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Thursday, November 28, 2013

Gold World News Flash

Gold World News Flash


On the Trail of Juniors with Blue-Sky Potential

Posted: 28 Nov 2013 07:00 AM PST

As the price of gold rose upward, junior miners chased ounces at all costs. This was a huge mistake, says Eric Coffin, because it resulted in unexciting projects, low margins and a depressed market. In this interview with The Gold Report, the publisher of Hard Rock Analyst explains that new discoveries with high margins are the essence of the junior.

Part Two: THE DOUBLE FACE OF GOLD – Dimitri Speck

Posted: 28 Nov 2013 12:20 AM PST

“The Matterhorn Interview – 25 Nov 2013: Dimitri Speck – Part 2″

In the second part of this exclusive video interview (18 mins) for Matterhorn Asset Management, independent financial journalist Lars Schall talked with book author Dimitri Speck about, inter alia: the prime virtues of gold as the antagonist of the fiat money/credit system; the notable central bank arrangement

Read the rest

Jim’s Mailbox

Posted: 28 Nov 2013 12:09 AM PST

Tony, The current suppression of the gold price is limited in time and likely price for many reasons. The people behind the suppression understand the value of gold and you can be assured they will be holding the most gold of anybody when gold turns and resumes its uptrend. Geopolitical events do have the capacity... Read more »

The post Jim’s Mailbox appeared first on Jim Sinclair's Mineset.

Asian Metals Market Update

Posted: 27 Nov 2013 11:04 PM PST

Gold and silver are looking bearish at the moment and have room to fall further. The rise in bitcoin prices over $1000 is luring more and more new investors to look at bitcoin as an investment. I think 2013 could mark the beginning of a new currency which is not controlled by central banks. Different forms of electronic money will be here to stay.

Gold, the Economy, and a Whiff of Stagflation

Posted: 27 Nov 2013 11:00 PM PST

Nichols on Gold

Why Gold Stocks Are Not a Substitute for Gold

Posted: 27 Nov 2013 09:58 PM PST

An investor who was correctly bullish on gold in late 2004 had three basic investment options to capitalize on an increase in the price of gold: Invest in physical gold Invest in a proxy for physical gold such as the SPDR Gold Shares (GLD) Invest in gold mining companies The investor who picked option three [...]

I Sleep Better With Gold Holdings Than Equities: Merk

Posted: 27 Nov 2013 09:40 PM PST

from KitcoNews:

Fantastic Chart Shows Key Commodity That May Help Gold

Posted: 27 Nov 2013 09:01 PM PST

On the heels of some interesting trading in global markets and with gold and silver under recent pressure, today top Citi analyst Tom Fitzpatrick sent King World News a fantastic chart which shows a key commodity may be ready to explode higher. If this is the case it will be extremely constructive for gold. Below is what Fitzpatrick had to say, along with his incredibly key chart.

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

Peak Gold – 75% of All Gold Deposits Have Already Been Mined

Posted: 27 Nov 2013 08:52 PM PST

The basic law of supply and demand dictates the quantity of goods offered for sale.  If prices are low and goods cannot be sold at a reasonable profit, producers will be unmotivated to increase production.  If prices  increase as demand for a product is soaring and producers can reap high returns, supply will increase as [...]

Wednesday Humor: The 10 Principles Of Economics, Revisited

Posted: 27 Nov 2013 06:18 PM PST

Some clarification from Wu Tang Finance on the ten key principles of economics...

"they ain't no such thang as free lunch... if you haven't figured that out yet in yo life, we is shaking our heads at ya...

 

PV=MV bitches. Velocity of money just not picking up boo. People been deleveraging up in here."

Via @Wu_Tang_Finance

THE TEN PRINCIPLES OF ECONOMICS, REVISITED

1.People Always Facing Tradeoffs.

They aint no such thang as free lunch. If you haven’t figured that out yet in yo life, I’m shaking my head at ya. To get yo hands on one thing, you gotta give up something else in return. Making decisions requires trading off one goal against another. Whether it be fo’ yo goals of wealth, fo’ shawties, drank or food, you gotta give up something in return.

 

2.The Cost of Something is What You Give Up to Get It.

