Change : 26.02 or 3.77%

Dow Industrial : 15,237.11
Change : 111.04 or 0.73%

US Dollar Index : 80.166
Change : 0.432 or 0.54%

Franklin is travelling this week, but he wanted y'all to receive today's prices, below.
God willing, He will return on Monday, 14 October 2013.

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

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2013, 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 or 18 ounces of silver. or 18 ounces of silver. US $ and 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.

What Happened To The Gold Price Today?

Posted: 11 Oct 2013 02:58 PM PDT

It was another one of those days that got gold enthusiasts stunning when looking at the daily gold price chart. Right in between the London AM and PM Fix, at 8h30 EST more precisly, the gold price went some $30 lower in a matter of seconds. The following chart is a 5-minute futures charts and it shows the event with the gap down.

gold price 11 october 2013 price

Right after the event, Zerohedge wrote that 800,000 ounces of notional gold were dumped  and that in the space of 4 minutes, almost 2 million ounces notional were flushed into the gold futures markets.”

There is obviously no connection whatsoever between this type of event and the real world of gold. With the words of Julian Philips of GoldForecaster: “With the world's richest banks involved in nearly all global financial markets and capable of moving prices to suit themselves, it becomes easy to ensure prices either do or don't reflect demand and supply.”

Later on, Zerohedgeexplained in great detail that the price drop resulted in a short shut down of gold futures trading. The technical term used for such an event is “stop logic”:

What is Stop Logic? Basically, it is a the mother of all stop hunts, which takes out the entire bid stack and continues until such time as there is absolutely no liquidity left in the entire market! Of course, the liquidity we re-enter at a time when the prevailing price has been reset substantially lower on what is basically a “banging the open” type of event, or in this case market open, when one or more traders attempt to generate the well-known “momentum ignition” event so known to HFT algo manipulators everywhere. The chart below from Nanex show precisely when and how the trading was stopped for 10 seconds in the aftermath of the furious sell trade.

The nanosecond chart shows the gap, or stop logic, which resulted in a temporary shutdown of trading.

Gold shutdown 11 october 2013 price

Readers interested to know more about the workings of manipulation in the paper market can read pieces that appeared earlier on our site:

How Can The Gold Price Drop In A Matter Of Milliseconds?
Gold Price Manipulation Proven On The Intraday Charts
Why The Silver Manipulation MUST End by Ted Butler

Gold Daily and Silver Weekly Charts - Fear and Loathing on the Comex

Posted: 11 Oct 2013 01:46 PM PDT

Gold Daily and Silver Weekly Charts - Fear and Loathing on the Comex

Posted: 11 Oct 2013 01:46 PM PDT

The Week That Was: October 7th - 11th, 2013

Posted: 11 Oct 2013 01:43 PM PDT

This objective report concisely summarizes important macro events over the past week. It is not geared to push an agenda. Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.

 

Summed up the equity market did this...

 

Positives

  1. Typo leads to $14 billion in Spanish growth debt – Predictably in the new normal, Spreads tighten
  2. If you want to trade the debt ceiling debacle, we suggest moving from cash markets to the repo market, via repo pathway
  3. Booya: Fed arbitrarily adds $180 billion to non-revolving consumer credit – think of the economic growth that will result soon!
  4. JPY continues its volatility, leads S&P higher, while T-bill yields spike on default worries
  5. The Squid says sell your gold, cuz it’s a ‘slam dunk’ trade… promise
  6. Relatively smooth 3-yr auction confirms default fear confined to short-term bonds for now
  7. Alcoa ‘beats’ Q3 estimates… if you exclude recurring non-recurring expenses
  8. Italian & Spanish bond volatility is now less than… the US? Move along
  9. Yellen is nominated to Fed Chair, yay ‘growth’ can resume!
  10. Headlines suggest progress is being made on the debt-ceiling talks (though Republicans remain confused)

 

Negatives

  1. SocGen reiterates it’s all about flow, says market could correct 15% upon a Fed taper
  2. POMO lifts, IB margin hike taketh away – markets get antsy over shutdown
  3. Nikkei plunges on the back of tax hikes, stronger yen
  4. IB margin hike reminds us that the market is driven by leveraged momentum chasing, er, fundamentals
  5. Psst: $441 billion in US debt matures by November 15th
  6. 1-month T-bill yield explodes, highest sinch Lehman
  7. Economic confidence index collapses at fastest pace since Lehman
  8. Fidelity no longer holds any debt maturing around the government X-date
  9. Iceland is what happens Larry, when you put in capital controls – fx shortfall looms
  10. Dow crosses below 200DMA for first time in 2013 – BTFATH re-set
  11. Interactive Brokers hikes margins a second time, TSLA impacted
  12. As we suspected, overnight repo rate soars
  13. Consumer Confidence Slumps To 9 month low

 

Additional

Gold and its direct economic impact

Posted: 11 Oct 2013 01:33 PM PDT

The Real Asset Co

The Daily Market Report

Posted: 11 Oct 2013 12:40 PM PDT

Gold Drop Fires-Up Physical Buyers


11-Oct (USAGOLD) — It’s been a very busy day here at USAGOLD with physical buyers taking advantage of today’s lower prices. The yellow metal slid to a new 13-week low as seemingly hope springs eternal that a deal will get done to avert a technical default and maybe even reopen the government.

While Thursrday’s big meeting between the President and Congressional leaders yielded nothing, the stock market was not only able to maintain yesterday’s large gains, but add to them. Stock market euphoria has diminished the appeal of gold as a safe-haven and I suspect we’re seeing additional redemptions in various paper representations of gold that are being plowed back into equities.

However, today’s lower prices have attracted the interest of physical buyers. Most have told me they view recent losses as counter-intuitive. After all, a government shutdown, the looming threat of a default and a new Fed chair nominee that may be even more dovish than her predecessor all scream “buy gold” to them. And that’s not to mention the still voracious demand for physical gold in places like China, amid declining mine output.

Bottom line, our clients that have been lighting up the phone lines today are inclined to trust their instincts and not look a gift horse in the mouth. One of my regular clients simply said, “I see gold is on sale today, so I’d like to place another order.”

Maguire – The “Vampire Squid” Is Busy In The Gold Market

Posted: 11 Oct 2013 12:22 PM PDT

Dear CIGAs, On the heels of a plunge in the price of gold and silver, today London metals trader Andrew Maguire spoke with King World News about the takedown in gold and silver, and he told KWN the "Vampire Squid" is very busy in the gold market.  He also spoke about what is taking place... Read more »

The post Maguire – The “Vampire Squid” Is Busy In The Gold Market appeared first on Jim Sinclair's Mineset.

Gold And Silver Smash & A Nation On The Edge Of A Precipice

Posted: 11 Oct 2013 12:16 PM PDT

With continued intervention and pressure in the gold and silver markets, today the 42-year market veteran who correctly predicted that the Fed would not taper spoke with King World News about exactly why the intervention is taking place in the metals markets, and the answer will surprise some readers. Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this fascinating interview.

