Sunday, October 27, 2013

Gold World News Flash

Gold World News Flash


The REAL Reason U.S. Targets Whistleblowers

Posted: 26 Oct 2013 11:57 PM PDT

U.S. leaders have long:

  • Labeled indiscriminate killing of civilians as terrorism.  Yet the American military  indiscriminately kills innocent civilians (and see this),  calling it “carefully targeted strikes”.   For example, when Al Qaeda, Syrians or others target people attending funerals of those killed – or those attempting to rescue people who have been injured by – previous attacks, we rightfully label it terrorism.  But the U.S. government does exactly the same thing (more), pretending that it is all okay
  • Scolded tyrants who launch aggressive wars to grab power or plunder resources. But we ourselves have launched a series of wars for oil (and here) and gas

Can you spot a pattern of hypocrisy?

Indeed, the worse the acts by officials, the more they say we it must be covered up … for “the good of the country”.

For example, Elizabeth Goitein – co-director of the Liberty and National Security Program at New York University School of Law’s Brennan Center for Justice – writes:

The government has begun to advance bold new justifications for classifying information that threaten to erode the principled limits that have existed — in theory, if not always in practice — for decades. The cost of these efforts, if they remain unchecked, may be the American public’s ability to hold its government accountable.

 

***

The government acknowledged that it possessed mug shots, videos depicting forcible extractions of al-Qahtani from his cell and videos documenting various euphemistically termed “intelligence debriefings of al-Qahtani.” It argued that all of these images were properly classified and withheld from the public — but not because they would reveal sensitive intelligence methods, the traditional justification for classifying such information. The government did not stake its case on this time-tested argument perhaps because the details of al-Qahtani’s interrogations have been officially disclosed through agency reports and congressional hearings. Instead, the government argued that the images could be shielded from disclosure because the Taliban and associated forces have previously used photos of U.S. forces “interacting with detainees” to garner support for attacks against those forces. Even more broadly, the government asserted that disclosure could aid in the “recruitment and financing of extremists and insurgent groups.”

 

***

The government’s argument echoed a similar claim it made in a lawsuit earlier this year over a FOIA request for postmortem photographs of Osama bin Laden. A CIA official attested that these images could “aid the production of anti-American propaganda,” noting that images of abuse at Abu Ghraib had been “very effective” in helping Al-Qaeda to recruit supporters and raise funds. The appeals court did not address this argument, however, resting its decision on the narrower ground that these particular images were likely to incite immediate violence.

 

The judge in al-Qahtani’s case showed no such restraint. She held that the photos and videos were properly classified because “it (is) both logical and plausible that extremists would utilize images of al-Qahtani … to incite anti-American sentiment, to raise funds, and/or to recruit other loyalists.” When CCR pointed out that this result was speculative, the judge responded that “it is bad law and bad policy to second-guess the predictive judgments made by the government’s intelligence agencies.” In short, the government may classify information, not because that information reveals tactical or operational secrets but because the conduct it reveals could in theory anger existing enemies or create new ones.

 

This approach is alarming in part because it has no limiting principle. The reasons why people choose to align themselves against the United States — or any other country — are nearly as numerous and varied as the people themselves. Our support for Israel is considered a basis for enmity by some. May the government classify the aid we provide to other nations? May it classify our trade policies on the basis that they may breed resentment among the populations of some countries, thus laying the groundwork for future hostile relations? May it classify our history of involvement in armed conflicts across the globe because that history may function as “anti-American propaganda” in some quarters?

Perhaps even more disturbing, this justification for secrecy will be strongest when the U.S. government’s conduct most clearly violates accepted international norms. Evidence of human rights abuses against foreign nationals, for instance, is particularly likely to spark hostility abroad. Indeed, the judge in the al-Qahtani FOIA case noted that “the written record of (al-Qahtani’s) torture may make it all the more likely that enemy forces would use al-Qahtani’s image against the United States” — citing this fact as a reason to uphold classification.

 

Using the impropriety of the government’s actions as a justification for secrecy is the very antithesis of accountability. To prevent this very outcome, the executive order that governs classification forbids classifying a document to “conceal violations of law” or to “prevent embarrassment to a person, organization, or agency.” However, a federal judge in 2008 interpreted this provision to allow classification of information revealing misconduct if there is a valid security reason for the nondisclosure. Together, this ruling and the judge’s opinion in the al-Qahtani FOIA case eviscerate the executive order’s prohibition: The government can always argue that it classified evidence of wrongdoing because the information could be used as “anti-American propaganda” by our adversaries.

 

Human rights advocates cannot rely on al-Qahtani to tell us what the photos and videos would reveal. The government asserts that his own knowledge of what occurred at Guantánamo — knowledge he gained, not through privileged access to government documents but through his personal experience — is a state secret. The words that Guantánamo detainees speak, once transcribed by their attorneys, are “presumptively classified,” and the government determines which of those words, if any, may be released. Legally, the government may classify only information that is “owned by, produced by or for, or is under the control of the United States Government.” Because the detainees are under the government’s control, so, apparently, are the contents of their memory.

That’s why high-level CIA whistleblower John Kiriakou was prosecuted him for espionage after he blew the whistle on illegal CIA torture.*

Obviously, the government wants to stop whistleblowers because they interfere with the government’s ability to act in an unaccountable manner. As Glenn Greenwald writes:

It should not be difficult to understand why the Obama administration is so fixated on intimidating whistleblowers and going far beyond any prior administration – including those of the secrecy-obsessed Richard Nixon and George W Bush – to plug all leaks. It’s because those methods are the only ones preventing the US government from doing whatever it wants in complete secrecy and without any accountability of any kind.

But whistleblowers also interfere with the government’s ability to get away with hypocrisy.  As two political science professors from George Washington University (Henry Farrell and Martha Finnemore) show, the government is so hell-bent to punish Manning and Snowden because their leaks are putting an end to the ability of the US to use hypocrisy as a weapon:

The U.S. establishment has often struggled to explain exactly why these leakers [Manning, Snowden, etc.] pose such an enormous threat.

***

The deeper threat that leakers such as Manning and Snowden pose is more subtle than a direct assault on U.S. national security: they undermine Washington’s ability to act hypocritically and get away with it. Their danger lies not in the new information that they reveal but in the documented confirmation they provide of what the United States is actually doing and why. When these deeds turn out to clash with the government’s public rhetoric, as they so often do, it becomes harder for U.S. allies to overlook Washington’s covert behavior and easier for U.S. adversaries to justify their own.

 

***

 

As the United States finds itself less able to deny the gaps between its actions and its words, it will face increasingly difficult choices — and may ultimately be compelled to start practicing what it preaches. Hypocrisy is central to Washington’s soft power — its ability to get other countries to accept the legitimacy of its actions — yet few Americans appreciate its role.

 

***

 

American commitments to the rule of law, democracy, and free trade are embedded in the multilateral institutions that the country helped establish after World War II, including the World Bank, the International Monetary Fund, the United Nations, and later the World Trade Organization. Despite recent challenges to U.S. preeminence, from the Iraq war to the financial crisis, the international order remains an American one. This system needs the lubricating oil of hypocrisy to keep its gears turning.

 

***

 

Of course, the United States has gotten away with hypocrisy for some time now. It has long preached the virtues of nuclear nonproliferation, for example, and has coerced some states into abandoning their atomic ambitions. At the same time, it tacitly accepted Israel’s nuclearization and, in 2004, signed a formal deal affirming India’s right to civilian nuclear energy despite its having flouted the Nuclear Nonproliferation Treaty by acquiring nuclear weapons. In a similar vein, Washington talks a good game on democracy, yet it stood by as the Egyptian military overthrew an elected government in July, refusing to call a coup a coup. Then there’s the “war on terror”: Washington pushes foreign governments hard on human rights but claims sweeping exceptions for its own behavior when it feels its safety is threatened.

 

***

 

Manning’s and Snowden’s leaks mark the beginning of a new era in which the U.S. government can no longer count on keeping its secret behavior secret. Hundreds of thousands of Americans today have access to classified documents that would embarrass the country if they were publicly circulated. As the recent revelations show, in the age of the cell-phone camera and the flash drive, even the most draconian laws and reprisals will not prevent this information from leaking out. As a result, Washington faces what can be described as an accelerating hypocrisy collapse — a dramatic narrowing of the country’s room to maneuver between its stated aspirations and its sometimes sordid pursuit of self-interest. The U.S. government, its friends, and its foes can no longer plausibly deny the dark side of U.S. foreign policy and will have to address it head-on.

 

***

 

The era of easy hypocrisy is over.

Professors Farrell and Finnemore note that the government has several options for dealing with ongoing leaks.  They conclude that the best would be for the government to actually do what it says.

What a novel idea …

* Note: That may be why Guantanamo is really being kept open, and even prisoners that the U.S. government admits are inno

QE and Cheap Debt Benefit the Top of the Capital Food Chain and Few Others

Posted: 26 Oct 2013 10:00 PM PDT

 

Debt is not intrinsically evil. There is in fact good debt (debt which provides growth opportunities) and bad debt (debt which becomes a net drag on productivity).

 

We’ve crossed that line.

 

In the 1960s every new $1 in debt bought nearly $1 in GDP growth. In the 70s it began to fall as the debt climbed. By the time we hit the ‘80s and ‘90s, each new $1 in debt bought only $0.30-$0.50 in GDP growth. And today, each new $1 in debt buys only $0.10 in GDP growth at best.

 

Put another way, the growth of the last three decades, but especially of the last 5-10 years, has been driven by a greater and greater amount of debt. This is why the Fed has been so concerned about interest rates.

 

You can see this in the chart below. It shows the total credit market outstanding divided by GDP. As you can see starting in the early ‘80s, the amount of debt (credit) in the system has soared. We’ve only experienced one brief period of deleveraging, which came during the 2007-2009 era.

 

 

Bernanke couldn’t stomach this kind of deleveraging. The reason is simple: those who have accumulated great wealth as a result of this system are highly incentivized to keep it going.

 

Bernanke doesn’t talk to you or me about these things. He calls Goldman Sachs or JP Morgan. And most of the Wall Street wealth of the last 30 years has been the result of leverage (credit growth). Take away credit and easy monetary policy and a lot of very “wealthy” people suddenly are not so wealthy.

 

Let me put this in terms of real job growth (created by startups) vs the “job growth” of the last five years.

 

According to the National Bureau of Economic Research, startups account for nearly all of the US’s net job creation (total job gains minus total job losses). And smaller startups have a very different perspective of debt than larger more established firms.

 

The reason is quite simple. When a small business owner takes out a loan he or she is usually posting personal assets as collateral (a home, car or some other item). As a result, the debt burden comes with the very real possibility of losing something of great value. And so debt is less likely to be incurred.

 

This stands in sharp contrast to a larger firm, which can post collateral owned by the business itself (not the owners’ personal assets) and so feels less threatened by leveraging up. Thus, in this manner, QE and other loose monetary policies maintained by the Fed favor those larger firms rather than the real drivers of job creation: smaller firms and startups.

 

For this reason, the Fed’s policies, no matter what rhetoric the Fed uses, are more in favor of the stock market than the real economy. That is to say, they are more in favor of those firms that can easily access the Fed’s near zero interest rate lending windows than those firms that are most likely to generate jobs: smaller firms and start-ups.

 

This is why job growth remains anemic while the stock market has rallied to new all-time highs. This is why large investors like Bill Gross have applauded the Fed’s policies at first (when the deleveraging was about to wipe him out in 2008), but then turned against them in the last few years as a political move. This is why QE is so dangerous, because it increases concentration of wealth and eviscerates the middle class.

 

Guys like Warren Buffett or Larry Ellison of Oracle can take advantage of low interest rates to leverage up, acquiring more assets (that can produce income) by posting their current assets as collateral (Ellison commonly “lends” shares in Oracle to banks in exchange for bank loans).

 

Cheap debt is useful to them because the marginal risk of taking it on is small relative to that of a normal individual investor who would have to post a needed asset (his or her home) as collateral on a loan to leverage up.

 

This system works as long as debt continues to stay cheap. However, in the last 12 months the Fed has definitively crossed the point of no return with its policies. It is not just a matter of timing before this debt bubble bursts.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best

Phoenix Capital Research

 

 

 

Sunday NYTimes front-pages an appeal for lots more inflation

Posted: 26 Oct 2013 09:31 PM PDT

In Fed and Out, Many Now Think Inflation Helps

By Binyamin Applebaum
The New York Times
Sunday, October 27, 2013

http://www.nytimes.com/2013/10/27/business/economy/in-fed-and-out-many-n...

WASHINGTON -- Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama's nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

... Dispatch continues below ...



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The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers' wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August, just above the lowest pace on record.

"Weighed against the political, social, and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about," Kenneth S. Rogoff, a Harvard economist, wrote recently. "It should be embraced."