Decision-makers gotta understand both the direct and indirect costs of their actions. Cash rules everything around you, but you best protect ya neck from negative externalities. Sometimes that paper clouds ya judgment. Yo Enron, shawty!! What did dat accounting scandal do to yo reputation? Company? U was chasin that short term gain now look atcha you took down an oil giant and a storied accounting firm with ya sorry ass.

 

3.Rational Dealers Think at the Margin.

True thugs live their lives at the margin (http://rapgenius.com/1148769). A rational gangsta ass banker takes action if and only if (“iff” for you math geeks out there, shoutout & respects to the QED crew) the marginal benefit of such action exceeds dat marginal cost. Don’t hold too much product on ya if the cost of carry be high. Whether if you slanging financial products or if u slanging other “high margin” goods.


 

4.People Respond to Incentives.

Behavior changes when costs or benefits change. This is truuuuuu in all aspects of life. Think bout thatshawty u chasin. Why u in hot pursuit tho? Incentives? Why u working them long nights? To get that cream? Simple shit bruh.

 

5.Trade Can Make Everyone Better Off.

Free trade of goods and services allow individuals to specialize skills, be rewarded economically and benefit others all at once, which gets me moderately turnt. That division of labor be some trill ish. Governments sometimes create disincentives that make people worse off.


 
 
6. Markets Are Usually a Good Way to Organize Economic Activity.

Watchout otherwise that invisible hand gonna slap you hard in the face. Households and firms that are interacting in the free market allocate resources efficiently.

THIS IS A HARD ONE TO COMPARE TO THE REAL WORLD THO. THE GOVERNMENT HAS ITS HANDS ALL UP IN MY PRIVATE MARKETS AND THAT’S NOT COOL DAWG SOME MARKETS IS UNDER 18 YEARS OLD. For real, look at markets where the government is less involved….technology for example. PRICES DECREASE OVER TIME AS RESOURCES ARE ALLOCATED EFFICIENTLY TOWARD PROFIT GENERATIN PRODUCTS. The opposite of this prosperous, tax revenue-generating, catalyst of economic activity is those markets organized by central planners within the government. Think higher education prices (ANNUAL PRICE INCREASES ARE HIGH AF) and healthcare costs (DAMN I GET FADED THINKING BOUT THOSE PRICES). Those markets are controlled by government whether it be credit monopolization or price oversight….


 

7.Governments Can Sometimes Improve Market Outcomes.

NAH JUST KIDDING DUDE WAS FADED WHEN HE THOUGHT OF THIS ONE LOL.

 

8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services.

What explains these big-ass differences up in livin standardz among countries over time, biatch? Almost all variation in livin standardz be attributable to differences up in countries' productivity (goods and services, yo). Productivitizzle is tha quantitizzle of skillz produced from each unit of a workers time. In *theory*, the growth rate of a nation’s productivity determines tha growth rate of average income.

 

9.Prices Rise When the Government Prints Too Much Money.

In a *simple* supply and demand relationship, if one increases the supply of a good like mad, then the price of that good will have to decrease.
This one trips me out when we consider the past few years of the dollar’s value, B. This is where I need some expert Atlantic-economist-journalist ta tell me why our crazy asses have peeped no "inflation" since embarkin up in all dat asset purchasing, or QE. Put a house up on that ass, that’s an ass-state.
While many worry that tha rapid rise up in tha Fed’s balance sheet (value of securities held at da Federal Resereve) will invariably result in a rapid rise up in tha money supply up in tha real economy, this hasn’t been the mf case. Most of tha purchases intended ta pump money tha fuck into tha real economizzle have straight-up sat idle wit tha Fed as excess reserves. Some shawties would argue that the government’s emasure of inflation is whats really trippin.

PV=MV bitches. Velocity of money just not picking up boo. People been deleveraging up in here.

10. Society Faces a Short-Run Tradeoff Between Inflation and Unemployment.

I AINT GONNA GET INTO THAT DUDE PHILLP’S CURVE AT ALL BRUH.  All I gotta say is dat policymakers can and do exploit this tradeoff rockin various policy instruments, n u can take that all the way to yo bulge bracket bank. For example, by changin the amount it spends, the amount it taxes, n' tha amount of cream it prints, Policymakers can influence the combination of inflation n' unemployment tha economy experiences.