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

Gold Stocks Have Never Been As Cheap as Right Now

Posted: 11 Oct 2013 12:12 PM PDT

Gold stocks continue to be universally despised, plagued by extreme bearishness.  This has hammered their stock prices to epically-undervalued levels that are truly fundamentally absurd.  This whole sector is now trading as if the gold price was less than a third of current levels!  This massive disconnect has created vast opportunities for brave contrarians who have forged the mettle to buy low when few others will. For literally thousands of years around the entire planet, gold has been an indispensable asset.  It has been Tolkien’s One Ring of money, ruling over all national currencies ever created.  It has been essential for wealth preservation and portfolio diversification, not to mention inflation protection and capital gains.  The natural human lust for gold has dramatically reshaped world history, there is simply nothing else like it.

The 1% that Can Fix the State

Posted: 11 Oct 2013 12:01 PM PDT

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

– Ernest Hemingway, Notes on the Next War: A Serious Topical Letter

The transition from total war to world peace will go a lot faster if you, dear reader, recognize and own your own power. Own it and participate.

Without the reality, or a credible threat, of total war, Big Government loses its existential justification.

We — including you — created the Big Government for very good reasons. Now, for very good reasons, we are going to dismantle it. (It won't dismantle itself. And yes, the empire is sure to strike back. But advantage: rebel alliance.)

Peace, to be sure, is provisional. Its prospect is not guaranteed. Yet the tilt of the terms of engagement now is in liberal republicanism's favor and against Big Government. Peace favors liberal republicanism.

For the first time in a century, the deck is stacked in favor of liberty. Do help it along. As Roger Mexico memorably declares, in Thomas Pynchon's tour de force Gravity's Rainbow, "My mother is the war." Spot on.

Certainly, war is the mother of the state. Without the reality, or a credible threat, of total war, Big Government loses its existential justification. Without such justification, it is doomed.

Well, Mom's dead. All unnoticed, Big Government has been orphaned. It has lost its protectress. Absent a successful concoction of a casus belli by the warmongers among us, Big Government is set to fall. If we play shrewdly the hand we have been dealt, Big Government will fall faster than most of us yet imagine possible.

Big Government didn't just happen. We the people built our little government into a big one, and for good reason. Big Government was our tool to take down the biggest, absolutist, most totalitarian and corrupt governments since Imperial Rome: the pure despotisms of National Socialism, militarism and communism.

Then… we won. The long war is over. But we haven't quite noticed. Now we are beginning to take notice. We notice, too, that the power is ours for the taking back. We will take it back.

At the beginning of World War I, 80% of humanity was governed by emperors. Empire, of course, is the antithesis of liberty. A mere five years after the end of that war, four of the five great empires had fallen. The Chinese, Russian, Austro-Hungarian and Ottoman emperors had been overthrown. The least autocratic of the five empires, the British, inexorably was on its way to dissolution.

Humanity, which had been governed by emperors and royalty for millennia, abruptly overthrew its kings of kings. Once Paine stripped existential legitimacy from monarchy, the royal dominoes slowly, but surely, began to fall.

The fall of empire, however, did not — contrary to expectations — result in the rise of liberal republicanism. Tyrannical despots, replacing emperors, took power in Europe. Warlords — Nazis, fascists and communists — emerged. Hitler, Mussolini, Stalin and others assumed the role of despots.

It took Western victory, propelled by a militantly liberal republican America, in World War II to install liberal republicanism as normative in Western Europe and Japan. It took Western victory, propelled by a militantly liberal republican America, in the Cold War — World War III — to install liberal republicanism as normative in Eastern Europe and South America.

Big Government exists, whether or not we are conscious of the fact, with our consent, the consent of the governed. Its legitimacy, and thus, its basis for existence, derives from big threats.

"Extraordinary claims require extraordinary proof," a dictum credited to Marcello Truzzi and popularized by astronomer Carl Sagan, holds true for politics as well as science. A claim of right to appropriate trillions of dollars of the people's money — our money — is, indeed, an extraordinary claim.

World war was the extraordinary proof. Without war, much of the federal edifice becomes as indefensible as the perquisites justified by the "divine right of kings."

When the time is ripe, as now, epochal things may occur with blinding speed. As Victor Hugo noted in History of a Crime, "On resiste a l’invasion des armees; on ne resiste pas a l’invasion des idees." This often is mistranslated to mean what we wish Hugo had said: "There is nothing as powerful as an idea whose time has come."

The idea whose time has come? Peace.

What might the transformation look like? Well, we would expect it to begin with something very much like the Tea Party and Occupy Wall Street. Both of these were citizen uprisings whose message, however inchoate, was the same:

"Ahoy Big Government (and your big finance, big business, big media handmaidens): We regular people demand our power, our money and our dignity back."

Most people typically take not the right path, nor the best path, but the path of least resistance.

But neither the Tea Party nor OWS understood a fundamental fact. Both failed to grasp that we, the rank and file citizens, had delegated our massive power to create Big Government to defeat totalitarian tyrants.

We built that. Knowing that one simple but heretofore overlooked fact makes it, now, truly, possible to take back our power (and money and dignity).

Naturally, those in government will resist by pretext and even, some of them, by duplicity. Nobody readily gives up power and its associated perquisites. But the relinquishment of power by those in authority, restoring it to the people, is, without world war or the credible threat of war, the path of least resistance.

Benko's law (this one's eponymous) holds: Most people typically take not the right path, nor the best path, but the path of least resistance.

Now, the war over, the path of least resistance is: small government liberal republicanism.

The connection between war and Big Government most poignantly was noted by New Republic writer Randolph Bourne, a proto-libertarian left-winger who died at age 32 in the influenza pandemic of 1918. Bourne wrote an essay, posthumously published in 1918, entitled "War is the Health of the State."

In it, he observed:

"Government is obviously composed of common and unsanctified men, and is thus a legitimate object of criticism and even contempt. If your own party is in power, things may be assumed to be moving safely enough; but if the opposition is in, then clearly all safety and honor have fled the state…

"In a republic the men who hold office are indistinguishable from the mass. Very few of them possess the slightest personal dignity with which they could endow their political role; even if they ever thought of such a thing. And they have no class distinction to give them glamour. In a republic the government is obeyed grumblingly, because it has no bedazzlements or sanctities to gild it…

"The moment war is declared, however, the mass of the people, through some spiritual alchemy, become convinced that they have willed and executed the deed themselves. They then, with the exception of a few malcontents, proceed to allow themselves to be regimented, coerced, deranged in all the environments of their lives…

"The citizen throws off his contempt and indifference to government, identifies himself with its purposes, revives all his military memories and symbols, and the state once more walks, an august presence, through the imaginations of men…

"All of which goes to show that the state represents all the autocratic, arbitrary, coercive, belligerent forces within a social group, it is a sort of complexus of everything most distasteful to the modern free creative spirit, the feeling for life, liberty and the pursuit of happiness. War is the health of the state… The rulers soon learn to capitalize the reverence which the state produces in the majority, and turn it into a general resistance toward a lessening of their privileges."

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."

This writer works in the capital and has for 30 years. He has worked on White House staff, on agency staff, as a federal subcontractor and as a policy advocate working extensively with civic leaders and on Capitol Hill. He thereby is privy to secrets scrupulously withheld from the general populace.

Let me whisper just one to you.