The Fed, in a break from its historic focus on suppressing inflation, has tried since the financial crisis to keep prices rising about 2 percent a year. Some Fed officials cite the slower pace of inflation as a reason, alongside reducing unemployment, to continue the central bank's stimulus campaign.

Critics, including Professor Rogoff, say the Fed is being much too meek. He says that inflation should be pushed as high as 6 percent a year for a few years, a rate not seen since the early 1980s. And he compared the Fed's caution to not swinging hard enough at a golf ball in a sand trap. "You need to hit it more firmly to get it up onto the grass," he said. "As long as you're in the sand trap, tapping it around is not enough."

All this talk has prompted dismay among economists who see little benefit in inflation, and who warn that the Fed could lose control of prices as the economy recovers. As inflation accelerates, economists agree that any benefits can be quickly outstripped by the disruptive consequences of people rushing to spend money as soon as possible. Rising inflation also punishes people living on fixed incomes, and it discourages lending and long-term investments, imposing an enduring restraint on economic growth even if the inflation subsides.

"The spectacle of American central bankers trying to press the inflation rate higher in the aftermath of the 2008 crisis is virtually without precedent," Alan Greenspan, the former Fed chairman, wrote in a new book, "The Map and the Territory." He said the effort could end in double-digit inflation.

The current generation of policy makers came of age in the 1970s, when a higher tolerance for inflation did not deliver the promised benefits. Instead, Western economies fell into "stagflation" -- rising prices, little growth.

Lately, however, the 1970s have seemed a less relevant cautionary tale than the fate of Japan, where prices have been in general decline since the late 1990s. Kariya, a popular instant dinner of curry in a pouch that cost 120 yen in 2000, can now be found for 68 yen, according to the blog Yen for Living.

This enduring deflation, which policy makers are now trying to end, kept the economy in retreat as people hesitated to make purchases, because prices were falling, or to borrow money, because the cost of repayment was rising.

"Low inflation is not good for the economy because very low inflation increases the risks of deflation, which can cause an economy to stagnate," the Fed's chairman, Ben S. Bernanke, a student of Japan's deflation, said in July. "The evidence is that falling and low inflation can be very bad for an economy."

There is evidence that low inflation is hurting the American economy.

"I've always said that a little inflation is good," Richard A. Galanti, Costco's chief financial officer, said in December 2008. He explained that the retailer is generally able to expand its profit margins and its sales when prices are rising. This month Mr. Galanti told analysts that sluggish inflation was one reason the company had reported its slowest revenue growth since the recession.

Executives at Walmart, Rent-A-Center, and Spartan Stores, a Michigan grocery chain, have similarly bemoaned the lack of inflation in recent months.

Many households also have reason to miss higher inflation. Historically, higher prices have led to higher wages, allowing borrowers to repay fixed debts like mortgage loans more easily. Over the five years before 2008, inflation raised prices 10 percent. Over the last five years, prices rose 8 percent. At the current pace, prices would rise 6 percent over the next five years.

"Let me just remind everyone that inflation falling below our target of 2 percent is costly," Charles L. Evans, the president of the Federal Reserve Bank of Chicago, said in a speech in Madison, Wis., this month. "If inflation is lower than expected, then debt financing is more burdensome than borrowers expected. Problems of debt overhang become that much worse for the economy."

Inflation also helps workers find jobs, according to an influential 1996 paper by the economist George Akerlof and two co-authors. Rising prices allows companies to increase profit margins quietly, by not raising wages, which in turn makes it profitable for companies to hire additional workers. Lower rates of inflation have the opposite effect, making it harder to find work.

Companies could cut wages, of course. But there is ample evidence that even during economic downturns companies are reluctant to do so. Federal data show a large spike since the recession in the share of workers reporting no change in wages, but a much smaller increase in workers reporting wage cuts, according to an analysis by the Federal Reserve Bank of San Francisco. There is, in practice, an invisible wall preventing pay cuts. The standard explanation is that employers fear that workers will be angry and therefore less productive.

"I want to be really careful about advocating for lower wages because I typically advocate for the other side of that equation," said Jared Bernstein, a fellow at the left-leaning Center on Budget and Policy Priorities and a former economic adviser to Vice President Joseph R. Biden Jr. "But I think higher inflation would help."

The Anchorage school board, facing pressure to cut costs because of a budget shortfall, began contract negotiations with its 3,500 teachers this year by proposing to freeze rather than cut wages. The final deal, completed last month, gives the teachers raises of 1 percent in each of the next three years.

Teachers, while not thrilled, described the deal as better than a pay cut. But it is likely, in effect, to cut the teachers' pay. Economists expect prices to rise about 2 percent a year over the next three years, so even as the teachers take home more dollars, those dollars would have less value. Instead of a 1 percent annual increase, the teachers would fall behind by 1 percent a year.

"We feel like this contract still allows us to attract and retain quality educators," said Ed Graff, the Anchorage school district superintendent.

In June, Caterpillar, the industrial equipment maker, persuaded several hundred workers at a Wisconsin factory to accept a six-year wage freeze. The company described the workers as overpaid but it did not seek direct cuts.

The slow pace of inflation, however, minimizes the benefits. Seeking further savings, Caterpillar has since laid off almost half of the workers.

* * *

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

http://www.minesandmoney.com/

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Sunday-Wednesday, November 10-13, 2013
Hilton New Orleans Riverside Hotel
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* * *

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Donating to Promoters & Bankers – The Wall Street Charity

Posted: 26 Oct 2013 09:30 PM PDT

from Armstrong Economics:

QUESTION: Martin, you said in a recent blog: "Gold peaked with the low in the ECM in 2011 and it should rise after 2016 into 2020. This is a matter of the overall business cycle."

Have you now changed your major low in gold forecast from the original before or in Jan 2014 to now in 2015? Has your gold major low forecast cycle analysis changed to expect a major low in gold before 2016 now instead of by Jan 2014?And your original forecast of the earnest rise in gold from 2014 through 2017 to now from 2016 to 2020? we will all be frail by then!

Also, is this a sudden sense one gets from reading your blogs these days of your new found enamoured feelings towards stocks now? LOL. Has Marin joined the Dow 31000 crowd and gold back to $250 bandwagon?

Read More @ ArmstrongEconomics.org

Mike Kosares: Screen-traded fiat gold could get violent wake-up call

Posted: 26 Oct 2013 09:09 PM PDT

11a ICT Sunday, October 27, 2013

Dear Friend of GATA and Gold:

Mike Kosares, proprietor of Centennial Precious Metals in Denver, has provided more evidence for his commentary a week ago --

http://www.gata.org/node/13149

-- arguing that Western exchange-traded fund gold is moving to Asia after being recast in Swiss refineries. Kosares' new commentary is headlined "Screen-Traded Fiat Gold Could Get Very Violent Wake-Up Call" and it's posted at Centennial's Internet site, USAGold, here:

http://www.usagold.com/cpmforum/2013/10/26/fiat-gold-could-get-very-viol...

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



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GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:

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Join GATA here:

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



ADVERTISEMENT

How to profit with silver --
and which stocks to buy now

Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million.

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:

http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp...


In FT, John Dizard notes potential strain on paper gold

Posted: 26 Oct 2013 09:01 PM PDT

Strange GOFO Cry Heralds Trouble for Gold

By John Dizard
Financial Times, London
Friday, October 25, 2013

http://www.ft.com/intl/cms/s/0/445c613a-2ce4-11e3-8281-00144feab7de.html

Something is unsettling the animals in the forest of the gold market. Usually there is a chorus of chirrups and squeaks that are significant, momentarily, for one species or another, such as a few cents of arbitrage between Zurich and London, or a dollar-an-ounce rise in India caused by a dealer's near insolvency. Then the noise settles down to the murmur of wind through the trees

However, the continuing high level of premiums for physical gold over the kinds you can trade on a screen suggests that the next move in the major gold indices or the various exchange traded funds could be discontinuous and dramatic. It would be much better for the financial world if gold were just bumping along, with only enough volatility and liquidity to keep a few dealers' lights on. That would mean electronic or paper assets have retained their essential credibility with the public.

... Dispatch continues below ...



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The "gold price" found in a box on the homepage, has, after bouncing off its June lows of around $1,150, had a depressed September and has begun to move up again, to Friday's level of about $1,300.

Much more interesting is that Indians are willing to pay about $270 above the world market price, when you add the "ex-duty premium" to the recently increased 10.3 per cent import duty. There is, of course, a black market price for those who are willing to take a chance with the Indian revenue that is a bit lower. The government wants to discourage "non-essential" imports such as gold, through levers such as taxation and restrictions on credit for gold dealing.

The Chinese government has no anti-gold retail purchases policy. There are no issues with importing, refining and fabricating, or distributing gold. Yet there is a Shanghai market premium that last week was fluctuating from a little under $7/ounce to a bit over. That is actually a lot of money for a location arbitrage. As my old boss at Mocatta told me: "If you do this right, it's a nickel-and-dime business." Well, maybe a $2 or $3 business.

John Brimelow, a gold analyst who has been deconstructing the Indian premiums for many years, says: "There was a collapse of Indian premiums in early August that was due to the collapse of the rupee and the rise in duty to the current level. The current 20 per cent premium has not been seen since gold import was made legal in 1990."

A third strange cry in the forest is the "negative gofo," or gold forward lease rates that effectively pay a higher gold price over the next three months than in the future. This "backwardation" is a common enough phenomenon for other commodities in short physical supply, but, given the much greater weight of above-ground supplies in the gold market, is supposed to be a nonexistent or fleeting occurrence for the metal. Yet the negative gofo, at least for 400-oz good delivery London bullion bars, has persisted for weeks.

As one of my gold refiner friends puts it: "The negative gofo is just a shortage of kilo bars. It is, technically, a backwardation, but I call it the convenience yield of having gold immediately available for physical delivery. Look at the huge premiums in the Shanghai exchange and in India. You think maybe the market will normalise and the premium will disappear soon. So you pay up for immediate delivery."

The 400-oz bars, though, are the only acceptable form of backing for gold exchange-traded funds, not to mention the London market. There is a shrinking supply, which has been gradually flown from London to Switzerland, where the bars are further refined, cast into kilos, and sent on to China, India, the Middle East, and elsewhere.

Say, what if there is a rise in the world gold price that leads to an increase in demand for gold ETFs and exchange-traded futures? Could the gold flow back from those kilo bars to recasting as good delivery 400-oz bars?

Not easy, my refiner says: "Much of that has been converted to jewellery. It would be a lengthy process. Those are pretty sticky hands."

He continues: "This could turn into a very violent wake-up for (screen-traded gold). People talk about 'fiat currencies,' but we also have fiat gold. Volatility is too cheap right now."

Taken together, this collection of persistent microeconomic signals in gold could flag macro trouble to come. These noises worried me in August. They worry me more now.

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Former US Treasury Official - America’s Ultimate Collapse

Posted: 26 Oct 2013 09:01 PM PDT

Today a former US Treasury Official spoke with King World News about the chilling reality of America's ultimate collapse. He also discussed how a coming "black swan" event will have an enormous impact on the price of gold. Below is what Dr. Paul Craig Roberts had to say in part II of his powerful interview series.

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

Claims Per Deliverable Ounce Rises Above 55 at These Prices – JPM’s Odd Warehouse Deliveries

Posted: 26 Oct 2013 09:00 PM PDT

from Jesse's Café Américain:

There was nothing in or out of the Comex warehouses yesterday with regard to gold bullion.

TFMetals had some very interesting observations on recent actions in the Comex, in which JPM brought in two tranches of perfectly even metric tonnes to their warehouse.

Anyone who knows the nature of actual gold bars in use understands that they are never crafted even to the ounce, and certainly not to the tonne.

And one has to wonder where such a large amount of gold was found outside the Comex in 100 oz bars and/or from what refinery it has recently been certified Comex good.  Or were the customary requirements waived for some reason on introducing new bullion bars into the Comex complex for them?  Are they self-certifying now? 

Read More @ Jessescrossroadscafe.blogspot.ca

Gold and Gold Stocks – The Tackling of Resistance

Posted: 26 Oct 2013 08:00 PM PDT

by Pater Tenebrarum, Acting-Man.com:

Gold Surpasses $1340-$1350 Zone

We have frequently discussed the technical resistance zone at the 1340-1350 level in gold. In Friday’s trading, after several previous attempts that fell just a little bit short, gold finally managed a close above this level. The daily chart of the December gold contract below illustrates the situation.

As the chart shows, the close on Friday was only slightly above the first of the three lateral resistance zones identified above. In that sense, it is perhaps not a significant enough break yet, but it is encouraging that the $1350 level has not rejected gold this time around.