 

‘YELLEN HAVE A DREAMMMMM….. of maximal employment. She is from Brooklyn zoo too…RIP ODB…
 
Peace.
 

Howard Marks: "Markets Are Riskier Than At Any Time Since The Depths Of The 2008/9 Crisis"

Posted: 27 Nov 2013 05:43 PM PST

In Feb 2007, Oaktree Capital's Howard Marks wrote 'The Race to the Bottom', providing a timely warning about the capital market behavior that ultimately led to the mortgage meltdown of 2007 and the crisis of 2008 as he worried about "carelessness-induced behavior." In the pre-crisis years, as described in his 2007 memo, the race to the bottom manifested itself in a number of ways, and as Marks notes, "now we’re seeing another upswing in risky behavior." Simply put, Marks warns, "when people start to posit that fundamentals don’t matter and momentum will carry the day, it’s an omen we must heed," adding that "the riskiest thing in the investment world is the belief that there’s no risk."

Excerpted from OakTree Capitals' Howards Marks most recent letter to investors:

Of all the cycles I write about, I feel the capital market cycle is among the most volatile, prone to some of the greatest extremes. It is also one of the most impactful for investors. In short, sometimes the credit window is open to anyone in search of capital (meaning dumb deals get done), and sometimes it slams shut (meaning even deserving companies can’t raise money).

...

The cycles I describe aren’t predictable as to timing or extent. However, their fluctuations absolutely can be counted on to recur, and that’s what matters to me. I think it’s also what Mark Twain had in mind when he said “History doesn’t repeat itself, but it does rhyme.” The details don’t repeat, but the rhyming patterns are extremely reliable.

Competing to Provide Capital

When the economy is doing well and companies’ profits are rising, people become increasingly comfortable making loans and investing in equity. As the environment becomes more salutary, lenders and investors enjoy gains. This makes them want to do more; gives them the capital to do it with; and makes them more aggressive. Since this happens to all of them at the same time, the competition to lend and invest becomes increasingly heated.

When investors and lenders want to make investments in greater quantity, I think it’s also inescapable that they become willing to accept lower quality. They don’t just provide more money on the same old terms; they also become willing – even eager – to do so on weaker terms. In fact, one way they strive to win the opportunity to put money to work is by doing increasingly dangerous things.

This behavior was the subject of The Race to the Bottom. In it I said to buy a painting in an auction, you have to be willing to pay the highest price. To buy a company, a share of stock or a building – or to make a loan – you also have to pay the highest price. And when the competition is heated, the bidding goes higher. This doesn’t always – or exclusively – result in a higher explicit price; for example, bonds rarely come to market at prices above par. Instead, paying the highest price may take the form of accepting a higher valuation parameter (e.g., a higher price/earnings ratio for a stock or a higher multiple of EBITDA for a buyout) or accepting a lower return (e.g., a lower yield for a bond or a lower capitalization rate for an office building).

Further, rather than paying more for the asset purchased, there are other ways for an investor or lender to get less for his money. This can come through tolerating a weaker deal structure or through an increase in risk. It’s primarily these latter elements – rather than securities merely getting pricier – with which this memo is concerned.

History Rhymes

In the pre-crisis years, as described in the 2007 memo, the race to the bottom manifested itself in a number of ways:

There was widespread acceptance of financial engineering techniques, some newly minted, such as derivatives creation, securitization, tranching and selling onward. These innovations resulted in the creation of such things as highly levered mortgage-backed securities, CDOs and CLOs (structured credit instruments offering tiered debt levels of varying riskiness); credit default swaps (enabling investors to place bets regarding the creditworthiness of debtors); and SPACs (Special Purpose Acquisition Companies, or blind-pool acquisition vehicles). Further, the development of derivatives, in particular, vastly increased the ease with which risk could be shouldered (often without a complete understanding) as well as the amount of risk that could be garnered per dollar of capital committed.

 

While not a novel development, there was an enormous upsurge in buyouts. These included the biggest deals ever; higher enterprise values as a multiple of cash flow; increased leverage ratios; and riskier, more cyclical target companies, such as semiconductor manufacturers.