The most explosive of secrets is the power of constituents. Meaning, the power you, dear reader have (and probably neglect to exercise very much). It is unnecessary to participate in rallies and demonstrations (although you are free to do so if to your taste).

All that is required to right the ship of state is for a small number of citizens — for 1% of The Daily Reckoning's readers, for instance — to participate actively in the open system of representative democracy.

As Margaret Mead supposedly said: "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has." She was quite right.

The DR has something like 600,000 readers; 1% of that is 6,000. This happens to be about what Heritage Action think tank commands.

And with its 5,000 engaged citizens, Bloomberg BusinessWeek has dubbed Heritage's president, former U.S. Sen. Jim DeMint, the "Shadow Speaker of the House."

The feuding Republican political factions crudely (meanly and incorrectly) can be caricatured as dividing up between the "surrender caucus" — surrender to the social democratic agenda championed by the atavistic Big Government crowd — and the "suicide caucus" — those Tea Partiers who demand direct confrontation even if it puts at risk the relatively smaller government GOP's perilously thin, 17-seat House majority.

Between these two factions is the narrow but vital unclaimed turf that could be called the "supply-side caucus." The supply side always has been tiny — and disproportionately influential. The supply side's governing ethos is a populist humanitarian one. The supply side is driven by equitable prosperity and civil liberty, not doctrine or dogma.

The suddenly reappearing supply side now is focusing on closing what its political champion, Rep. Kevin Brady (R-Texas) — not so incidentally the current chairman of the Congressional Joint Economic Committee — calls "the growth gap."

Brady has been characterized as "the 6-trillion-dollar man." Why 6 trillion?

World-class economist and public intellectual Charles Kadlec, an Arthur Laffer protege, sussed an obscure fact out of a Congressional Budget Office appendix. (This writer has deemed it the "Kadlec curve.") It's mind-boggling. Here it is.

Every one-tenth of 1% of economic growth, above baseline, according to CBO, adds — without raising taxes — over $300 billion to federal income over 10 years. 2% growth equals, over 10 years, $6 trillion. This balances the federal budget without raising taxes and makes Social Security and Medicare solvent for as long as we keep growth good.

Kevin Brady, the new Jack Kemp, is the official in Washington taking this fact the most seriously. Brady has a suite of comprehensive economic reforms designed, specifically, to raise GDP growth by 2% (or more) above baseline, creating millions of good new jobs, a great climate for investments to prosper and … bringing the federal budget back into surplus.

Brady has surrounded himself with the savviest team of economists, communicators, and strategists currently in evidence on Capitol Hill. He is offering a suite of legislation — the Centennial Monetary Commission Act, the Sound Dollar Act, the MAP Act — to cut out profligate spending and reform our monetary, regulatory and tax systems in ways that would turbocharge America's — and the world's — economy.

Have you — citizen! — told your Representative to support his legislation? High time.

Will the "supply-side caucus" achieve the kind of prominence it did in the 1970s and 1980s, upstaging both the (unfairly named) "suicide caucus" and (unfairly named) "surrender caucus"? The answer, dear reader, as surprising as this may sound, may prove to be up to you. Constituent power is the strongest force in a republic.

Are you in?

Regards,

Ralph Benko
for The Daily Reckoning

Ed. Note: Now is the time to act. Stay informed. Sign up for The Daily Reckoning email edition, for free, and get the most up-to-date analysis of what’s going on behind the scenes in Washington… and how to profit in spite of it. Don’t wait. Your next issue is just a few hours away. Sign up for free, right here.

U.S. Gold and Debt Ceiling - Here We Go Again

Posted: 11 Oct 2013 11:47 AM PDT

Since the U.S. shutdown began last week gold has been trading in a tight range between $1,277 and $1,330 per ounce. Although investors have believed that worries over the debt ceiling would be only short-lived, it seems that each day that passed without an agreement tested their nerves. On Thursday, President Barack Obama agreed to consider a proposal from Republican lawmakers to avert a historic debt default. U.S. House of Representatives Republicans plan to offer President Barack Obama a short-term increase in the federal debt limit if he agrees to negotiate with Republicans on matters, including funding to reopen the government.

Gold - The Situation Is Hopeless, But Not Serious

Posted: 11 Oct 2013 11:40 AM PDT

By Shannara Johnson, Chief Editor "After listening to some of this morning's speakers, I made sure to program the number of the suicide hotline into my cell phone," real estate expert Andy Miller joked at the beginning of his speech. And legendary natural-resource investor and chairman of Sprott US Holdings, Rick Rule, quipped, "It's amazingâ€"I actually get to be the positive guy here."

Gold Price Sinks 1.8% in 2 Minutes on U.S. Debt Deal Hope

Posted: 11 Oct 2013 11:24 AM PDT

WHOLESALE and futures prices for gold dumped 1.8% inside 2 minutes Friday lunchtime in London, extending the week's losses to $50 per ounce at a 3-month low of $1265. The move came on suddenly heavy volume in the gold futures market, which had previously been quiet after Thursday's fall through $1300.

Gold Trading Halted!

Posted: 11 Oct 2013 10:39 AM PDT

Let's hear those theories! Gold trading was temporarily halted on the CME for 10 seconds this morning at 8:42 AM ET for a "stop logic event," according to Bloomberg.

[[ This is a content summary only. Visit http://goldbasics.blogspot.com or http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]

Gold Price's "Default" Model Broken

Posted: 11 Oct 2013 10:18 AM PDT

Why? Because this is not the debt default gold prices were looking for...
 
NO DENYING it, writes Adrian Ash at BullionVault. The threat of US debt default has been a non-event for gold prices so far.
 
In fact, the mere hint of a short-term fix knocked gold prices below $1300 on Thursday, with a further plunge as the week ended.
 
For long-time investors, the irony looks so thick you could butter your toast with it.
 
The US Dollar is the world's most important currency. The United States is also the world's largest debtor. So-called gold "bugs" who began buying gold in the early 2000s thought they saw what was coming. Then from 2007, Washington only added to its historic debt pile, backing the nation's entire finance sector with yet more taxpayer promises.
 
The endgame looked clear. And here it is, with less than one week to go. We now have the very real risk of an outright default, a failure by the United States government to pay its debts or bills as they come due.
 
US Treasury bonds underpin the world's financial system, setting interest rates and acting as collateral for pretty much the entire planet. The panic about to take hold should mean silver and gold prices are soaring. Yet here we sit, back below $1300 and $22 per ounce.
"You would think," offers John Waggoner in USA Today, "that the threat of a government default would send gold soaring. In default, after all, those who normally buy government debt would flee, driving down the value of US currency on foreign markets. But gold is doing little to aid your portfolio."
The gold price just isn't working as it should, in short, as US default draws near. "Honestly, it doesn't make sense," adds Dan Denbow – a guy who understands gold more than most, as manager of the $1bn USAA Precious Metals fund (USAGX). "The current situation is a bit perplexing."
 
But step back for a second. The world doesn't fit your model. So the world must be wrong?
 
Back in 2009, "the recent [gold] price surge looks suspiciously like a bubble," wrote Nouriel Roubini. Because in the absence of severe inflation, or a catastrophic economic collapse, the NYU Stern School professor couldn't imagine gold prices rising. Yet they were. So gold must be wrong. Because of course, Roubini could only be right.
 