Read More @ Acting-Man.com

A Closer Look At The Decrepit World Of Wall Street Rental Homes

Posted: 26 Oct 2013 05:42 PM PDT

Submitted by Michael Krieger of Liberty Bitzkrieg blog,

This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes. In recent weeks, HuffPost spoke with more than a dozen current tenants, along with former employees who recently left the real estate companies. Though it’s not uncommon for tenants to complain about their landlords, many who had rented before described their current experience as the worst they’ve ever had.

 

A former inspector for American Homes 4 Rent who worked in the Dallas office said he routinely examined homes just prior to rental that were not habitable. Though it wasn’t his job to answer complaints, he said he fielded “hundreds of calls” from irate tenants.

 

- From the Huffington Post’s excellent article: Here’s What Happens When Wall Street Builds A Rental Empire

This is a topic that I have been writing extensively on since the beginning of the year. In fact, I don’t think there’s another topic I have focused so intently on in the whole of 2013, with the exception of the NSA revelations. It all started back in January with my post titled, America Meet Your New Slumlord: Wall Street, which received a huge amount of attention in the alternative media world.

I knew from the start that this whole “buy-to-rent” thing would be a disaster. Over the last decade or so, everything that Wall Street touched has turned into a scheme primarily focused on parasitically funneling wealth and resources away from society at large to itself. This is no different. They call it a “new asset class.” I call it Wall Street serfdom.

What makes this article even more interesting is that it’s not simply greed, it is also obvious that these Wall Street firms have no idea what the fuck they are doing. For example:

Former employees of the companies, who spoke on condition of anonymity because they worry about jeopardizing their careers, said their former colleagues can’t keep up with the volume of complaints. The rush to buy up as many homes as possible has stretched resources to the point of breaking, these people said.

My advice to people out there in the rental market, is they should try to avoid Wall Street rentals. The three main companies highlighted in this article are: Invitation Homes (owned by Blackstone), Colony American and American Homes 4 Rent. Unfortunately, it appears these companies may try to hide their presence in certain markets so you may have to do additional digging. For example, WRI Property Management is the local agent of Colony American in Georgia.

More from the Huffington Post:

There’s no escaping the stench of raw sewage in Mindy Culpepper’s Atlanta-area rental home. The odor greets her before she turns into her driveway each evening as she returns from work. It’s there when she prepares dinner, and only diminishes when she and her husband hunker down in their bedroom, where they now eat their meals.

 

For the $1,225 a month she pays for the three-bedroom house in the quiet suburb of Lilburn, Culpepper thinks it isn’t too much to expect that her landlord, Colony American Homes, make the necessary plumbing repairs to eliminate the smell. But her complaints have gone unanswered, she said. Short of buying a plane ticket to visit the company’s office in Scottsdale, Ariz., she is out of ideas.

 

“You can not get in touch with them, you can’t get them on the phone, you can’t get them to respond to an email,” said Culpepper, whose family has lived with the problem since the day they moved in five months ago. “My certified letters, they don’t get answered.”

 

Most rental houses in the U.S. are owned by individuals, or small, local businesses. Culpepper’s landlord is part of a new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion buying and renovating at least 75,000 homes in order to rent them out.

 

Most who spoke with HuffPost said they moved into their rental homes only to find that renovations they were assured were comprehensive amounted to little more than a fresh coat of paint and new carpeting. Tenants said they immediately discovered major mechanical and plumbing problems: broken water heaters and air conditioners, broken toilets and in some cases even vermin infestations, including fleas, silverfish and rodents.

 

Several weeks after Rosemary moved into the Raleigh, N.C., house she’s renting from American Homes 4 Rent, her hot water tank exploded. Rosemary, who declined to use her last name for fear of losing her security deposit, said she couldn’t shower for days. It took constant calls and emails to the rental company before they sent someone to replace the tank.

 

Former employees of the companies, who spoke on condition of anonymity because they worry about jeopardizing their careers, said their former colleagues can’t keep up with the volume of complaints. The rush to buy up as many homes as possible has stretched resources to the point of breaking, these people said.

 

A former inspector for American Homes 4 Rent who worked in the Dallas office said he routinely examined homes just prior to rental that were not habitable. Though it wasn’t his job to answer complaints, he said he fielded “hundreds of calls” from irate tenants.

“It’s just a slumlord,” Culpepper said of Colony American. “A huge, billion-dollar slumlord.”

Indeed, and it shouldn’t be a surprise to anyone.

Full article here.

Guest Post: The ‘No Exit’ Meme Goes Mainstream

Posted: 26 Oct 2013 04:50 PM PDT

Submitted by Pater Tenebrarum of Acting-Man blog,

A Change in Tune

It is interesting to watch how mainstream reporting on certain major topics at times undergoes chameleon-like changes with the meme originally presented suddenly turning into the exact opposite. Not too long ago conviction was extremely high that the Fed would slow down its 'QE' operations and that the economy's weak recovery was going to morph into something one might call 'business as usual'. That notion has never struck us as credible.

Readers who follow Zerohedge may have noticed two recent articles discussing the change in mainstream bank analyst views on the dreaded 'QE taper'. It is instructive to review them: Deutsche Bank now argues that there 'won't be any tapering at all', while SocGen as gone a step further and is now saying 'QE may be increased'.

In other words, mainstream analysts have finally realized that the  insane are running the asylum. Regarding the changing tune in the popular mainstream press, we have come across this recent article at Bloomberg, entitled “Central Banks Drop Tightening Talk as Easy Money Goes On”.

 

“The era of easy money is shaping up to keep going into 2014. The Bank of Canada’s dropping of language about the need for future interest-rate increases and today’s decisions by central banks in Norway and Sweden to leave their rates on hold unite them with counterparts in reinforcing rather than retracting loose monetary policy. The Federal Reserve delayed a pullback in asset purchases, while emerging markets from Hungary to Chile cut borrowing costs in the past two months.

 

“We are at the cusp of another round of global monetary easing,” said Joachim Fels, co-chief global economist at Morgan Stanley in London.

 

Policy makers are reacting to another cooling of global growth, led this time by weakening in developing nations while inflation and job growth remain stagnant in much of the industrial world. The risk is that continued stimulus will inflate asset bubbles central bankers will have to deal with later. Already, talk of unsustainable home-price increases is spreading from Germany to New Zealand, while the MSCI World Index of developed-world stock markets is near its highest level since 2007.

 

“We are undoubtedly seeing these central bankers go wild,” said Richard Gilhooly, an interest-rate strategist at TD Securities Inc. in New York. They “are just pumping liquidity hand over fist and promising to keep rates down. It’s not normal.”

 

(emphasis added)

So, have central bankers drunk the Kool-Aid with the acid in it? What we see here is global acceptance of the Bernankean theory – largely derived from Milton Friedman's analysis of the depression era and Bernanke's own analysis of Japan's post bubble era – that even though new bubbles may be staring everyone into the face, central banks must 'not make the mistake to stop easing too early'. It is held that that would 'endanger the recovery', similar to  what happened in the US in 1937 and Japan in 1996.

We have previously discussed that the 'Ghost of 1937' is hanging over the proceedings and tried to explain why this reasoning is absurd. While it is true that the liquidation of malinvested capital would resume if the monetary heroin doses were to be reduced, the only alternative is to try to engender an 'eternal boom' by printing ever more money. This can only lead to an even worse ultimate outcome, in the very worst case a crack-up boom that destroys the entire monetary system.

 

Why It Is Not 'Business as Usual'

One of the reasons why we remain convinced that the widely hoped for return to a 'normal expansion' isn't likely to occur is that we have some evidence – tentative though it may be – that the economy's production structure has been severely distorted again by the Fed's interest rate manipulations and the huge growth in the money supply it had to engender in order to keep interest rates below the natural level dictated by time preferences.

As one of our readers frequently points out in the comments section, the policy is mainly a stealth bank bailout, as money is transferred from savers to banks in order to avert the liquidation of unsound credit. How much unsound credit is still clogging up the system after the 2008 crisis? We unfortunately don't know, as bank balance sheets have become even darker black boxes than they already were after 'mark to market' accounting was suspended in April of 2009 (no doubt people who have the time to study the hundreds of pages of bank earnings reports with their endless footnotes in detail could come up with estimates, but apparently no-one really takes the time to do that).

Below is a chart that we use to gauge how factors of production are distributed in the economy. Note that this cannot be more than a rough guide, but it is a guide that has served us well in identifying unsustainable credit-induced bubbles in the past.

What the chart shows is the ratio of capital goods (business equipment) to consumer goods production. When the ratio rises, it means that factors of production are increasingly moving from lower order stages of the capital structure to higher order ones – which is a phenomenon typically associated with credit-induced booms.

Of course this chart cannot tell us how much of the capital drawn toward higher order stages will turn out to be malinvested. However, what it does tell us is that the economy's production structure is in danger of tying up more consumer goods than it produces. In other words, it is an economy that may temporarily already be operating outside of what Roger Garrison calls the 'production possibilities frontier'.

By definition, this state of affairs is unsustainable. Eventually the process will  reverse, namely once market interest rates stop 'obeying' the central bank's diktat and relative prices in the economy begin to revert to something a bit closer to their previous configuration. The revolutionized price structure can of course never return precisely to its initial, pre-boom state. However, if market interest rates were to start increasing, the prices of capital goods would certainly begin to decline relative to the prices of consumer goods. The prices of titles to capital, i.e. stocks, would then begin to fall as well, as would the ratio shown below.

 


 

Production - capital vs. cons goods

The production of capital versus consumer goods in the US economy – once again reflecting credit bubble distortions – click to enlarge.

 


 

For readers not familiar with the long term chart, we show it below. What is interesting about this chart is that prior to the Nixon gold default and the adoption of a pure fiat money, the ratio traveled in a fairly narrow sideways channel. It only began to embark on a strong secular rise once the greatest credit bubble in history took off:

 


 

Production - capital vs. cons goods-LT

The production of capital versus consumer goods, long term. Prior to the massive credit bubble that started after the last tie of the dollar to gold was abandoned, the ratio traveled in a tight sideways channel between 0.3 and 0.4 – click to enlarge.

 


 

To be sure, not all of this structural change in the economy's capital structure can be blamed on the credit bubble. Partly it is probably also a result of the vast increase in global trade, which enabled a different and more efficient distribution of production to be put into place (labor-intensive consumer goods such as apparel are for instance nowadays mainly produced in China and other Asian nations). To the extent that the shift is due to the law of association it is beneficial and nothing to worry about.

Nevertheless, it can be clearly seen on the chart that even if we allow for a structural shift that is to some degree the result of benign developments, periods in which the credit bubble expands more strongly are accompanied by strong increases in the ratio, while busts result in 'mean reversion' moves.

The reason why these mean reversion moves don't play out more forcefully is that the central bank always does its utmost to arrest and reverse the liquidation of malinvested capital and unsound credit.

 

Conclusion:

Once the economy's capital structure is distorted beyond a certain threshold, it won't matter anymore how much more monetary pumping the central bank engages in – instead of creating a temporary illusion of prosperity, the negative effects of the policy will begin to predominate almost immediately.

Given that we have evidence that the distortion is already at quite a 'ripe' stage, it should be expected that the economy will perform far worse in the near to medium term than was hitherto widely believed. This also means that monetary pumping will likely continue at full blast, as central bankers continue to erroneously assume that the policy is 'helping' the economy to recover.

Market Monitor – October 26th

Posted: 26 Oct 2013 04:41 PM PDT

LBO Multiples: The Latest Credit Bubble 2.0 Record

Posted: 26 Oct 2013 03:42 PM PDT

This week marked what we suspect will become an important inflection point when the world looks back at this debacle of a bubble. The Fed, having already warned in January of 'froth' in credit markets (and ths the fuel for 'hope' in stocks) proposed tougher underwriting standards for leveraged loans. Credit markets have underperformed since; but as Diapason Commodities' Sean Corrigan notes, the baleful impact of the central banks is still everywhere to be seen in the credit markets. From junk issuance to the rapid regrowth of the CDO business to the 'record' high multiples now being exchanged for LBOs; Central Banker's monomaniacal fixation on zero interest rates and artificial bond pricing is setting us up for the next, great disaster of misallocated capital and malinvested resources.

 

Any 'popping' of the credit bubble will be massively destructive to stocks - as we warned here, this is Carl iCahn's worst nightmare...

...But we have seen this "credit cycle end, equities ramp" before - in 2007 - where leverage (both firm-wise (debt/EBITDA) and instrument-wise (CDOs)) provided the extra oomph to send stocks higher on the back of credit fueled extrapolation of earnings trends.

(charts: Barclays)

In the end we know this is unsustainable - the question is when (in 2007 it last 10 months or so...).

We already see 30Y Apple bonds trading at 5% yields - admittedly low still but notably higher than when they issued previously. The Verizon deal recently now trades at around 5.7% yield and is considerably worse financially pro forma. Of course, just as in 2007, things change very quickly once collateral chains start to shrink.