 

There was widespread structural deterioration. Examples included covenant-lite loans carrying few or none of the protective terms prudent lenders look for, and PIK-toggle debt on which the obligors could elect to pay interest “in kind” with additional securities rather than cash.

 

Finally, there was simply a willingness to buy riskier securities. Examples here included large quantities of CCC-rated debt, as well as debt issued to finance dividend payments and stock buybacks. The last two increase a company’s leverage without adding any productive assets that can help service the new debt.

Toward the end, my 2007 memo included the following paragraph:

Today’s financial market conditions are easily summed up: There’s a global glut of liquidity, minimal interest in traditional investments, little apparent concern about risk, and skimpy prospective returns everywhere. Thus, as the price for accessing returns that are potentially adequate (but lower than those promised in the past), investors are readily accepting significant risk in the form of heightened leverage, untested derivatives and weak deal structures. The current cycle isn’t unusual in its form, only its extent. There’s little mystery about the ultimate outcome, in my opinion, but at this point in the cycle it’s the optimists who look best. (emphasis in the original)

Now we’re seeing another upswing in risky behavior. It began surprisingly soon after the crisis (see Warning Flags, May 2010), spurred on by central bank policies that depressed the return on safe investments. It has gathered steam ever since, but not to anywhere near the same degree as in 2006-07.

  • Wall Street has, thus far, been less creative in terms of financial engineering innovations. I can’t think of a single new “modern miracle” that’s been popularized since the crisis.
  • Likewise, derivatives are off the front page and seem to be created at a much slower pace. A full resumption of derivatives creation and other forms of financial innovation appears to be on hold pending clarification of the regulatory uncertainty surrounding acceptable activity for banks.
  • Buyout activity seems relatively subdued. In 2006-07, it seemed a buyout in the tens of billions was being announced every week; now they’re quite scarce. Many smaller deals are taking place, however, including a large number of “flips” from one buyout fund to another, and leverage ratios have moved back up toward the highs of the last cycle.
  • “Cov-lite” and PIK-toggle debt issuance is in full flower, as are triple-Cs, dividend recaps and stock buybacks.

It’s highly informative to assess how the other characteristics of 2007 enumerated above compare with conditions today:

  • global glut of liquidity – check
  • minimal interest in traditional investments – check (relatively little is expected today from Treasurys, high grade bonds or equities, encouraging investors to shift toward alternatives)
  • little apparent concern about risk – check
  • skimpy prospective returns everywhere – check

Risk tolerance and leverage haven’t returned to their pre-crisis highs in quantitative terms, but there’s no doubt in my mind that risk bearing is back in vogue.

...

Perhaps most tellingly, the November 19 Bloomberg story referenced above included the following observation from a strategist whom I’ll allow to go nameless: “The analysis at some point shifts from fundamentals to being purely based on the price action of the stock.” When people start to posit that fundamentals don’t matter and momentum will carry the day, it’s an omen we must heed.

While the extent is nowhere as dramatic as in 2006-07 – and the psychology behind it isn’t close to being as bullish or risk-blind – I certainly sense a significant increase in the acceptance of risk. The bottom line is that when risk aversion declines and the pursuit of return gathers steam, issuers can do things in the capital markets that are impossible in more prudent times.

 

Why Is Risk Bearing on the Rise, and What Are the Implications?

To set the scene for answering the above questions, I’m going to reiterate and pull together some observations from recent memos.

Psychologically and attitudinally, I don’t think the current capital market atmosphere bears much of a resemblance to that of 2006-07. Then I used words like “optimistic,” “ebullient” and “risk-oblivious” to describe the players. Returns on risky assets were running high, and a number of factors were cited as having eliminated risk:

  • The Fed was considered capable of restoring growth come what may.
  • A global “wall of liquidity” was coming toward us, derived from China’s and the oil producers’ excess reserves; it could be counted on to keep asset prices aloft.
  • The Wall Street miracles of securitization, tranching, selling onward and derivatives creation had “sliced and diced” risk so finely – and directed it where it could most readily be borne – that risk really didn’t require much thought.

In short, in those days, most people couldn’t imagine a way to lose money.