Now in late 2013, the opposite problem is confusing pundits and traders alike. Gold is falling when it "should" be soaring. Maybe gravity's failed, the earth is flat, or somebody's rigging the market?
 
But this US "default" isn't for real. It's a sham, a fraud and scamola. Political posturing is all that is happening, and the financial markets know it. America faces default on a technicality, not on a refusal by creditors to finance any more of its spending. Even if no deal is done by Oct. 17th, equity and bond investors know the US can borrow and spend all it wants at the moment. Only the arbitrary and very moveable debt ceiling is stopping it. And the US of course remains the world's biggest economy, and the source of its hottest must-have investments, regardless of value.
 
Take communications, for instance. The UK has Royal Mail, floated this week for the equivalent of $5.25 billion, and then jumped 38% on first trading today. The US in contrast has Twitter, priced at twice as much by its IPO. Never mind the business models (Royal Mail made $700m operating profit in full-year 2012. Twitter lost $68m in the first-half of 2013). One of these stocks is a sell. But the faller will most likely be different short term from long.
 
Meantime, there's little surprise that gold and silver aren't jumping. Because the US default isn't happening, whether it does next Thursday or not. And together with America's rediscovered bounce, the sense of crisis peaking in 2011 continues to ebb. The real panic, the financial "end times" which Tea Party Republicans are winking at, is still pending. It isn't here today. And when it does show up, precious metals – most especially gold – will offer a stand-out antidote. 
 
Physically rare and indestructible, gold is the very opposite of debt investments. Owning it puts you a million miles from being a creditor. If this US default were for real, gold would say so. For now, this is not the debt default gold owners were looking for.

Gold Price's "Default" Model Broken

Posted: 11 Oct 2013 10:18 AM PDT

Why? Because this is not the debt default gold prices were looking for...
 
NO DENYING it, writes Adrian Ash at BullionVault. The threat of US debt default has been a non-event for gold prices so far.
 
In fact, the mere hint of a short-term fix knocked gold prices below $1300 on Thursday, with a further plunge as the week ended.
 
For long-time investors, the irony looks so thick you could butter your toast with it.
 
The US Dollar is the world's most important currency. The United States is also the world's largest debtor. So-called gold "bugs" who began buying gold in the early 2000s thought they saw what was coming. Then from 2007, Washington only added to its historic debt pile, backing the nation's entire finance sector with yet more taxpayer promises.
 
The endgame looked clear. And here it is, with less than one week to go. We now have the very real risk of an outright default, a failure by the United States government to pay its debts or bills as they come due.
 
US Treasury bonds underpin the world's financial system, setting interest rates and acting as collateral for pretty much the entire planet. The panic about to take hold should mean silver and gold prices are soaring. Yet here we sit, back below $1300 and $22 per ounce.
"You would think," offers John Waggoner in USA Today, "that the threat of a government default would send gold soaring. In default, after all, those who normally buy government debt would flee, driving down the value of US currency on foreign markets. But gold is doing little to aid your portfolio."
The gold price just isn't working as it should, in short, as US default draws near. "Honestly, it doesn't make sense," adds Dan Denbow – a guy who understands gold more than most, as manager of the $1bn USAA Precious Metals fund (USAGX). "The current situation is a bit perplexing."
 
But step back for a second. The world doesn't fit your model. So the world must be wrong?
 
Back in 2009, "the recent [gold] price surge looks suspiciously like a bubble," wrote Nouriel Roubini. Because in the absence of severe inflation, or a catastrophic economic collapse, the NYU Stern School professor couldn't imagine gold prices rising. Yet they were. So gold must be wrong. Because of course, Roubini could only be right.
 
Now in late 2013, the opposite problem is confusing pundits and traders alike. Gold is falling when it "should" be soaring. Maybe gravity's failed, the earth is flat, or somebody's rigging the market?
 
But this US "default" isn't for real. It's a sham, a fraud and scamola. Political posturing is all that is happening, and the financial markets know it. America faces default on a technicality, not on a refusal by creditors to finance any more of its spending. Even if no deal is done by Oct. 17th, equity and bond investors know the US can borrow and spend all it wants at the moment. Only the arbitrary and very moveable debt ceiling is stopping it. And the US of course remains the world's biggest economy, and the source of its hottest must-have investments, regardless of value.
 
Take communications, for instance. The UK has Royal Mail, floated this week for the equivalent of $5.25 billion, and then jumped 38% on first trading today. The US in contrast has Twitter, priced at twice as much by its IPO. Never mind the business models (Royal Mail made $700m operating profit in full-year 2012. Twitter lost $68m in the first-half of 2013). One of these stocks is a sell. But the faller will most likely be different short term from long.
 
Meantime, there's little surprise that gold and silver aren't jumping. Because the US default isn't happening, whether it does next Thursday or not. And together with America's rediscovered bounce, the sense of crisis peaking in 2011 continues to ebb. The real panic, the financial "end times" which Tea Party Republicans are winking at, is still pending. It isn't here today. And when it does show up, precious metals – most especially gold – will offer a stand-out antidote. 
 
Physically rare and indestructible, gold is the very opposite of debt investments. Owning it puts you a million miles from being a creditor. If this US default were for real, gold would say so. For now, this is not the debt default gold owners were looking for.

Gold Price's "Default" Model Broken

Posted: 11 Oct 2013 10:18 AM PDT

Why? Because this is not the debt default gold prices were looking for...
 
NO DENYING it, writes Adrian Ash at BullionVault. The threat of US debt default has been a non-event for gold prices so far.
 
In fact, the mere hint of a short-term fix knocked gold prices below $1300 on Thursday, with a further plunge as the week ended.
 
For long-time investors, the irony looks so thick you could butter your toast with it.
 
The US Dollar is the world's most important currency. The United States is also the world's largest debtor. So-called gold "bugs" who began buying gold in the early 2000s thought they saw what was coming. Then from 2007, Washington only added to its historic debt pile, backing the nation's entire finance sector with yet more taxpayer promises.
 
The endgame looked clear. And here it is, with less than one week to go. We now have the very real risk of an outright default, a failure by the United States government to pay its debts or bills as they come due.
 
US Treasury bonds underpin the world's financial system, setting interest rates and acting as collateral for pretty much the entire planet. The panic about to take hold should mean silver and gold prices are soaring. Yet here we sit, back below $1300 and $22 per ounce.
"You would think," offers John Waggoner in USA Today, "that the threat of a government default would send gold soaring. In default, after all, those who normally buy government debt would flee, driving down the value of US currency on foreign markets. But gold is doing little to aid your portfolio."
The gold price just isn't working as it should, in short, as US default draws near. "Honestly, it doesn't make sense," adds Dan Denbow – a guy who understands gold more than most, as manager of the $1bn USAA Precious Metals fund (USAGX). "The current situation is a bit perplexing."
 
But step back for a second. The world doesn't fit your model. So the world must be wrong?
 
Back in 2009, "the recent [gold] price surge looks suspiciously like a bubble," wrote Nouriel Roubini. Because in the absence of severe inflation, or a catastrophic economic collapse, the NYU Stern School professor couldn't imagine gold prices rising. Yet they were. So gold must be wrong. Because of course, Roubini could only be right.
 