Perhaps this is why Carl iCahn said the Apple CFO/CEO shunned him - iCahn's worst nightmare is simply the inability to proxy-LBO each and every firm...

Given these charts - which market do you think is in a bubble - equity or credit? Bear in mind that the Fed's Jeremy Stein has already made his case that the latter is a bubble for sure... and the fragility that reaching for yield creates...

 

But the signs of an even bigger bubble are clear...

Via Sean Corrigan of Diapason Commodities:

The Taper fiasco may have delivered a temporary fright, but this has not yet been sufficient to bring about a more lasting reappraisal. With junk yields having retraced half their 180bps spike ? and so reaching territory only ever undercut at the very height of the wild enthusiasm of the first half of this year—and with the CDX index pretty much back to its post?Crisis best, it can only be a matter of time before issuance volumes swell once more.

Even with the last few months’ abatement, this has hardly been a market in dearth, as you can see from a sampling of the comments made by Thomson Reuters in its review of the third quarter:?

The volume of global high yield corporate debt reached US$350.2 billion during the first nine months of 2013, a 27% increase compared to the first nine months of 2012 and the strongest first three quarters for high yield debt activity since records began in 1980... Issuance from European issuers more than doubled compared to the same time last year.

 

Nor was the gold rush restricted to bonds, per se:?

Overall Syndicated lending in the Americas… increased 34.9% from the same period in 2012, with proceeds reaching US$1.8 trillion… Leveraged lending in the United States increased markedly from the first nine months of 2012, totalling US$894.8 billion... representing an 81.5% increase in proceeds.

And, to add to the thrills—They?y?y’r?r?e Back! Yes, CDOs and CLOs are enjoying a renewed vogue just five short years after they played a key role in blowing up the world’s financial system:?

Global asset?backed securities totalled US$251.3 billion during the first nine months of 2013, a 7% increase compared to the same time last year and the best annual start for global ABS since 2007. Collateralized debt and loan obligations totalled US$62.3 billion during the first nine months, more than double issuance during the first nine months of 2012. CDO and CLO volume accounted for one quarter of ABS [volume].

 

As the good folks at PitchBook also pointed out, this was no time to be sitting on the sidelines in the LBO world, either:?

Corporations’ appetite to utilize cheap debt manifested itself in an average leverage ratio of 61.8%... a postfinancial?crisis high (2007 was 67.6%). Another important development has been the rapid increase in valuation?to?EBITDA multiples for buyout deals, which hit a decade high of 10.7x in 2013.

 

In a summation which perfectly encapsulates how the CBs’ monomaniacal fixation on zero interest rates and artificial bond pricing is setting us up for the next, great disaster of misallocated capital and malinvested resources, one Margaret Shanley, a principal at Cohn?Reznick, opined that:?

“...it is no surprise that valuations have remained at robust levels this year, several factors are at play supporting the increase—high demand and low supply for quality deals and easy access to debt with historically low pricing...”

? the first two features being a direct consequence of a set of policies expressly fashioned to bring about the last one cited, one hastens to add.

 

 

Brazil's Flaws Are Clear...

Posted: 26 Oct 2013 02:32 PM PDT

While Eike Batista's collapse from grace may be the poster child for the country, this deep dive into the Latin American economy concludes Brazil's flaws are clear. Commodity prices have been volatile; global growth has been weak and inconsistent. Brazil can no longer depend on these factors for growth. A closer look reveals that internal conditions are progressively becoming Brazil's main economic foe. Ironically this is good news as the country is increasingly in a position to take control of its destiny. What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country. Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future.

Via Rodrigo Serrano of RCS Investments,

Brazil's emergence as a significant economic force over the past decade generated noteworthy investor enthusiasm. From 2003 to 2008, an amalgamation of principal factors such as: macroeconomic stability stemming from prior reforms in the country, a recovering U.S. economy from its 2001 recession, historically low global interest rates, appreciating commodity prices, and rising demand from China set the stage for a sustained period of solid economic growth in Brazil.

While most of the aforementioned tailwinds provided a sound incubator for solid economic growth across all BRIC nations during the same period; Russia, India, and China averaged 7.1%, 8.0%, and 11.3% respectably; it was Brazil that more than doubled its rate of growth from 2.0% during 1997-2002 to 4.2% from 2003-2008 according to the World Bank. This improvement was the best among the BRIC nations.

As the 2008 financial crisis approached, many prominent investors and academics, fond of the bullish long-term prospects of the BRIC nations, entertained the decoupling thesis. From the Economist: "Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy. Decoupling does not mean that an American recession will have no impact on developing countries… The point is that their GDP-growth rates will slow by much less than in previous American downturns" (Economist: The decoupling debate).

While the American downturn and subsequent financial crisis did precipitate a global recession largely debunking the idea that BRIC nations could step in and save the world economy, investor interest in Brazil only intensified when the event seemed like it would be little more than a slight bump in the road in terms of economic growth. Brazil's economy registered a scant contraction of 0.3% in 2009, which was then followed the following year by the strongest pace of annual growth in 25 years at 7.5%. Furthermore, Brazil's Bovespa index rocketed higher from the nadir of its stock market crash in late 2008 by roughly 129% by the end of 2009, the second best performance among BRIC nations over that period after Russia's MICEX index.

Despite these impressive performance statistics, since peaking in 2010, economic growth has been widely lackluster, souring investor sentiment and bringing into the spotlight the panoply of structural problems facing Latin America's largest economy. This extensive report covers a brief economic history of Brazil, a focus on the country's current economic impediments, and steps for positive future development.

Full report below:

RCS Investments: Brazil Special Report

Screen-traded fiat gold could get very violent wake-up call

Posted: 26 Oct 2013 11:56 AM PDT

by Michael J. Kosares

“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about 'fiat currencies', but we also have 'fiat gold.' Volatility is too cheap right now.” — Gold refiner quoted by John Dizard in his Financial Times column this weekend

Note: This post is a follow-up to last weekend’s China's London-Zurich-Hong Kong gold conduit — a major financial coup d'etat

In the initial Reuters report on the London-Zurich-Hong Kong-Shanghai gold pipeline, Macquarie gold analyst Matthew Turner suggested that the 1016 metric tonne United Kingdom export (up from 85 tonnes the previous year) might have been shipped to Zurich for refining into "smaller bars more attractive to Asian consumers or to be vaulted there instead." Though vaulting cannot be ruled out, the recasting explanation makes considerably more sense given the times and the extraordinary amount of gold being imported by China annually – roughly 1044 tonnes according to research published by the Koos Jansen website. It is difficult to imagine a scenario in which China would be interested in vaulting gold in the West – particularly at a time when the West is experiencing difficult financial and economic circumstances.

On the other hand, we know that four of the world's top gold refineries are located in Switzerland — Valcambi, Pamp, Argor-Heraeus and Metalor. Roughly 70% of the world's annual gold production is refined in Switzerland and it is considered the center of the world's gold refinery business. Its bars are trusted on the world's gold exchanges by the top banks, bullion dealers, jewelry manufacturers, and nation states alike. If Turner is right about recasting the bars into Asia-friendly units, and I think he is, Switzerland would be the place to do it, particularly in light of the volume reportedly being re-refined. In my view, China intends for this gold to be transported to and remain in the East otherwise it would not have gone to the trouble to have it recast into Asia friendly bars.

To gain a deeper understanding of what China might be up to, some background is essential. Let's start with the trading units at the two major Chinese exchanges involved in the gold trade – the Hong Kong Gold and Silver Exchange and the Shanghai Gold Exchange (SGE) – because that goes a long toward explaining why the 1016 tonne export made its stop in Switzerland before moving on to China.

The tael is the standard unit of weight on the Hong Kong exchange. It equals 1.20337 troy ounces, or 37.4290 grams, fineness in the past has been 99% but this standard has been upgraded to 99.99% to conform to international trading standards. According to gold expert Timothy Green's The Gold Companion (1991), the standard trading sizes on the Hong Kong exchange is five and ten taels. The basic contract is 100 taels, or 120.377 troy ounces, as opposed to the standard 100 troy ounce contract on U.S. futures' exchanges.

The Hong Kong Gold Exchange is an outlet for much of Asia and the tael trading units, once again according to The Gold Companion are used in China, Taiwan, South Korea, Thailand and Viet Nam. The SGE is the only gold exchange in China and its contract-trading unit is the kilo bar (32.15 troy ounces), once again a significant deviation from the western exchange standard.

Dragon’s hoard includes Chinese people, Peoples Bank of China

Should this scenario prove to be accurate, most of the metal moving from London to Asia through Switzerland will more than likely end up in the hands of consumers in the form of jewelry and small bars. What few people realize is that all of this activity is fully sanctioned by the Chinese government and the Peoples Bank of China (PBOC). In fact, once again according to the Koos Jansen website, the Shanghai Gold Exchange is owned by the PBOC and as a result any gold imported and stored at the exchange for future delivery is, indirectly at least, gold inventory at China's central bank – at least until it is delivered to a buyer as part of the settlement process. SGE widely publicizes itself as a "delivery market" thus the smaller kilo bar size as its chief trading unit makes a great deal of sense.

If, as the smaller bar sizes suggest, the UK-Swiss aspect of the pipeline functions as a bar resizing operation, then we may have a long way to go before China's official sector (central bank) needs are satisfied. It also implies that the demand we have already seen, as large as it is, might be just the tip of the iceberg. China is likely to take advantage of any drop in the price to load up should the physical metal become available, as apparently it was in the April-August, 2013 time period. In one of my early articles on China's grand entrance in the gold market (June, 2009), I indicated that it would likely put a floor under the market for many years to come. The statistics

Drawing again from the Koos Jansen analysis, the China Gold Market Report – authored by the key players in China's gold market, including analysts for the SGE – lists the following distribution of physical metal through its Exchange in 2011:

456.66 tonnes – Jewelry manufacturing
53.22 tonnes – Industrial raw materials
21.55 tonnes – Gold coins
213.85 tonnes – Investment gold bars
13.52 tonnes – Other, unnamed industrial purposes
284.88 tonnes – Net investment (??) "…[D]emand arising from the transfer process of gold as an investment tool (This might be the portion that goes to central bank reserves.)

Total = 1043.68 tonnes

To offer a measuring stick that might give that number additional meaning – the total equals roughly 40% of annual mine production, one-eighth the U.S. gold reserve, and nearly one-third Germany's reserve. (Keep in mind, too, we are talking 2011 numbers not 2013 numbers after the latest massive imports.)

Fiat currency, fiat gold

John Dizard's column in this weekend's Financial Times explores the unsettling developments in the physical gold market and what problems they might impose on the paper gold market. Though the column itself is a very positive one for gold's prospects, it runs under a negative headline that has little to do with the content: Cry of negative gofo heralds trouble for gold. The words "paper traders" should have been added to end of the headline, because that is clearly the point Dizard is making.

He points to the very situation we have just covered in depth on the China connection, and talks about the shortage of kilo bars globally, the recasting of 400 troy ounce LBMA/ETF bars, and the upside down forward rate on physical gold. Dizard poses the question, "Could the gold flow back from those kilo bars to recasting as good delivery 400oz bars?" In other words, does the London-Zurich-Hong Kong-Shanghai pipeline run both ways? An unidentified gold refiner answers: "Much of that has been converted to jewelry. It would be a lengthy process. Those are pretty sticky hands…This could turn into a very violent wake-up call for [screen-traded gold]. People talk about 'fiat currencies', but we also have 'fiat gold.' Volatility is too cheap right now."

Final note

One more point of interest before I put this piece of the China analysis to rest: HSBC, the multinational bank headquartered in London, is the chief storage facility for the largest gold ETFs. As mentioned in my previous article, much of the gold transferred to Switzerland by HSBC came out of the ETFs. In addition, HSBC is an important trading member in the daily London Gold Market Fixings. Founded by Sir Thomas Sutherland in the British colony of Hong Kong in 1865, HSBC notably stands for the Hong Kong Shanghai Banking Corporation.

____________

If you are looking for a gold-based analysis of the financial markets and economy, we invite you to subscribe to our FREE newsletterUSAGOLD’s Review & Outlook, edited by Michael J. Kosares, the author of the preceding post, the founder of USAGOLD and the author of “The ABCs of Gold Investing: How To Protect And Build Your Wealth With Gold.” You can opt out any time and we won’t deluge you with junk e-mails.

Silver Is At A Powerful Technical Launchpad

Posted: 26 Oct 2013 09:43 AM PDT

Silver has suffered a rough year, but its fortunes are changing. In recent months its price has firmed at the convergence of multiple major support zones, a powerful technical launchpad. Silver has soared in parabolic uplegs from the handful of similar past convergences, a very bullish omen. And with silver languishing so low in its trading range relative to gold, it has enormous potential to catapult far higher soon.