I believe most strongly that the riskiest thing in the investment world is the belief that there’s no risk. When that kind of sentiment prevails, investors will engage in otherwise-risky behavior. By doing so, they make the world a risky place. And that’s what happened in those pre-crisis years. When The New York Times asked a dozen people for articles about the cause of the crisis, I wrote one titled “Too Much Trust; Too Little Worry.” Certainly a dearth of fear and a resulting high degree of risk taking accurately characterize the pre-crisis environment. But that was then. It’s different today.

Today, unlike 2006-07, uncertainty is everywhere:

  • Will the rate of economic growth in the U.S. get back to its prior norm? Will unemployment fall to the old “structural” level?
  • Can America’s elected officials possibly reach agreement on long-term solutions to the problems of deficits and debt? Or will the national debt expand unchecked?
  • Will Europe improve in terms of GDP growth, competitiveness and fiscal governance? Will its leaders be able to reconcile the various nations’ opposing priorities?
  • Can Abenomics transform Japan’s economy from lethargy to dynamism? The policies appear on paper to be the right ones, but will they work?
  • Can China transition from a highly stimulated economy based on easy money, an excess of fixed investment and an overactive non-bank financial system, without producing a hard landing that keeps it from reaching its economic goals?
  • Can the emerging market economies prosper if demand from China and the developed world expands more slowly than in the past?

Looking at the world more thematically, a lot of questions surround the ability to manage economies and regulate growth:

  • Can low interest rates and high levels of money creation return economic growth rates to previous levels? (To date, the evidence is mixed.)
  • Can inflation be returned to a salutary level somewhat above that of today? Right now, insufficient inflation is the subject of complaints almost everywhere. Can the desired inflation rate be reinstated without going beyond, to undesirable levels?
  • Programs like Quantitative Easing are novel inventions. How much do we know about how to end them, and about what the effects of doing so will be? Will it prove possible to wind down the stimulus – the word du jour is “taper” – without jeopardizing today’s unsteady, non-dynamic recoveries? Can the central banks back off from interest rate suppression, bond buying and easy money policies without causing interest rates to rise enough to choke off growth?
  • How will governments reconcile the opposing goals of stimulating growth (lower taxes, increased spending) and reining in deficits (increased taxes, less spending)?
  • Will prosperous regions (e.g., Germany) continue to be willing to subsidize profligate and poorer ones (e.g., Spain and Portugal)?

As to investments:

  • When the Fed stops buying bonds, will interest rates rise a little or a lot? Does that mean bonds are unattractive?
  • Are U.S. stocks still attractive after having risen strongly over the last 18 months?
  • Ditto for real estate following its post-crash recovery?
  • Can private equity funds buy companies at attractive prices in an environment where few owners are motivated to sell?

As I’ve said before, most people are aware of these uncertainties. Unlike the smugness, complacency and obliviousness of the pre-crisis years, today few people are as confident as they used to be about their ability to predict the future, or as certain that it will be rosy. Nevertheless, many investors are accepting (or maybe pursuing) increased risk.

The reason, of course, is that they feel they have to. The actions of the central banks to lower interest rates to stimulate economies have made this a low-return world. This has caused investors to move out on the risk curve in pursuit of the returns they want or need. Investors who used to get 6% from Treasurys have turned to high yield bonds for such a return, and so forth.

Movement up the risk curve brings cash inflows to riskier markets. Those cash inflows increase demand, cause prices to rise, enhance short-term returns, and contribute to the pro-risk behavior described above. Through this process, the race to the bottom is renewed.

In short, it’s my belief that when investors take on added risks – whether because of increased optimism or because they’re coerced to do so (as now) – they often forget to apply the caution they should. That’s bad for them. But if we’re not cognizant of the implications, it can also be bad for the rest of us.

Where does investment risk come from? Not, in my view, primarily from companies, securities – pieces of paper – or institutions such as exchanges. No, in my view the greatest risk comes from prices that are too high relative to fundamentals. And how do prices get too high? Mainly because the actions of market participants take them there.

Among the many pendulums that swing in the investments world – such as between fear and greed, and between depression and euphoria – one of the most important is the swing between risk aversion and risk tolerance.