Now in late 2013, the opposite problem is confusing pundits and traders alike. Gold is falling when it "should" be soaring. Maybe gravity's failed, the earth is flat, or somebody's rigging the market?
 
But this US "default" isn't for real. It's a sham, a fraud and scamola. Political posturing is all that is happening, and the financial markets know it. America faces default on a technicality, not on a refusal by creditors to finance any more of its spending. Even if no deal is done by Oct. 17th, equity and bond investors know the US can borrow and spend all it wants at the moment. Only the arbitrary and very moveable debt ceiling is stopping it. And the US of course remains the world's biggest economy, and the source of its hottest must-have investments, regardless of value.
 
Take communications, for instance. The UK has Royal Mail, floated this week for the equivalent of $5.25 billion, and then jumped 38% on first trading today. The US in contrast has Twitter, priced at twice as much by its IPO. Never mind the business models (Royal Mail made $700m operating profit in full-year 2012. Twitter lost $68m in the first-half of 2013). One of these stocks is a sell. But the faller will most likely be different short term from long.
 
Meantime, there's little surprise that gold and silver aren't jumping. Because the US default isn't happening, whether it does next Thursday or not. And together with America's rediscovered bounce, the sense of crisis peaking in 2011 continues to ebb. The real panic, the financial "end times" which Tea Party Republicans are winking at, is still pending. It isn't here today. And when it does show up, precious metals – most especially gold – will offer a stand-out antidote. 
 
Physically rare and indestructible, gold is the very opposite of debt investments. Owning it puts you a million miles from being a creditor. If this US default were for real, gold would say so. For now, this is not the debt default gold owners were looking for.

The CME/Comex And Truth In Reporting

Posted: 11 Oct 2013 10:16 AM PDT

The information in this report is taken from sources believed to be reliable; however,  the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness.  This report is produced for information purposes only.
The above legal disclaimer mysteriously, and with no explanation, showed up one day on the Comex gold and silver warehouse stock reports about 8 months (roughly).  After several years of publishing the warehouse stock reports, why all of a sudden did the CME feel compelled to stick this disclaimer specifically on the gold and silver warehouse reports?

I bring this up because I was having a discussion with a couple of long-time colleagues about the unprecedented level of manipulation of gold and silver that is occurring specifically on the Comex and primarily during Comex trading hours.  Today's activity is a perfect example.  And the behavior of the price action in the paper Comex market completely defies the unprecedented amount of physical gold being bought for accumulation by Asia, Russia and the Middle East.  In fact, India and China together are on track to inhale more gold in 2013 than is currently being produced by every single gold mine globally this year.

The nature of the discussion had to with the fact that, according to the CFTC Commitment of Traders report (COT), the four biggest gold futures traders on the Comex are, and have been, net long a record amount of gold contracts.  In an ordinary, unmanipulated and uncorrupted system, that positioning stance would be extraordinarily bullish.

But my view is that the data being reported by the CME/Comex and the CFTC is not to be trusted. In fact, if we could get a completely independent audit done of the CME/Comex, I think we would find a fraudulent horror show there beyond anyone's imagination.

But then there's Ted Butler.  He'll tell anyone who wants to be spoon fed by his drivel that the CME/Comex numbers are 100% accurate and there's no fraudulent reporting.  And it's pure speculation on Ted Butler's part that it's JP Morgan who's long Comex gold futures - he's the originator of the idea.  I place a heavy discount on anything Butler speculates on that I can't verify with my own eyes. 

The other BIG problem with basing analysis the way Butler does - and he unbelievably puts full faith in the notion that the CFTC/COT reporting is accurate and honest - is that I do not trust the data that is reported by the CME or the CFTC.  The CFTC COT report is based on the data it gets from the CME.  The CME bases its reports on the data it gets from the banks.  Obviously the CME recently put a legal disclaimer on the data coming from the banks.  But then again, Butler has to maintain religious-like faith that the CME/Comex are not fraudulent because he makes a healthy living selling newsletter subscriptions to his newsletter that is based on analyzing that data.  He has no choice but to believe the data is uncorrupted.

IF the banks are honestly reporting the CME data, it would be the ONLY aspect of their financial reporting that is being done honestly.  The irrefutable laws of probability would suggest that the CME/COT/open interest reports are fraudulent, just like every other aspect of the Comex.  Let's take JP Morgan as an example.  In it's latest earnings report released today, it reported that it is taking $9.2 billion in pre-tax legal expenses this quarter.   This is $9.2 billion that JPM is forced to spend to defend itself from the very type of fraud and corruption in every other aspect of JPM's trading and banking business that Ted Butler says does not exist with respect to JPM's reporting of its trading positions and its gold/silver warehouse stock on the Comex. 

I know that myself and several other long-time precious metals and financial market professionals are confident that JPM's warehouse stock report is full of fraud - that most of the gold/silver it reports is not either not there or is sitting there but has been hypothecated in some form.  It would be a mistake to overlook the fact that the MF Global bankruptcy and fraud case - with which JPM was intimately involved - has set the precedence in terms of protecting banks who hypothecate customer assets.

If Ted wants to believe that the CME/CFTC/Comex data is accurate and honest, I have a bridge that I own that connects the upper east side of Manhattan to the borough of Queens that I would love to sell him.  What's your bid, Ted?

That tragedy of all of this is that the crime/corruption/fraud on the Comex reflects the same on all of Wall Street and, in fact, our entire political and economic system.  This country's "wealth" has been built on the back of the giant Ponzi scheme that is the U.S. Treasury market and the $17 trillion in debt that has been issued to keep the system alive.  In other words, our entire system of economics and politics is one giant facade of complete deception.  And I'm not even addressing here the massive insolvency of the cities, States and public/private pension funds.

This will not end well.  The volatility exhibited by the economy, the stock market, the political situation in DC and in the gold and silver markets - especially the latter - reflects just how broken and corrupted our system is.   Try to enjoy what you can, while you can - because there's no telling when the inevitable occurs and life becomes extraordinarily unpleasant for everyone.

Cheap Gold Stocks 5

Posted: 11 Oct 2013 10:15 AM PDT

Gold stocks continue to be universally despised, plagued by extreme bearishness. This has hammered their stock prices to epically-undervalued levels that are truly fundamentally absurd. This whole sector is now trading as if the gold ... Read More...

Know Your Emerging Markets

Posted: 11 Oct 2013 10:03 AM PDT

Dear Reader,

Dan Steinhart here, filling in for David Galland. Your regular host will be back soon, but for now, you're stuck with me.

I've been thinking of my grandmother since yesterday, so I'll start today's Room talking about her. We call her Gram, and she's 101 years old. She's confined to a wheelchair, but otherwise has all of her faculties.

Gram is always smiling and loves to tell stories about growing up in an orphanage in central Pennsylvania. You'd think such an experience would be traumatic, but not to hear Gram tell it. She remembers her years in the orphanage as similar to a summer camp, complete with songs, cabins, and plenty of friends.