After plummeting a brutal 39% in the first half of 2013, silver naturally remains deeply out of favor today. Investors don't want to touch it with a ten-foot pole, convinced silver will soon roll over to plumb ugly new depths. Investors as a herd always hit peak bearishness after exceptionally-large selloffs, extrapolating the downtrend continuing indefinitely. But when major lows are witnessed is exactly the wrong time to be bearish.

Silver's bullish price action since late June yet again proves this truth. As 2013's anomalous gold plunge dragged silver down near $18.50 less than 4 months ago, bearishness was overpowering. Investors and analysts fell all over themselves to forecast much lower silver prices. But instead silver surged out of that ubiquitous despair, blasting 33% higher in just 2 months. Excessive bearishness bred a major reversal.

And though silver retreated in September, any short-term chart shows its young rally remains very much intact. Since late June, this white metal has carved a very definite uptrend. Its series of higher lows defines the first major support zone that is converging into silver's technical launchpad today. But though this support line confirms a new upleg is indeed underway, it is the least important support zone by far.

The support I've been watching with great interest in recent months is secular, much older and stronger. Despite 2013's ugly selling anomaly, silver remains in a secular bull market. Born way back in November 2001 when silver languished just above $4, it catapulted silver an astounding 1105% higher at best by April 2011! Silver just bounced up from this bull's same support line that birthed its mightiest past uplegs.

This first chart offers a much-longer-term perspective on silver than most market websites, extending back to 2005 when silver still traded with a $6 handle. Remember that bygone era? Even with this metal so deeply out of favor near major lows today, it is still up 233% since 2005 dawned! The benchmark S&P 500 stock index only rose 44% over that same span. Silver's bull market is still proving wildly profitable.

gold silver price 2006 2013 investing

Silver's 2013 selling anomaly had absolutely nothing to do with this metal's fundamentals, it was solely collateral damage from gold's own selling anomaly. Gold was crushed when the Fed-driven levitation in the general stock markets sucked capital out of the flagship GLD gold ETF, which was forced to dump record amounts of gold bullion. The resulting gold weakness ignited a handful of ultra-rare futures forced liquidations.

While silver certainly has its own bullish fundamental merits, technically it trades in lockstep with gold prices. Investors buy silver when gold is strong, and sell it when gold is weak. So silver prices tend to amplify whatever is happening in gold. Over the dozen years since silver's secular bull was born, its daily price action has had a 92% r-square with gold's. Over 11/12ths of all silver action is statistically explainable by gold's!

So no silver discussion is complete without considering gold. Brutal silver corrections only happen when gold is exceptionally weak, and big silver uplegs only run when gold is also rallying in parallel uplegs of its own. This silver-launchpad concept of major support zones converging today is impossible to fully understand without considering gold's impact on the equation. Gold ties in intimately with silver support approaches.

Just 4 months ago in late June when silver scraped $18.50, it hit the major secular support line rendered above. This line extends back nearly a decade, even beyond the 2005 origin of this chart. Though old and strong, silver rarely hits this powerful secular support zone. The last time was early 2010, before that during and after 2008's epic stock panic, and before that way back in 2005. All these events were very bullish.

After each time secular support was hit, silver almost immediately started climbing relentlessly in what would grow into its biggest uplegs of its entire secular bull! And just like silver's 2013 secular-support approach, the prior times also happened after massive corrections when silver's price had fallen well behind gold's own. Silver recently bouncing off this secular support line is its most bullish omen in years.

Gold and therefore silver have always tended to drift sideways to lower during the summer doldrums, a period of weak demand seasonally. That was the case in August 2005 when silver slumped below its secular support line. But out of that same technical support zone silver just bounced off of this summer, it soon rocketed 124% higher in well under a year in one of this white metal's signature parabolic uplegs.

When any price rockets as fast as silver's does when investors favor it, greed and euphoria soon burn themselves out and that price collapses. Indeed silver soon plummeted by over a third in just a month in June 2006, which is simply par for the course in the volatile silver realm. But that again hammered silver down near its secular support line, from which silver launched into another massive 114% parabolic upleg.

That peaked just under a couple years later, in March 2008. Silver then corrected and consolidated, but soon got sucked into the most extreme fear event we'll ever witness in our lifetimes. 2008's once-in-a-century stock panic was an epic fear maelstrom that even sucked in gold, which naturally led to a frantic flight out of silver. In just a matter of months, the silver price had plummeted a gut-wrenching 57%!

Back in late 2008 and early 2009, much like in June and July this year, silver sentiment was dominated by the worldview that this metal's secular bull market was dead. Traders extrapolated silver's exceptional and inherently-unsustainable panic-driven selloff as something that would persist indefinitely. But as all contrarians know, consensus is always wrong at major highs and major lows when greed or fear get too extreme.

Silver had even been bashed below its secular support by the stock-panic selling, something we saw to a smaller extent this year in June and July. But back then, like today, silver prices had fallen way behind gold's. Silver is something of a sentiment indicator for gold, because it gets overbought and surges ahead when gold is particularly strong. Then when gold is exceptionally weak, silver gets oversold and falls behind.

The close relationship between silver prices and gold prices is best understood with a simple ratio, the Silver/Gold Ratio. The SGR divides the daily silver price by the gold price. Back in early 2009 just after the stock panic, when silver was still trading in the $12s, I used the SGR to argue that silver was due for a major upleg to catch back up with the gold price. And that contrarian forecast proved dead right of course.

Silver would ultimately skyrocket a mind-boggling 443% higher over the next 2.4 years, as a normal upleg ballooned into a euphoric parabolic blowoff! Check it out on this chart in late 2010 and early 2011, it was utterly amazing. Since silver is such a tiny market in the grand scheme of things, every upleg has the potential to evolve into such a super-rally. Silver's extreme volatility is the main reason it is so enticing.

When silver really starts regaining favor again in a big way, the flood of investor capital deluging in far outstrips any near-term supply. So silver explodes parabolically until greed and euphoria burn themselves out, which happens when all potential near-term buyers have already bought in. While great fun, the cost of such parabolic explosions is exceptionally long and deep corrections afterwards to rebalance sentiment.

Thus silver corrected sharply into mid-2012, when this metal would have bottomed in normal markets. But the Fed-QE3-driven levitation in the general stock markets soon started to attract most capital away from all alternative investments, including gold. This led to the extraordinary self-feeding gold selloff that snowballed into 2013's anomalous plunge. And by late June, that had dragged silver back to secular support.

Just like at past major secular-support approaches, silver prices had fallen well behind gold's. This is readily evident in this chart. And the combination of silver hitting its secular support, bouncing up off of it despite extreme prevailing bearishness and despair, and falling behind gold is incredibly bullish. Even if we ignore that epic 2011 upleg, the average silver upleg emerging out of similar conditions was still stupendous.

Silver's 2006 and 2008 uplegs weighed in at an average gain of 119% over an average duration of just 1.2 years. Once silver starts running, it tends to move pretty fast. If silver merely experiences a similar upleg out of its recent late-June low, it would power up near $41 by late next year! And since that doesn't require silver to start regaining favor among mainstream investors, just contrarians, it is a conservative target.

Provocatively that also coincides with silver's secular resistance line, which will also hit $41 by later next year. Both silver's 2006 and 2008 uplegs failed at this resistance zone, and the 2010/2011 one nearly did too until the whims of prevailing psychology ignited that parabolic feeding frenzy. So silver exceeding $40 again by sometime next year is an easy bet, simply an average upleg after a secular-support approach.

There is a third support zone involved in today's silver-launchpad convergence that is the most important of all, and it is in that Silver/Gold Ratio. This next chart looks at the SGR, or technically the inverted Gold/Silver Ratio (the same thing) since the SGR yields tiny hard-to-comprehend decimals. It reveals silver has also converged at multiple key support zones relative to gold, which has always been silver's primary driver.

gold silver ratio 2006 2013 investing

For years before 2008's once-in-a-lifetime stock panic, the SGR averaged 54.9x. An ounce of silver was worth about 1/55th of the price of an ounce of gold. This average was derived from SGR action that forged a strong trading range between 60x on the low side and 45x on the high side. When silver was out of favor its price tended to fall to 1/60th the price of gold's, and then rose to 1/45th when it was in favor.

Note that today the SGR is right at the bottom of its pre-panic range, with silver trading near 1/59th the gold price this week. That 60x line is major support for silver relative to gold, both before and since the stock panic. While the SGR was pummeled to absurdly-low extremes by the panic, which I correctly pointed out at the time was wildly bullish, silver indeed soon recovered fully relative to the price of gold.

Even before silver's 2010 upleg shot parabolic in early 2011, the SGR was already back up high into its pre-panic trading range. Then with even mainstream investors starting to plow capital into the tiny silver market, its price skyrocketed so fast that it was soon hitting a bull-high SGR of 32x. While that was an overbought anomaly that couldn't last, which I warned about just beforehand, the SGR's trading range still held.

As silver corrected sharply in 2011, the SGR remained right in the middle of its pre-panic trading range. That action, which often corresponded with very bearish silver sentiment among traders, reestablished the validity of the pre-panic SGR range of 60x to 45x in this post-panic world. And as of this week, the post-panic average SGR is 57.3x, which isn't too far from the long-standing pre-panic average of 54.9x.

So for nearly a decade, any time silver has traded around 1/60th the price of gold it is simply too cheap relative to its dominant driver. A 60x SGR indicates silver is out of favor, sentiment is too pessimistic and bearish. And out of such conditions, major silver uplegs are born. All of the uplegs in silver's secular bull ignited when silver was undervalued relative to gold as revealed by a low SGR. And today we've got one again.

In addition to silver being right at its powerful 60x SGR support now, it is also at a separate ascending post-panic SGR support line. This is a fourth major support zone converging today! It was right off this same line back in late-summer 2010 when the biggest upleg by far of silver's secular bull started marching higher. With silver right at so many major support zones, the odds are overwhelming a young upleg is underway.

While silver's secular technicals gave this white metal a $41 target, the SGR is even more bullish. Silver's next upleg should easily see it regain enough favor among investors to hit the upper resistance of the SGR's range, 45x. At today's $1350 gold that is only $30, but it is still about a third higher than today's out-of-favor silver prices. But gold itself is due to head much higher too in a massive mean-reversion rebound.

Sentiment is so suffocatingly bearish in the precious-metals realm this year that the vast majority of investors have no idea how anomalous 2013's gold prices are. In 2012 which was by no means a strong year for gold, the yellow metal still averaged $1669! So seeing $1650 again as the GLD mass exodus reverses and speculators' gold-futures longs and shorts normalize again is nothing, all but guaranteed.

At $1650 gold and a resistance-level SGR of 45x, silver would approach $37 which is 2/3rds higher than today's levels. And of course the higher gold goes, the more bullish silver's outlook becomes. If gold retests its August 2011 bull-to-date high near $1900, which is very likely as the Fed continues to aggressively monetize Treasuries, a 45x SGR would put silver above $42. That's about 7/8ths higher than today.

But such epic bearishness and universal despair converging with four major support zones in recent months means it wouldn't be a surprise at all if silver breaks out of its SGR trading range. Market sentiment is like a giant pendulum, the farther it is stretched in one direction the more momentum its counterswing has to the opposite extreme. So there is another SGR target that is intriguing, its pre-panic support.

Before 2008's wildly-anomalous stock panic, this support line never failed. The SGR not only regained it in early 2011 as silver roared back into favor with investors, but it surged far above it. Today this old SGR support zone is up near 38x, and is climbing by about 3 points per year. So a year from now, about the average time for a major silver upleg, it will be up near 35x. This in-favor scenario is super-bullish for silver.

At the same $1350, $1650, and $1900 gold levels, a 35x SGR implies silver prices near $39, $47, and $54 respectively! The potential silver gains from here as silver eventually migrates from deeply out of favor to some degree of relative in-favorness again are enormous. And silver will absolutely return to favor in the coming years, as the markets are forever cyclical. Any sentiment extreme next yields to the opposite one.

And as silver's young new upleg first mean-reverts higher then later soars as investors start chasing silver again, the hyper-oversold silver-mining stocks are going to soar. Silver's gold-driven 2013 selling anomaly was so spectacular that elite silver stocks plummeted to insanely-low valuations, some even with unheard of single-digit price-to-earnings ratios. Silver stocks have never been so cheap relative to silver!

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The bottom line is silver today looks to be on a powerful technical launchpad. Despite extreme fear and despair near its brutal late-June lows, silver bounced off the confluence of multiple major support zones and has been rallying on balance ever since. It remains out of favor and way too low relative to gold, which gives silver enormous potential to far outpace gold's advance as the precious-metals uplegs accelerate.

As always emerging out of hyper-bearish major lows, mainstream investors haven't caught on. You won't be hearing about silver's new upleg on CNBC until its lion's share is already past and the big easy gains have already been won. But for the brave contrarians willing to buy low when few others will, the bullish implications of today's silver support convergence offer an exceptional opportunity to get in early and cheap.