Risk aversion is the essential element in sane markets. People are supposed to prefer safety over uncertainty, all other things being equal. When investors are sufficiently risk averse, they’ll (a) approach risky investments with caution and skepticism, (b) perform thorough due diligence, incorporating conservative assumptions, and (c) demand healthy incremental return as compensation for accepting incremental risk. This sort of behavior makes the market a relatively safe place.

But when investors drop their risk aversion and become risk-tolerant instead, they turn bold and trusting, fail to do as much due diligence, base their analysis on aggressive assumptions, and forget to demand adequate risk premiums as a reward for bearing increased risk. The result is a more dangerous world where asset prices are higher, prospective returns are lower, risk is elevated, the quality and safety of new issues deteriorates, and the premium for bearing risk is insufficient.

It’s one of my first principles that we never know where we’re going – given the unreliability of macro forecasting – but we ought to know where we are. “Where we are” means what the temperature of the market is: Are investors risk-averse or risk-tolerant? Are they behaving cautiously or aggressively? And thus is the market a safe place or a risky one?

Certainly risk tolerance has been increasing of late; high returns on risky assets have encouraged more of the same; and the markets are becoming more heated. The bottom line varies from sector to sector, but I have no doubt that markets are riskier than at any other time since the depths of the crisis in late 2008 (for credit) or early 2009 (for equities), and they are becoming more so.

....

However, Marks has a silver lining,

No, I don’t think it’s time to bail out of the markets. Prices and valuation parameters are higher than they were a few years ago, and riskier behavior is observed. But what matters is the degree, and I don’t think it has reached the danger zone yet.

 

Over the last 2-3 years, my motto for Oaktree has been consistent: “move forward, but with caution."

Silver and Gold Prices Offer Great Buying Opportunities Soon

Posted: 27 Nov 2013 05:31 PM PST

Gold Price Close Today : 1237.80
Change : -3.60 or -0.29%

Silver Price Close Today : 19.63
Change : -0.21 or -1.08%

Gold Silver Ratio Today : 63.05
Change : 0.50 or 0.80%

Silver & GOLD PRICES won't get any relief until the Dow in Gold & Dow in Silver turn down. Today the DiG closed at another new high for the move, 13 oz. against the June high at 12.514 oz. Dow in silver finally gave in & posted a new high at 819.91 oz against the June high at 816.77 oz. Both are monstrously overbought, but that can persist quite a while. We wait.

The GOLD PRICE dropped $3.60 to $1,237.80 on Comex. Silver gave back 21.5 cents and ended at 1963.3 cents.

Behold, how the 5 day chart instructeth us! Overnight Monday-Tuesday gold rose to $1,255, then was slammed on the US open. Dropped to $1,245, but yesterday after the close began rising again, reached $1,254.80 overnight, then was cold-cocked again about the same time, leaving behind a huge gap on the chart from $1,294 to $1,240, and a low at $1,237.30.

Ditto for the SILVER PRICE. Only difference is that silver fell nearly to Monday's low while gold caught hold higher than Monday's $1,225.70, namely, $1,237.30. Actually, there's a modicum of hope buried in that. Also in interest rates rising a teentch today (10 year yield rose 1.48% to 2.736%). Rising rates will help silver & gold by blowing apart the Fed's Zero Interest Rate Policy.

Yet today was the first day of the move gold closed below $1,240. Hard to believe there's not one more plunge coming, and that right soon.

Keep your powder -- or, money, as the case may be -- dry because a great buying opportunity in silver & gold is coming. But we have to wait for some evidence the falling has ended. Steady. Steady. Steady.

The bull market in silver and gold has NOT ended. Keep your eyes on the Federal Reserve's balance sheet. So far they've managed to sideline about $2.5 trillion into bank reserves and keep it out of the money supply. Once interest rates rise, banks will have no incentive to leave reserves with the Fed earning 0.25%. The results will be catastrophic. The Fed remains the best friend silver and gold have.

Tomorrow is the Thanksgiving holiday and I'm taking off Friday, so I am sending you this weekly summary today.

Leading into a holiday week in the US, most everything has traveled sideways, except for silver, gold, & palladium, which have edged down.