I've been thinking about Gram ever since I watched this video yesterday:


In it, Casey Research's CEO Olivier Garret—who usually shuns the public spotlight—interviews technology whiz Pat Cox about the most exciting new technology trends.

Pat said something about the US's doomed Social Security program that really clamped onto my brain: that the blame for its inevitable failure rests entirely on humans' inability to adapt to the doubling of the average human lifespan—a trend directly attributable to technology.

He's absolutely right. When Gram was born in 1912, the average life expectancy was 51 years. On her next birthday, she'll double that. She's been collecting Social Security checks for 48 years.

I'm thankful that Gram is blessed with top-notch genes that have helped her elude the twin maladies of cancer and heart disease that claim so many lives. Today she's an outlier, one of only 53,000 centenarians in the US.

But tomorrow, if the almost unbelievable things Pat Cox had to say about the leaps and bounds being made in medical technology come to fruition, you won't need robust genes to live past 100. You'll just need a competent doctor who's able to leverage the newest technologies for a fighting chance to join the Century Club.

In other words, thanks to technology, the number of Grams is set to explode.

Technology is not my forte, but I found Pat's insights fascinating. If you do too, be sure to check out Science Saves the Future, an upcoming webinar hosted by our friends at Mauldin Economics, in which Pat Cox, joined by several colleagues, discuss how they expect stunning advances in medical technology to transform our future. From eradicating diseases to halting the aging process, it's incredible stuff. Click here for details and to register for this free event.

Our first article today is from Kevin Brekke, Editor of World Money Analyst. Having recently returned from a trip to Singapore, he'll explain why treating the vastly different emerging markets as one homogenous entity for the sake of convenience can obfuscate investment opportunities.

Media Attempts to Re-colonize Emerging Markets

Kevin Brekke, Managing Editor

The skies were clear as we started final approach into Changi International Airport. Still several kilometers out in the Singapore Strait, dozens of container ships sat idle, tethered to the seabed, and seemed to stretch clear to Batam Island, part of the Indonesian archipelago. Each ship formed part of a nautical queue and waited its turn for cargo to be transshipped or offloaded at Singapore's port terminals.

Singapore is the world's second-busiest port in terms of cargo tonnage, and number one for the transshipment of cargo. This volume of traffic and trade has turned the Singapore Strait into a major link in one of the world's most strategic shipping lanes that connects the South China Sea with the Strait of Malacca, and all destinations west.

The above anecdotal observation from my window seat aligns with recent action in the Baltic Dry Index (BDI). The BDI is an indirect measure of global supply and demand for shipping capacity. The index acts as a leading indicator in that it measures the demand for "dry" commodities (grain, coal, timber, ores) that are the raw materials used in intermediate and finished-goods manufacture.

Source: Bloomberg

So, a rise in the Index implies an increase in the production of food, electricity, housing, and steel, and points to future global economic growth. As shown in the above chart, the BDI has doubled since early August and tripled year to date. A big slowdown in global economic activity doesn't seem to be in the cards.

A Good Story

The facts, however, seldom present an obstacle that a good media story can't overcome. Such was the case with the media-induced, emerging-market selloff ahead of the Fed's anticipated "taper" announcement.

The story—or at least a chapter from it—went something like this:

Emerging markets are carrying big current account deficits...

  • any twist of the Fed's liquidity spigot will slow the flow of Western capital into emerging economies and aggravate the deficits…
  • a rise in interest rates would ensue…
  • higher rates will slow economic growth...
  • better to sell emerging markets and their currencies ahead of these events.

The sand in the ointment that lubricated the media jaws is that "emerging markets" is not a homogenized thing, but an array of countries with distinct economic and fiscal profiles. For a real-world perspective, let's look at the 21 emerging markets as defined by the MSCI Market Index. Here they are, sorted by region, with countries that run a current account deficit shown in red, and those with a surplus shown in green:

America's
Europe, Middle East, Africa
Asia
Brazil
Chile
Colombia
Mexico
Peru
Czech Republic
Egypt
Hungary
Morocco
Poland
Russia
S. Africa
Turkey
China
India
Indonesia

Korea
Malaysia
Philippines
Taiwan
Thailand

Hmmm… I see a pattern here. The farther east you look, the greener it gets. It's pretty obvious that most Asian markets were smeared as card-carrying members of the current-account-deficit club, a grossly inaccurate generalization.

Indonesia, by the way, hiked interest rates in early September and revised its GDP estimate for 2013 lower to 6%, a growth rate that countries in the left and center columns of the table are yearning to achieve.

Without Us, You're Toast

In 1965, Singapore, following a decade of strife to attain self-rule, became an independent nation. The thumb of British colonial occupation was lifted.

The prognosis from the foreign press was immediate and unequivocal: Singapore was doomed. The only question was when. Britain had agreed to maintain its military bases in the country, the primary source of security and economic support for the fledgling country. The bases were a hundred-million-pound burden on the British treasury—closure was inevitable.

A British withdrawal from Singapore was compared to the decline of the Roman Empire, where law and order collapsed as the Roman legions retreated and barbarians filled the vacuum.

The latest round of emerging-market skepticism, concocted and perpetuated by an ill-informed Western media, embodies the nauseating ideal of Anglo-exceptionalism and is reminiscent of the "you can't make it without us" conceit of the 20th century.

Singapore is not an emerging market, of course, but it was, having clawed its way from backwater trading post in the hinterlands of the British Empire to today's economic and financial powerhouse. Other Asian nations are following the path it trod, and intra-emerging-market export trends and demographics suggest that the region's growth story is far from over.


Dan here. Kevin is spot-on: emerging markets (EMs) are different as can be. Having just completed an exhaustive analysis of the sixteen investable emerging markets in the October edition of The Casey Report (hot off the press last night), I can tell you that the differences in valuation alone are striking.

Mexican and Colombian stocks, for example, are stupid expensive. I wouldn't touch them with a diez-foot pole. On the other hand, a select few countries in Southeast Asia are dirt-cheap, even though their growth puts their Latin American counterparts to shame.

Further, if you're going to invest in emerging markets, you'd better understand capital flows. With the Fed's eventual taper on the horizon, EM investors are petrified that it will siphon money from EM stock markets. And rightly so—capital flows to and from emerging markets are notoriously fickle.

So you want to make sure your favorite EM is equipped to avoid that fate: it should be financed with a good dose of domestic savings and foreign direct investment, NOT portfolio investment, which is simply the buying of securities, and can flee without notice.

If you'd like to check out the comprehensive emerging-market analysis our Casey Report team put together—including which emerging markets are resistant to capital outflows—click here for a risk-free trial subscription.

Moving on, regular Casey readers know that the Federal Reserve has essentially commandeered the US stock market. By uttering a negative phrase, Bernanke (and soon, Janet Yellen) can whack stocks by a few hundred points.

If you have nothing better to do, watch a dynamic chart of the S&P 500 during an important, live Fed speech. Stocks literally swing up and down by the second, hanging on each word Bernanke says.

And if you check the financial news afterwards, you'll read something like this: "OMG, last month Bernanke said the economic recovery is moderate, this week he says it's middling!" Seriously, that's only a minor exaggeration.