 

Gold And Silver – Sticking With The Charts, From A Buddhist Perspective

Posted: 26 Oct 2013 09:34 AM PDT

"If you want to know your past, look into your present conditions. If you want to know your future, look into your present actions." ~Buddhist Saying.

The cliché for that is, "you cannot know where you are going until you know where you have been." One of the most direct applications of this wisdom of the ages is found in charts.

Left to the realities of supply/demand factors, gold and silver would be considerably higher, already. We can think of no other commodity situation with unprecedented demand and shrinking supply that has done anything else than drive price much higher. The fiat cartel will not allow reality to supplant their massive wealth-transfer Ponzi scheme, as it enters the final stages like a cancer consuming everything until inevitable death results from this banker faux-Kabuki theater.

This leaves us with monitoring the measure of price "reality" found in the charts. Lacking an alternative, the COMEX and LBMA remain the questionable arbiter of last resort to see how the marketplace is assessing what "value" to use in determining the current price for gold and silver, as derived from the exchange paper markets. Ultimately, therein lies the most important element, that of timing.

Fortunately, charts are a good thing, providing a past as a guide and pointing to a likely future direction.

Charts are the distillation of all available information, including inside information, even manipulation. It is okay not to be able to understand or read them, but it is a huge mistake to dismiss them. You see the results that include the most highly informed, as well as those with the highest degree of skill in trading. You get a front seat on the battle line, observing first hand what is going on. Too few realize the importance of the valuable information a chart can and does convey.

Some of the finest and most highly regarded minds in the world of PMs have been saying metals are going higher, most particularly over the past few years. The charts have "said" otherwise, and that has been the correct read. Charts are infallible. Why? They are the market. They are the mirror of what the war between supply and demand is. They show the intervening battles between buyers and sellers, and everyone gets to see the results, as they develop, each and every day.

If demand is greater than ever; if supply is shrinking, relative to demand, yet price is and has been moving lower, then the problem is what almost all recognize, manipulation. The charts for both gold and silver have been steadily reflecting that fact. What that fact is telling the world is that the manipulators have been in control, and still are.

If gold is going substantially higher price levels, it must first show an ability to rally above certain resistance levels. That has not happened, in large. The same holds true for silver. If you read about all the reasons why both metals should be at much higher levels, weigh that information with what the charts are revealing.

If you want to make rabbit stew, first you have to catch the rabbit. It you want to see prices go higher, first you have to see them stop going lower. It could not be any simpler.

Within this context, here is our read of the charts.

The reason why the trend is mentioned so frequently is because it tells you if the ocean tide is coming in or going out, as it were, and you do not want to be opposing the direction of prevailing strength. In gold, the trend remains down, but evidence is building that shows there are signs of weakening.

The simplest definition of an up trend is a series of higher swing lows and higher swing highs. The most important information in the weekly chart, after acknowledging the trend is down, it the first higher swing low since the 2011 lows. This is showing factual evidence of a change in market behavior. While the trend is down, it has weakened, but not ended.

What would change the trend? A higher swing high above the August high of 1434. In a down trend, the onus is on buyers to demonstrate a change in market behavior, and this is one of the measures.

If you notice the bars since that August swing high, they have remained relatively large and overlapping, at the same time. In making that observation, we learn buyers have been more active and responsive to selling activity. The proof of that comes from the outcome: a newly established swing low. Price closed at the highest weekly level since the opening week of September. This is a red flag for the bears.

Weekly charts are not used for timing. We need to look at a daily chart for more detail.

gold price weekly 25 october 2013 price

Charts can be a thing of beauty when they capture an ongoing synergy that procedurally leads one in a certain direction, and with a purpose. There are a few aspects found in this daily chart.

On the left side, there is a clustering of closes, at "A." A clustering can lead to a brief pause before resuming the previous trend, [down, in this case], or it can lead to change, as it did here.

After the strong rally bar and swing high, just above 1340, the character of the ensuing correction was labored, taking 11 trading days to retrace a five-day rally. This is a clear message from the market, for anyone to see, although not everyone does despite it being there.

The retest correction ends at "B," and another higher rally follows. What we can now see are two points of support for future reference. After that rally, another correction developed, and its decline stopped at "C," the same price level as "A" and "B." In knowing the past, the market was providing important information in the then present, at "C."

We see the rally that followed "C" was weak, and from that, we could expect either another retest, or even a stronger trend lower. Another clustering of closes and overlapping bars developed at "D," slightly lower than "C," but still in a support area, which we know from knowledge of the past.

The difference between the stronger quality retest at "B" versus the weaker retest at "D" comes from knowing the trend. At "B," we were seeing the early stages of a trend higher. At "D," price has obviously been trending lower, and it take more effort to stop and reverse a down trend.

What we continue to know from the past is even though retest "D" may have been lower than "C," it is still at previous support "A" and "B." We comment that support is an area and not a single straight line or single price level. One has to be more flexible.

Would the "D" cluster be a pause, or would it reverse the down trend, while at support? The answer came on 17 October when price rallied higher on a wide range bar and also on increased volume, "E." At the same time, the trend line off the August high was broken.

After the rally at "E," the market provided more important information in the 3 day correction sideways, a rally ensuing on the third day. Note how little price corrected over that 3 day span. Weak corrections lead to higher prices, and the market's message did not disappoint.

After the next rally, 4th bar from the right, there was only a one day correction, and price began to resume its current love higher. So far, the lack of a downside counter move has been a sign of strength, and price may be absorbing at the minor failed high resistance at the end of September.

The more important resistance level, at least on the daily, is just under 1380. How price gets there and how it reacts to that potential resistance level will provide additional market feedback that will reveal the character of the trend at that point.

The futures are now providing reason to be trading from the long side, that is, the paper market. The other known fundamental factors have already been screaming for purchases of the physical metal, without any question.

The point is to use a chart to provide a context for viewing fundamental considerations.

gold price daily 25 october 2013 price

Silver has been constant in its message since the August breakout gap. Knowledge of the trend, [past], tells us not to expect too much from rallies until there is proven change. From that gap higher rally, a swing high formed two days later. The retest correction of what was a 3 day rally took 7 days to unfold. This is the market telling us price is having an easier time going up, and a harder time declining.

The chart provides more information by showing the labored decline stopped at the gap breakout, [a support point], and a higher swing low was created, a necessary first step in a change of trend. We are being educated about the nature and character of the market via the chart pattern behavior.

silver price weekly 25 october 2013 price

Similar to the daily gold analysis but sharper in subsequent support areas, silver has also been sending a message of change. There were two consecutive labored corrections after a rally, and both are signs of buyers being more in control over sellers who are having more difficulty moving price lower. In a down trend, sellers should be in greater control and be able to move the market more readily.

The two failed retests stopped at previous support. By taking that knowledge of the past and applying it to the present, we are positioned to make a more informed decision about the future. There are both rhyme and reason to be found in the charts. Nothing is hidden. Everyone gets to see the developing information at the same time.

All we can say for certain is that the trend has weakened, but it has not ended. Still, we are being given clues on how to participate from the long side, using close stops. The last 4 trading days appear to be absorbing the effort of the sellers. If that is the case, expect to see higher prices next week.

The fundamentals may be as bullish as can be. The charts are sending a different message, and that has been the case since the 2011 highs.

silver price daily 25 october 2013 price

 

 

Gold And Silver - Sticking With The Charts, From A Buddhist Perspective

Posted: 26 Oct 2013 07:55 AM PDT

Left to the realities of supply/demand factors, gold and silver would be considerably higher, already. We can think of no other commodity situation with unprecedented demand and shrinking supply that has done anything else than drive ... Read More...

This Past Week in Gold

Posted: 26 Oct 2013 07:11 AM PDT

Summary: Long term - on major sell signal since Mar 2012. Short term - on buy signals. Gold sector cycle - up as of 10/25. Read More...

US Dollar: Will It Increase Short-Term?

Posted: 26 Oct 2013 07:09 AM PDT

Expectations are mounting over the Fed reducing its Treasury program in December, which could cause the US dollar index to appreciate to 81.60 in the short term. Nonetheless, the Fed should keep its monetary policies unchanged until 2014. Read More...

Gold And Silver From A Buddhist Perspective

Posted: 26 Oct 2013 02:06 AM PDT

“If you want to know your past, look into your present conditions. If you want to know your future, look into your present actions.” ~Buddhist Saying. The cliché for that is, “you cannot know where you are going until you know where you have been.” One of the most direct applications of this wisdom of the ages is found in charts. Left to the realities of supply/demand factors, gold and silver would be considerably higher, already. We can think of no other commodity situation with unprecedented demand and shrinking supply that has done anything else than drive price much higher. The fiat cartel will not allow reality to supplant their massive wealth-transfer Ponzi scheme, as it enters the final stages like a cancer consuming everything until inevitable death results from this banker faux-Kabuki theater.

Silver Price Powerful Technical Launchpad, Could Easily Hit $41 by Late 2014

Posted: 26 Oct 2013 01:11 AM PDT

Silver has suffered a rough year, but its fortunes are changing.  In recent months its price has firmed at the convergence of multiple major support zones, a powerful technical launchpad.  Silver has soared in parabolic uplegs from the handful of similar past convergences, a very bullish omen.  And with silver languishing so low in its trading range relative to gold, it has enormous potential to catapult far higher soon. After plummeting a brutal 39% in the first half of 2013, silver naturally remains deeply out of favor today.  Investors don’t want to touch it with a ten-foot pole, convinced silver will soon roll over to plumb ugly new depths.  Investors as a herd always hit peak bearishness after exceptionally-large selloffs, extrapolating the downtrend continuing indefinitely.  But when major lows are witnessed is exactly the wrong time to be bearish.

Alasdair Macleod: The adverse effects of monetary stimulation

Posted: 25 Oct 2013 09:07 PM PDT

11:04a ICT Saturday, October 26, 2013

Dear Friend of GATA and Gold:

Monetary stimulation by central banks, GoldMoney research director Alasdair Macleod writes, benefits a privileged few -- the people closest to the money's entry point in the economy -- while leaving the great majority with nothing but inflation. Macleod's commentary is headlined "The Adverse Effects of Monetary Stimulation" and it's posted at GoldMoney's Internet site here:

http://www.goldmoney.com/en-gb/news-and-analysis/news-and-analysis-archi...

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



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http://www.jsmineset.com/2013/10/22/florida-qa-session-announced/



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Gold producers accused over 'misleading' data

Posted: 25 Oct 2013 08:59 PM PDT

By Neil Hume
Financial Times, London
Friday, October 25, 2013

http://www.ft.com/intl/cms/s/0/6606e0d6-3d96-11e3-b754-00144feab7de.html

A furious row has broken about between a high-profile gold investor and the industry body charged with promoting the precious metal on behalf of the world's biggest gold producers.

Eric Sprott, chief executive of Sprott Asset Management, which runs several bullion funds, has accused the World Gold Council of painting a misrepresentative picture of the real demand for gold.

In an open letter published early this week --

http://sprott.com/markets-at-a-glance/open-letter-to-the-world-gold-coun...

-- Mr Sprott said a massive imbalance between supply and demand was not being reflected in the gold price because widely followed statistics circulated by the WGC were misleading.

... Dispatch continues below ...



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"Over the past few years, we have seen incredible demand for gold," he wrote in the letter. "But demand statistics reported by the World Gold Council consistently misrepresent reality, most with regard to Asia."

Mr Sprott believes annualised demand for gold could be more than 3,000 tonnes more than supply.

Gold has fallen 20 per cent this year and is on course for its first annual loss in more than a decade.

Concerns about an end to ultra-loose US monetary policy and heavy selling by institutional investors have been among the factors driving the price lower.

On Friday, gold, which started the year at almost $1,700 a troy ounce, was trading at $1,350.

"I urge the leaders of the WGC, for the benefit of their members, to improve the quality of their data and find alternative sources than GFMS, which paints a misleading picture of the demand for gold," Mr Sprott wrote.

GFMS, which is owned by Thomson Reuters, is a leading precious metals consultancy and produces one of the most authoritative reports on the gold industry.

But the WGC has hit back, saying Mr Sprott's estimates of gold demand lacked sophistication.

"The use of import data as a proxy to measure gold demand is somewhat simplistic and does not take into account factors such as round-tripping and stocking/destocking," the WGC said in a statement. "To effectively measure gold demand, a more detailed holistic analysis is required."

Thomson Reuters GFMS said it stood by its 2013 supply and demand gold estimates. The figures were "based on highly detailed on-the-ground analysis by a large team of analysts based around the world and which are figures supported by experts at the World Gold Council," the company said.

* * *

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

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New Orleans, Louisiana

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

* * *

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

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

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



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http://www.goldmoney.com/?gmrefcode=gata


Chris Martenson: The Fed can only fail

Posted: 25 Oct 2013 08:39 PM PDT

10:36a ICT Saturday, October 26, 2013

Dear Friend of GATA and Gold:

Market analyst Chris Martenson argues in his new commentary, "The Fed Can Only Fail," that with debt in the United States growing so much faster than the economy, the debt will be serviceable only with currency devaluation, which will involve a transfer of wealth from financial assets to real assets. Martenson's commentary is posted at his Internet site, Peak Prosperity, here:

http://www.peakprosperity.com/blog/83361/fed-can-only-fail

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



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Buy metals at GoldMoney and enjoy international storage

GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:

http://www.goldmoney.com/?gmrefcode=gata



Join GATA here:

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



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How to profit with silver --
and which stocks to buy now

Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million.

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:

http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp...


Sen. Paul would tie Yellen appointment to Fed audit legislation

Posted: 25 Oct 2013 08:29 PM PDT

10:22a ICT Saturday, October 26, 2013

Dear Friend of GATA and Gold:

While it's probably just a bit of posturing that will pass, Kentucky Sen. Rand Paul is talking about delaying the appointment of Janet Yellen as chairwoman of the Federal Reserve until he can get a vote on his legislation, inherited from his father, former U.S. Rep. Ron Paul, to require full auditing of the Fed:

http://www.reuters.com/article/2013/10/25/us-usa-fed-yellen-idUSBRE99N1F...

The New York Sun approves editorially. The Fed audit legislation, the Sun writes, "would involve not just an accounting of the institution's balance sheet and gold holdings but also an examination of how the Federal Reserve System operates, of its foreign entanglements, and of its monetary philosophy. The Fed's most private records and correspondence, one can imagine, would have to be opened to auditors, along with its unredacted minutes. It strikes us that this is not too much to ask of the Senate as the Fed commences its second century."

The Sun's editorial is headlined "Rand Paul vs. Janet Yellen" and it's posted here:

http://www.nysun.com/editorials/paul-v-yellen/88470/

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



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Join GATA here:

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:

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To contribute to GATA, please visit:

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

Gene Arensberg: Big banks went longer gold amid September decline

Posted: 25 Oct 2013 08:19 PM PDT

10:19a ICT Saturday, October 26, 2013

Dear Friend of GATA and Gold:

Gene Arensberg's Got Gold Report reviews the latest data from the U.S. Commodity Futures Trading Commission and finds that the largest U.S. banks went even more unusually long gold as the price declined in September. The data was delayed by the U.S. government shutdown. Arensberg's analysis is posted at the GGR here:

http://www.gotgoldreport.com/2013/10/gold-and-silver-disaggregated-cot-r...

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



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Jim Sinclair Plans Seminar in Florida

Gold mining entrepreneur and gold advocate Jim Sinclair plans to hold his next financial seminar in Kissimmee, Florida, near Orlando, on Saturday, November 2. Details can be found at his Internet site, JSMineSet, here:

http://www.jsmineset.com/2013/10/22/florida-qa-session-announced/



Join GATA here:

Mines and Money Australia
Melbourne Conference and Exhibition Centre
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New Orleans Investment Conference
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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:

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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:

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To contribute to GATA, please visit:

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CPM Group's Christian denounces whistleblower Maguire at Silver Summit

Posted: 25 Oct 2013 07:39 PM PDT

10a ICT Saturday, October 26, 2013

Dear Friend of GATA and Gold:

A few years ago CPM Group Managing Director Jeff Christian and others in his crowd were claiming that London metals trader and silver market rigging whistleblower Andrew Maguire didn't even exist.

Now, according to reports from the Silver Summit in Spokane, Washington, Christian is trying to discredit Maguire on the basis of an interview Christian had with Maguire's former wife purportedly disclosing that Maguire has not always been in the monetary metals trading business.

Kitco News reports about it here:

http://www.kitco.com/news/2013-10-24/KitcoNews20131024DA-CPM-Group-Alleg...

And MineWeb here:

http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=210106&s...

So Maguire's existence is no longer challenged. Maybe that's progress.

... Dispatch continues below ...



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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:

http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp...



At issue here of course is the credibility of both Maguire and Christian himself as observers of the monetary metals markets. GATA has cited both as authority, Christian particularly for illuminating -- at the March 25, 2010, hearing of the U.S. Commodity Futures Trading Commission and in a written report 10 years earlier -- the extreme leverage in the so-called London "physical" market for the monetary metals:

http://www.gata.org/node/8478

http://www.gata.org/node/8627

Maguire's complaint of manipulation of the monetary metals markets was raised by GATA at that CFTC hearing, he spoke at GATA's conference in London in August 2011, and GATA has publicized interviews with him, particularly those done by King World News and Max Keiser's "Keiser Report" program on the Russia Today network.

Is Maguire less credible because he may not have spent his entire working life in the monetary metals market?

Is Christian more credible because he claims most central banks as clients -- or is he simply more compromised in commenting on those markets?

Maguire says he soon will reply formally to Christian's attack. But Maguire already has offered some defense in an interview with King World News, in which Sprott Asset Management CEO Eric Sprott participates and endorses Maguire's market analysis. Maguire tells KWN that Christian is engaged in "an attempt to discredit my work exposing the unallocated bullion banking system in which he has a vested interest and which he is desperately trying to defend."

An excerpt from the Maguire-Sprott interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/25_M...

While advocates of free and transparent markets in the monetary metals may be grateful for Christian's exposure of his own side in the gold and silver war, some may get a bit too agitated about him, as he is but a small cog in the machinery of central banking and bullion banking who is just trying to make up for the damage done to his side by a couple of moments of candor. The war has gotten far too big for Christian to make much difference in it now. The central banks and bullion banks can't show themselves without giving themselves away. Indeed, they already have given themselves away this year with their increasingly desperate paper bombings of the markets.

Christian is all they have left, and all he has left is to search out ex-wives.

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

* * *

Join GATA here:

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



ADVERTISEMENT

Buy metals at GoldMoney and enjoy international storage

GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:

http://www.goldmoney.com/?gmrefcode=gata


Silver and Gold Prices Broke Through Resistance Levels and Closed Above Their 50 DMA

Posted: 25 Oct 2013 02:33 PM PDT

Gold Price Close Today : 1352.40
Change : 2.20 or 0.16%

Silver Price Close Today : 22.603
Change : -0.183 or -0.80%

Gold Silver Ratio Today : 59.833
Change : 0.577 or 0.97%

Silver Gold Ratio Today : 0.01671
Change : -0.000163 or -0.96%

Platinum Price Close Today : 1451.50
Change : -18.10 or -1.23%

Palladium Price Close Today : 741.70
Change : -2.05 or -0.28%

S&P 500 : 1,759.77
Change : 7.70 or 0.44%

Dow In GOLD$ : $238.00
Change : $ 0.55 or 0.23%

Dow in GOLD oz : 11.513
Change : 0.026 or 0.23%

Dow in SILVER oz : 688.86
Change : 8.21 or 1.21%

Dow Industrial : 15,570.28
Change : 61.07 or 0.39%

US Dollar Index : 79.214
Change : 0.003 or 0.00%

Other than silver's slight weakness today, silver and GOLD PRICES could hardly have performed better this week. Both broke through to resistance levels, dropped back to test support, then closed above their 50 DMA. SILVER and GOLD PRICES have set the stage for higher prices next week. It looks like the long correction is over and the next rally has begun.

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 Broke Through Resistance Levels and Closed Above Their 50 DMA

Posted: 25 Oct 2013 02:33 PM PDT

Gold Price Close Today : 1352.40
Change : 2.20 or 0.16%

Silver Price Close Today : 22.603
Change : -0.183 or -0.80%

Gold Silver Ratio Today : 59.833
Change : 0.577 or 0.97%

Silver Gold Ratio Today : 0.01671
Change : -0.000163 or -0.96%

Platinum Price Close Today : 1451.50
Change : -18.10 or -1.23%

Palladium Price Close Today : 741.70
Change : -2.05 or -0.28%

S&P 500 : 1,759.77
Change : 7.70 or 0.44%

Dow In GOLD$ : $238.00
Change : $ 0.55 or 0.23%

Dow in GOLD oz : 11.513
Change : 0.026 or 0.23%

Dow in SILVER oz : 688.86
Change : 8.21 or 1.21%

Dow Industrial : 15,570.28
Change : 61.07 or 0.39%

US Dollar Index : 79.214
Change : 0.003 or 0.00%

Other than silver's slight weakness today, silver and GOLD PRICES could hardly have performed better this week. Both broke through to resistance levels, dropped back to test support, then closed above their 50 DMA. SILVER and GOLD PRICES have set the stage for higher prices next week. It looks like the long correction is over and the next rally has begun.

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.

CME: Gold Market Recap Report

Posted: 25 Oct 2013 01:46 PM PDT

25-Oct (CMEGroup) — Despite some initial weakness today December gold managed to fight its way back into positive ground in the early afternoon trade and that rekindled some bullish sentiment toward the market. Some players think that gold is poised to rise into an upcoming Fed meeting as economic data isn’t thought to be strong even to alter the Fed’s decision to delay tapering. While the Non farm payroll report released earlier this week was considered old news, the government shut down is thought to have added to the slowing in the US. Therefore seeing a Fed event ahead probably leaves the bull camp with a bullish fundamental theme. Seeing gold stand up in the face of adverse currency market action was also seen as a positive by some traders today. An issue that might provide gold with some support early next week is the prospect of a platinum strike in South Africa next week.

[source]

Gold Daily and Silver Weekly Charts - FOMC and Option Expiration Next Week

Posted: 25 Oct 2013 01:36 PM PDT

Gold Daily and Silver Weekly Charts - FOMC and Option Expiration Next Week

Posted: 25 Oct 2013 01:36 PM PDT

Monetary System for a Civilized World

Posted: 25 Oct 2013 12:58 PM PDT

Stock investors are still acting as though Janet Yellen will be good for the economy… or at least good for stock prices.

But will she be?

Yellen has no business or investment experience. Her entire career has been spent in academia and in public policy institutions. She has never started a business or had a job in the private sector.

People did not suddenly awake to a civilized dawn. Instead, the progress from barbarism to civilization came in fits and starts, with much backing up and many detours.

Does she have any idea how an economy functions? Not on the evidence…

In 2005, she described the developing housing bubble as a "good-sized bump in the road." Was she worried about it? Apparently not. "The economy ought to be able to absorb the shock," she claimed.

But how would she know?

And when, two years later, the economy hit the "bump" it turned out she didn't know anything. The economy wasn't able to absorb the shock at all. Instead, the wheels flew off… and the economy went into a ditch.

And now, it's late October and Yellen will soon be running the biggest, most powerful banking cartel the world has ever seen. Good luck to us all!

The days are crisping up in Maryland. Here in Florida, it's still summer.

We've come back to Florida to give a speech about writing. What can we say about it? Only that writing is easy; it's thinking that's hard.

We sat in the airport terminal in Baltimore. One man was reading a novel. Another was watching TV. Another sat down beside us and began playing a game on his iPhone. A woman was reading Woman's Day magazine. Others talked on their phones.

Are we the only ones here who are thinking about the Fed’s interest rate policy? We're clearly the dumbbell in this group. Most people have better things to do.

But now we're going to go back to thinking about how the Fed and the dollar fit into the general scheme of things – the really big picture, looking back 10,000 years and beyond.

The critical change came around 5,000 years ago. Little by little, man became "civilized." We use the word cautiously. It is like a hand-grenade without a pin. It could blow up on us at any moment.

What is civilization, anyway? Is it a good thing? A bad thing? Who's really civilized, and who's not? No matter what you say, you are bound to offend someone with deep prejudices on the subject…

But what the heck? Damn the torpedoes… full speed ahead!

Civilization is different from barbarism. Most anthropologists, archeologists and philosophers focus on the wrong things – art, culture and technology, for example. They miss the key differences – money, matrimony and the mandates that people follow.

People did not suddenly awake to a civilized dawn. Instead, the progress from barbarism to civilization came in fits and starts, with much backing up and many detours.

Don't bother to tell us the Germans were supposed to be civilized… yet they exterminated more than a million at Auschwitz… or that Americans are supposed to be civilized, but are sending drones to kill people they've never met. Even the most civilized peoples do uncivilized things. And most peoples, no matter how civilized they have become, still maintain some archaic, barbaric habits and institutions.

As civilization became more complex, the rules grew simpler. Typically, people became monogamous, monotheist and monetarist.

You can see this progress in the Bible. The Old Testament is full of war… and many rules for how people are to get along with one another. In the New Testament, Jesus proposes only one rule, which leaves little place for making war: Do unto others as you would have them do unto you.

In pre-civilized days a man might have as many wives and concubines as he could manage. Civilized, modern men typically have only one. (And that is more than enough for many men.)

In pre-civilized days, commercial transactions were difficult and complex – usually involving a credit-based system which left obligations stretching forward into the future, often unresolved over many generations. Civilized man developed modern money – typically gold – which made it much easier to settle up and move on.