So it's no surprise that a small army of analysts have taken to psychoanalyzing the chairman's mannerisms, right down to the color of his tie, looking for subconscious clues that transmit what he's really trying to say.

Well, it seems that there's a brand-new indicator to monitor. It's fascinating stuff, as I'll let Doug French explain.

The Fed Plays Make Me Laugh

Doug French, President of the Mises Institute

Fed economists and especially Fed governors are considered demigods. Supposedly they know all and can see around corners. But it turns out the serious deliberations of the Federal Open Market Committee (FOMC) are not all that serious.

According to a just-published paper in Economic Inquiry, author Kevin Capehart says between 1992 and 2000, FOMC members cracked wise 372 times in 18 meetings when economic forecasts were presented.

Capehart, being a PhD candidate, was careful to use a model taking into account factors like some members being funnier than others, and some members talking more than others, thus making them more likely to say something funny.

Always the jokester, Alan Greenspan attended all of these meetings. He didn't make any economic forecasts, yet elicited 31% of the laughter. During the period Capehart studied, 32 different members generated 58% of the laughs.

Don't get the idea FOMC meetings would be a suitable substitute for attending the Comedy Store, though. Capehart says there were 303 observations, and there was nary a laugh recorded in 177 of them. A solitary chuckle occurred in 76 of the observations. Two laughs in 31 observations.

You may wonder what the point of all this jocularity tallying is. Is it just another PhD candidate jumping through the required academic hoops to earn a degree, writing worthless analysis no one will read, let alone care about?

However, the subject matter of Capehart's paper caught the eye of a number of news outlets that spend lots of time attempting to read the Fed's tea leaves. The reason is Capehart's work indicates a correlation between laughter and inflation: a forecast of a 1% increase in inflation carried a 75% increase in laughs. Capehart's correlation is statistically significant.

It may seem Capehart is counting the number of laughs dancing on the head of a pin. After all, this 75% chance amounts to one-half a laugh. However, Capehart points out, "One-half of a laugh might not seem that large, but the members did not elicit that much laughter on average." Let's hope not.

What has Capehart and others scratching their heads is why a forecast of increased inflation inspires such levity. His rationalizations begin with "a member may try harder to say funnier things in order to cope with the psychological stress of a perceived threat to the economy."

My particular favorite is bad outcomes make for better joke opportunities. Capehart also speculates that members issuing what they perceive to be bad news have a tendency to talk more, and because they talk more, they are liable to say something funny, not necessarily on purpose.

Capehart himself, an economics nerd, admits he doesn't find many of the statements particularly funny. But the meeting transcripts show that after comments are made anticipating increased inflation, laughter often follows.

What Capehart and the others don't realize is the Fed is in the inflation business. Central banks serve as a cartel to the commercial banking system, which facilitates money creation. You can forget about protecting the value of the currency and creating full employment. The Fed's job is to backstop the commercial banking system and create money.

That is why Ben Bernanke was Time's Person of the Year in 2009 and Alan Greenspan was called The Maestro and knighted by the Queen of England. The Fed's fear is not inflation but deflation.

In 2004, Greenspan said to the Senate Banking Committee, "Threats of deflation, which were a significant concern last year, by all indications are no longer an issue before us. … That clearly is a change that's occurred in the last number of weeks, and it's a change ... that's been long overdue and is most welcome."

It's always been deflation that famously keeps Greenspan's successor awake at night. In 2002 he delivered his "Deflation: Making Sure 'It' Doesn't Happen Here" speech to the National Economists Club. In the portion of the speech titled "Curing Deflation," Bernanke said:

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Capehart speculates that FOMC members must "have a sense of humor in order to stay sane." He uses the term "inflation nutter" to describe someone strongly averse to inflation. A committee member "might go nuts if he or she expected higher inflation but did not have a sense of humor."

But Mr. Capehart's psychological analysis is completely wrong. Higher prices don't trouble the Fed—lower ones do. Inflation is good for debtors because the dollars required to pay back the debt are worth less as more money is created. Who is the biggest debtor in history? The United States government. And no matter what you read, the Fed is a part of the government. It will take care of its own.

If FOMC members are laughing about inflation, you might want to worry about it. They've successfully kept the deflation dragon at bay. One of these days, a crippling inflation will be the inevitable result.


Friday Funnies

In dishonor of Columbus Day this Monday, I found this playful narrative of what Columbus really did to earn his own federal holiday both comical and enlightening.

Some funny newspaper headlines…

And what Janet Yellen can expect as Bernanke begins his farewell tour:

As a last housekeeping item, there are two new Casey Phyles forming, one in Seoul, South Korea, and the other in the Querétaro, Mexico area. The latter is organized by a longtime subscriber who says if new members are concentrated closer to Mexico City, meetings will be held there rather than in Querétaro. If you are close to and interested in joining either one of them, drop us a note at phyle@caseyresearch.com and we'll hook you up.

That's it for this week. Enjoy the weekend, and thanks for being a Casey Research subscriber!

Dan Steinhart
Managing Editor

Gold and Debt Ceiling - Here We Go Again

Posted: 11 Oct 2013 09:55 AM PDT

Since the U.S. shutdown began last week gold has been trading in a tight range between $1,277 and $1,330 per ounce. Although investors have believed that worries over the debt ceiling would be only short-lived, it seems that each day ... Read More...

Maguire - The “Vampire Squid” Is Busy In The Gold Market

Posted: 11 Oct 2013 09:44 AM PDT

On the heels of a plunge in the price of gold and silver, today London metals trader Andrew Maguire spoke with King World News about the takedown in gold and silver, and he told KWN the "Vampire Squid" is very busy in the gold market. He also spoke about what is taking place in the gold market today and why. Below is the first in a series of powerful interviews with Maguire that will be released today.

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

Jeff Christian : We Could See Gold Prices Higher

Posted: 11 Oct 2013 09:15 AM PDT

We Could See Gold Prices Higher -- CPM Group's Jeff Christian on Kitco News Kitco News brings back Commodities Confidential with CPM Group's Managing Director, Jeffrey Christian. Daniela Cambone...

[[ This is a content summary only. Visit http://goldbasics.blogspot.com or http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]

Gold Plunge, Who’s Responsible, Who’s Buying & What’s Next?

Posted: 11 Oct 2013 08:31 AM PDT

On the heels of another smash in gold and silver, for the second day in a row the CEO of a prominent mining company sent King World News the following note regarding exactly what caused the smash in gold. The note also describes who is behind the plunge, as well as who is on the other side of the trade, buying gold.

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

Gold sinks 1.8% in 2 minutes amid ‘hope’ of US debt deal

Posted: 11 Oct 2013 08:25 AM PDT

The move came on suddenly heavy volume in the gold futures market, which had previously been quiet after Thursday’s fall through $1,300.

Read more….

Can the gold market withstand a ‘bear-raid’ now?

Posted: 11 Oct 2013 08:25 AM PDT

The size of any new 'bear raid' will be far less effective than the one in April but the reaction of Asia, particularly China, will be quicker and larger, says Julian Phillips.

Read more….

Kinross Gold to cut 300 jobs in Mauritania and Spain

Posted: 11 Oct 2013 08:25 AM PDT

The Canadian miner plans to cut 300 jobs at its mining operations in Mauritania and at a regional administrative office in Spain.

Read more….

America’s default on its debt is inevitable

Posted: 11 Oct 2013 07:00 AM PDT

by James Grant
10-Oct (Washington Post) — "There is precedent for a government shutdown," Lloyd Blankfein, the chief executive officer of Goldman Sachs, remarked last week. "There's no precedent for default."

How wrong he is.

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.

Default means to not pay as promised, and politics may interrupt the timely service of the government's debts. The consequences of such a disruption could — as everyone knows by now — set Wall Street on its ear. But after the various branches of government resume talking and investors have collected themselves, the Treasury will have no trouble finding the necessary billions with which to pay its bills. The Federal Reserve can materialize the scrip on a computer screen.

Things were very different when America owed the kind of dollars that couldn't just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.

[source]

Gold Fixation

Posted: 11 Oct 2013 06:28 AM PDT

What is it about gold that makes people view it differently than any other asset class, creating an almost religious fixation* on the metal? As long-term monetary insurance, you would think that it would be among the more boring items ... Read More...

Gold Price Plunges 1.8% In 2 Minutes, Triggers CME "Stop Logic" at 3-Month Low

Posted: 11 Oct 2013 06:14 AM PDT

GOLD PRICE losses for the week widened sharply Friday lunchtime in London, with gold's drop below $1300 per ounce suddenly extending a further 1.8% inside two minutes and triggering the CME future exchange's "Stop Logic" for a 10-second pause.
 
A large sell order began what traders called a "waterfall" drop in the gold price, with the CME's stop-logic system, designed to "prevent excessive price movements", automatically halting trade in gold futures.
 
The gold price dropped through $1300 on Thursday as news broke of a deal, apparently offered to President Obama by House speaker Boehner, to avoid next week's US debt ceiling deadline forcing a technical default on Washington's debt.
 
Sinking to a 3-month low of $1263 as the start of Friday's US stockmarket trading drew near, the gold price was set for its lowest end to the week since July 5th.
 
Silver also fell hard, and again on suddenly heavy CME futures volume, with hitting a 1-week low at $21.04.
 
"The stop-logic functionality happens across all markets at different times," Bloomberg quoted CME spokesman Damon Leavell after a gold price drop triggered it in September, "and can even happen several times in a day."
 
"With the US equity markets seemingly giving the prospect of a US debt deal credence by the magnitude of the rally," said Thursday night's closing comment on gold from the derivatives exchange, "a large portion of the [gold futures] marketplace bought into 'hope' of a deal," with the price falling $15 below the $1300 level.
 
New York stocks closed yesterday more than 2% higher, with Asia and European shares gaining some 1% on average on Friday.
 
Bondholder insurance on US debt meantime became cheaper, notes Reuters, as credit default swaps on 5-year US notes slipped to 0.3% and 1-year note CDS to 0.6%.
 
Even with the gold price below $1300, "Physical buying is fairly non existent," said broker Marex Spectron Friday morning.
 
"[Investment] funds are staying clear and even the most die-hard bulls are having problems coming up with a reason to buy gold, given its totally lacklustre performance as of late."
 
Thursday saw the SPDR Gold Trust – the world's largest exchange-traded fund by value in late 2011 – shed a further 1.8 tonnes, taking the volume of gold bullion needed to back its shares to a new 57-month low beneath 897 tonnes.
 
"The path of least resistance appears to be lower for gold," says a note from investment bank HSBC.
 
"There is a very well defined bearish trend line with five touches," said fellow London market maker Scotia Mocatta overnight, "which comes in at 1322 today." 
 
New data today meantime showed Japan's money-supply growth ticking higher to 3.7% per year in September.
 
Consumer prices in Italy and Spain fell last month, official indices said this morning, and were unchanged from August in Germany.
 
Gold price premiums in India – the world's largest consumer market until anti-import rules hit supply this year – jumped sharply this week, rising 8-fold to $40 per ounce above London benchmarks, according to the All-India Gems & Jewellery Trade Federation.
 
Bank of Nova Scotia said today it is in talks with both the Gems & Jewellery Trade Federation and India's central bank to try and attract existing household gold holdings into bank deposits, enabling jewelers to meet demand with domestic supplies.
 
As it is, however, "There is no official gold available," said Sudheesh Nambiath at Thomson Reuters GFMS, noting the start of India's heaviest gold-buying season, culminating with Diwali next month.
 
"People are not willing to sell their old jewellery" at the current gold price below $1300, he added. "Availability is largely unofficial [ie, black market] metal, which is being sold into market at a lower rate than the prevailing premium."
 

Top bullion bank to work with jewellers to tease out gold hoards

Posted: 11 Oct 2013 06:07 AM PDT

11-Oct (Economic Times) — The biggest bullion-importing bank in India plans to team up with jewellers for the first time to offer a gold deposit scheme, hoping ease of access and attractive interest rates will tempt people to part with their jewellery and relieve tight supplies.

Bank of Nova Scotia is in talks with trade group the Gems and Jewellery Trade Federation (GJF) and the Reserve Bank of India (RBI) to finalise details, the head of the bank’s Indian bullion operations said.

Gold imports to the world’s biggest bullion buyer have all but dried up after steps taken by the government and RBI to cut them to help rein in a record current account deficit, leaving domestic jewellers scrambling for supplies.

With demand still strong and expected to rise in the next few months as the festival season starts, the gold industry has turned its sights on the 20,000 tonnes of gold thought to be squirrelled away in homes.

[source]

PG View: As this plan is implemented, might it be in the bullion banks’ interest to keep prices suppressed so they can get the gold of Indian households as cheap as possible? Just saying…

Don’t Give Up on Gold

Posted: 11 Oct 2013 05:55 AM PDT


11-Oct (Barron’s) — Gold and gold mining shares spent most of the third quarter backing and filling without establishing any clear direction. Gold increased 7.6% during the quarter, closing at $1328.6 an ounce, but down 20.7% year-to-date. The XAU Index of gold and silver stocks rose 4.1% during the quarter, and was down 42.5% on a year-to-date basis.

The rationale for investing in the precious metals sector remains compelling, in our opinion. That rationale rests on two fundamental pillars. Firstly, world-wide fiscal and monetary policies have been directly and indirectly subsidizing asset values, which make financial assets especially vulnerable to permanent impairment when supports inevitably end. Secondly, continuous and unconstrained monetary emissions are fraught with unintended consequences, which have historically included debasement of paper currencies via inflation or devaluation and sovereign debt crises.

These risks can imperil all financial assets both in terms of their market prices and solvency.

[source]

Gold set for weekly loss on stronger dlr, US budget stand-off

Posted: 11 Oct 2013 05:49 AM PDT

Oct 11 (Reuters) – Gold snapped a three-day losing streak on Friday, but was still heading for a weekly decline as its safe-haven appeal dimmed and the dollar rebounded on signs the U.S. government was taking steps towards resolving its budget impasse.

Gold has been trading in a tight range since the U.S. shutdown began last week, with investors believing worries over raising the debt ceiling would be only short-lived.

Soft physical demand, lack of economic data and outflows from gold backed exchange-traded funds (ETFs) have also dragged on prices.

[source]

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