But the most profound difference was that barbaric people used force and violence to get what they wanted; civilized transactions are based on mutual consent and cooperation.

But wait. Where does that leave the dollar and the Fed?

Does the Fed allow willing buyers and sellers to set interest rates as they choose? Or does it force the issue… pushing interest rates around as though they were travelers in the airport security line?

Does the Fed permit investors to discover asset prices without interference? Or does it try to fix prices, claiming that it knows better than the rest of the world put together?

We know that the economy of the Soviet Union, driven by brute force, was a disaster. How do you think the economy of the US – heavily persuaded by the padded force of the Yellen-led Fed – will fare?

Is today's Fed a modern, civilized institution? Or an archaic throw-back to the past?

And what about the dollar itself? Is it a form of modern money… or a barbarous relic, depending on the police power of the state to give it value?

More to come…

Regards,

Bill Bonner
for The Daily Reckoning

Ed. Note: The whole modern monetary system is based on blind faith in unworthy governmental institutions. To say that system is problematic is an understatement. But there are ways around this system that can help you protect and grow you wealth no matter what the Feds do to destroy the dollar. That’s one of the main focuses of The Daily Reckoning email edition, and it’s why so many of its readers are prepared for whatever happens next. Sign up for FREE, right here, and start getting the full story.

Maguire & Sprott Refute Allegations & Discuss War In Gold

Posted: 25 Oct 2013 12:45 PM PDT

Today Andrew Maguire & billionaire Eric Sprott spoke with King World News and refuted allegations against Maguire, and also spoke about the ongoing war in the gold market. Below is what Maguire & Sprott had to say in this incredibly powerful and timely interview.

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

Silver Launchpad

Posted: 25 Oct 2013 12:38 PM PDT

Silver has suffered a rough year, but its fortunes are changing. In recent months its price has firmed at the convergence of multiple major support zones, a powerful technical launchpad. Silver has soared in parabolic uplegs ... Read More...

Central bankers trust gold more than money

Posted: 25 Oct 2013 12:30 PM PDT

The Real Asset Co

Dollar's Breakdown, Stocks' Breakout and Implications for Gold

Posted: 25 Oct 2013 12:19 PM PDT

After 12 years of gains, gold has fallen nearly 20% this year. The price of gold has been pressured for much of this year by the view that the Fed would end its stimulus program soon because of strength in the U.S. economy. Read More...

The Fed Can Only Fail: And we’ll all lose

Posted: 25 Oct 2013 12:04 PM PDT

by Chris Martenson

The basic predicament we are in is that the current crop of leaders in the halls of monetary and political power does not appear to understand the dimensions of our situation.

The mind-boggling part about all this is that it’s not really all that hard to grasp.

Our collective predicament is simply this: Nothing can grow forever.

Sooner or later, everything must cease growing, or it will exhaust its environs and thereby destroy itself. The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be “normal.”

But the problem is – or the predicament, I should more accurately say – is that the recent past was not normal. You’ve probably all seen this next chart. It shows total debt in the U.S. as a percent of GDP:

Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail.

It is simply not possible to grow your debts faster than your income forever. However, that’s been the practice since 1980, and every current politician and Federal Reserve official developed their opinions about ‘how the world works’ during the 33-year period between 1980 and 2013.

Put bluntly, they want to get us back on that same track, and as soon as possible. The reason? Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement during that period. And, frankly, a huge number of financial firms and political careers will melt away if/when that credit expansion finally stops.

And stop it will; that’s just a mathematical certainty. It’s now extremely doubtful that the Fed or D.C. will willingly cease the current Herculean efforts towards reviving this flawed practice of borrowing too much, too fast. So we have to expect that it will be some form of financial accident that finally breaks the stranglehold of failed thinking that infects current leadership.

The Math

As a thought experiment, let’s explore the math a little bit to see where it leads us. After all, I did just say that a poor end to all of this is a “mathematical certainty,” so let’s test that theory a bit. I think you’ll find this both interesting and useful.

To begin, Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing. So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It’s pretty much everything debt-related.

What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities. So the Social Security shortfalls are not in there, nor are the underfunded pensions at the state or corporate levels. TCMD is just debt, plain and simple.

As you can see in this next chart, since 1970, TCMD has been growing exponentially and almost perfectly, too. (The R2 is over 0.99, for you science types):

I’ve pointed out the tiny little wiggle that happened in 2008-2009, which apparently nearly brought down the entire global financial system. That little deviation was practically too much all on its own.

Now debts are climbing again at a quite nice pace. That’s mainly due to the Fed monetizing U.S. federal debt just to keep things patched together.

As an aside, based on this chart, we’d expect the Fed to not end their QE efforts until and unless households and corporations once more engage in robust borrowing. The system apparently ‘needs’ this chart to keep growing exponentially, or it risks collapse.

Okay, one could ask: Why can’t credit just keep growing?

Here’s where things get a little wonky. But if you’ll bear with me, you’ll see why I’m nearly 100% certain that the future will not resemble the past.

Let’s start in 1980, when credit growth really took off. This period also happens to be the happy time that the Fed is trying to (desperately) recreate.

Between 1980 and 2013, total credit grew by an astonishing 8% per year, compounded. I say ‘astonishing’ because anything growing by 8% per year will fully double every 9 years.

So let’s run the math experiment as ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That’s all. Nothing fancy, simply the same rate of growth that everybody got accustomed to while they were figuring out ‘how the world works.’

What happens to the current $57 trillion in TCMD as it advances by 8% per year for 30 years? It mushrooms into a silly number: $573 trillion. That is, an 8% growth paradigm gives us a tenfold increase in total credit in just thirty years:

For perspective, the GDP of the entire globe was just $85 trillion in 2012. Even if we advance global GDP by some hefty number, like 4% per year for the next 30 years, under an 8% growth regime, U.S. credit would be twice as large as global GDP in 2043 (!)

If that comparison didn’t do it for you, then just ask yourself: Why, exactly, would U.S. corporations, households, and government borrow more than $500 trillion over the next 30 years? The total mortgage market is currently $10 trillion, so might the plan include developing an additional 50 more U.S. residential real estate markets?

More seriously, can you think of anything that could support borrowing that much money? I can’t.

So perhaps the situation moderates a bit, and instead of growing at 8%, credit market debt grows at just half that rate. So what happens if credit just grows by 4% per year?

That gets us to $185 trillion, or another $128 trillion higher than today – a more than 3x increase:

Again, What might we borrow (only) $128 trillion for, over the next 30 years?

When I run these numbers, I am entirely confident that the rate of growth in debt between 1980 and 2013 will not be recreated between 2013 and 2043. With just one caveat: I’ve been assuming that dollars remain valuable. If dollars were to lose 90% or more of their value (say, perhaps due to our central bank creating too many of them?), then it’s entirely possible to achieve any sorts of fantastical numbers one wishes to see.

Think it could never happen?

Conclusion (to Part I)

This is the critical takeaway from all of the math above: For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a lot of value. I truly believe this is the Fed’s grand plan, if we may call it that, and it has nothing to do with what’s best for the people of this land. Instead, it’s entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.

That is, the Fed is beholden to a broken system; not anything noble.

In Part II: The Near Future May See One of the Biggest Wealth Transfers in Human History, we dive fully into the logic why GDP growth is very unlikely to support the rate of credit expansion that the Federal Reserve wants (or, more accurately, needs). And what will happen if it indeed doesn’t? A lot of painful, awful things – but central among them is a currency crisis.

Amidst the ensuing unpleasantness will be an awakening within today’s hyper-financialized markets to the huge imbalance now existing between paper claims and ownership of real things. A massive wealth transfer from those with ‘paper wealth’ (stocks, bonds, dollars) to those owning tangible assets (the productive value of which can’t easily be inflated away) will occur – and quickly, too.

Suggesting the key objective for today’s investor is answering: How do I make sure I’m on the right side of that wealth transfer?

Reposted with the permission of Chris Martenson and PeakProsperity.com.

The Daily Market Report

Posted: 25 Oct 2013 11:21 AM PDT

Gold Scores Second Consecutive Weekly Gain, but Where’s the Inflation?


25-Oct (USAGOLD) — Gold recovered from modest overseas corrective activity to trade little changed on the day. The yellow metal appears poised to record its second consecutive weekly gain.

Gold snapped back from earlier losses after a peek deeper into better than expected durable goods orders in September actually proved to be a disappointment. Additionally, the University of Michigan consumer sentiment final print for October missed expectations.

At 73.2, consumer sentiment is the weakest we’ve seen all year. That has to be a source of great consternation to retailers as we head into the all-important Christmas shopping season. Will those retailers try to get out in front of shoppers with aggressive pre-holiday sales?

That raises an important point relevant to gold: The yellow metal tends to fair quite well during inflationary periods. However, according to official data anyway, inflation remains quite tepid. August CPI was just 1.52% y/y (core 1.76% y/y). The Fed’s preferred measure of inflation, the PCE price index is even lower at 1.2% y/y in August (core 1.2%). That’s well below the Fed’s own target of 2%.

That’s right, the Fed, through all if its monetary machinations is attempting to create 2% inflation. And despite a balance sheet that is now approaching $4 trillion ($3.84 trillion as of 23-Oct), they have failed miserably in their effort to manufacture inflation.

That is part of the reason that I remain so skeptical about tapering. I believe the Fed will continue to push on that string, until they get the inflation they so desperately desire. When they succeed however, that inflation may well come with a vengeance and many fear they won’t be able to walk it back once it starts.

The absence of “offical” inflation is likely part of the reason that gold has been under pressure over the past two-years. Yet, five years after Lehman Brothers collapsed, business and household deleveraging continues amid persistent concerns about a soft economy, continued high unemployment and shaky sentiment.

But lest you think there really is no inflation, I encourage you to read Grant William’s recent piece called Chekhov’s Gun. “Inflation goes where the money goes — and the money is going to the wealthy,” Williams writes. He notes staggering inflation in the prices of racehorses, high grade tuna (for sushi) and diamonds. See also some of the recent prices paid for art and high end real estate in Manhattan and London.

Without the Fed’s aggressive measures however, I imagine we very well could be in the midst of a deflationary spiral, and that gentle reader is the central bank’s worst nightmare. I hasten to point out that historically gold has fared quite well during deflationary periods (see Great Depression and more recent Great Recession), but more importantly, if the opposite happens, if the Fed gets its wish, you’ll want to already be properly positioned in gold.

Now is the time to build your position, when the inflation risks are still hidden to most by the horizon and prices are at reasonable levels. When those risks clear the horizon, investors will be scrambling to get gold and the price will rise accordingly.

Anyone who follows the gold market even casually know that a great deal of physical gold has moved from weak hands here in the west to strong hands in the east over the past two-years. Even if the price rises significantly, perhaps amid the manifestation of inflationary pressures, those tonnes are not coming back to the west. Now is the time to be building/adding to your hedges.

Top TSX gold companies outstrip precious metals – except one

Posted: 25 Oct 2013 10:21 AM PDT

By and large TSX gold companies catapulted off gold’s recent gains, though one Canadian miner barely got any lift.

Read more….

Harmony Gold CEO’s pay drops as stock declines 53%

Posted: 25 Oct 2013 10:21 AM PDT

Graham Briggs earned R11.2 million in the year through June, compared with R14 million the previous year, according to the company's annual report.

Read more….

Best week in 11 for gold due to short covering

Posted: 25 Oct 2013 10:21 AM PDT

A combination of weak US data, a slump in the Dollar and positive Chinese economic data helped trigger a wave of short covering, says HSBC.

Read more….

As the gold price jumps in India, jewellers unveil new schemes to lure buyers

Posted: 25 Oct 2013 10:21 AM PDT

As the price of gold reaches a new high in India in the run up to Diwali, bullion houses lure buyers with benefits beyond mere adornment.

Read more….

U.S. Dollar's Breakdown, Stocks' Breakout and Implications for Gold

Posted: 25 Oct 2013 07:51 AM PDT

After 12 years of gains, gold has fallen nearly 20% this year. The price of gold has been pressured for much of this year by the view that the Fed would end its stimulus program soon because of strength in the U.S. economy. However, some recent (weaker than expected) economic data, along with the 16-day U.S. government shutdown, have suggested that the central bank may keep its bond purchase in place for longer and increased gold's safe-haven appeal. What impact did these circumstances have on the yellow metal?

Gold Best Week in 11 for on US Short-Covering

Posted: 25 Oct 2013 07:31 AM PDT

The PRICE of wholesale gold slipped but held near 1-month highs Friday morning in London, heading for the strongest week-on-week gain since mid-August at $1343 per ounce. Rising 1.7% from last Friday's finish, gold prices lagged silver – up 2.3% for the week – as European stock markets held flat and Asian stock markets fell hard.

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