The US dollar index today closed below its 20 day moving average & so turned its momentum heading down. Unless the dollar can turn around & close above the last high at 81.58, it is headed back to 79. That might help silver & gold.

Euro was flat today, up 0.4% at $1.3579. However, in the past two days it has once again edged over that upper trading channel line & closed above its 20 & 50 DMAs, so the euro should keep climbing. Six days ago the yen gapped down sharply, and has tumbled since. Dropped another 0.885 today to 97.89 cents/Y100, below the last two lows & evidently headed for 96.40 cents or lower. Amazing what a powerful weapon a jawbone is, especially in a world of illusion.

Dow & S&P500 both made new all time highs today while the Nasdaq Comp made a new high for the move. Dow rose 24.53 (0.15%) to 16,097.33. S&P500 edged up 4.48 (0.25%) to 1,807.23. Both are overripe for a correction, but after that should make one last leg up into first quarter 2014.

Y'all enjoy your weekend!

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 Offer Great Buying Opportunities Soon

Posted: 27 Nov 2013 05:31 PM PST

Gold Price Close Today : 1237.80
Change : -3.60 or -0.29%

Silver Price Close Today : 19.63
Change : -0.21 or -1.08%

Gold Silver Ratio Today : 63.05
Change : 0.50 or 0.80%

Silver & GOLD PRICES won't get any relief until the Dow in Gold & Dow in Silver turn down. Today the DiG closed at another new high for the move, 13 oz. against the June high at 12.514 oz. Dow in silver finally gave in & posted a new high at 819.91 oz against the June high at 816.77 oz. Both are monstrously overbought, but that can persist quite a while. We wait.

The GOLD PRICE dropped $3.60 to $1,237.80 on Comex. Silver gave back 21.5 cents and ended at 1963.3 cents.

Behold, how the 5 day chart instructeth us! Overnight Monday-Tuesday gold rose to $1,255, then was slammed on the US open. Dropped to $1,245, but yesterday after the close began rising again, reached $1,254.80 overnight, then was cold-cocked again about the same time, leaving behind a huge gap on the chart from $1,294 to $1,240, and a low at $1,237.30.

Ditto for the SILVER PRICE. Only difference is that silver fell nearly to Monday's low while gold caught hold higher than Monday's $1,225.70, namely, $1,237.30. Actually, there's a modicum of hope buried in that. Also in interest rates rising a teentch today (10 year yield rose 1.48% to 2.736%). Rising rates will help silver & gold by blowing apart the Fed's Zero Interest Rate Policy.

Yet today was the first day of the move gold closed below $1,240. Hard to believe there's not one more plunge coming, and that right soon.

Keep your powder -- or, money, as the case may be -- dry because a great buying opportunity in silver & gold is coming. But we have to wait for some evidence the falling has ended. Steady. Steady. Steady.

The bull market in silver and gold has NOT ended. Keep your eyes on the Federal Reserve's balance sheet. So far they've managed to sideline about $2.5 trillion into bank reserves and keep it out of the money supply. Once interest rates rise, banks will have no incentive to leave reserves with the Fed earning 0.25%. The results will be catastrophic. The Fed remains the best friend silver and gold have.

Tomorrow is the Thanksgiving holiday and I'm taking off Friday, so I am sending you this weekly summary today.

Leading into a holiday week in the US, most everything has traveled sideways, except for silver, gold, & palladium, which have edged down.

The US dollar index today closed below its 20 day moving average & so turned its momentum heading down. Unless the dollar can turn around & close above the last high at 81.58, it is headed back to 79. That might help silver & gold.

Euro was flat today, up 0.4% at $1.3579. However, in the past two days it has once again edged over that upper trading channel line & closed above its 20 & 50 DMAs, so the euro should keep climbing. Six days ago the yen gapped down sharply, and has tumbled since. Dropped another 0.885 today to 97.89 cents/Y100, below the last two lows & evidently headed for 96.40 cents or lower. Amazing what a powerful weapon a jawbone is, especially in a world of illusion.

Dow & S&P500 both made new all time highs today while the Nasdaq Comp made a new high for the move. Dow rose 24.53 (0.15%) to 16,097.33. S&P500 edged up 4.48 (0.25%) to 1,807.23. Both are overripe for a correction, but after that should make one last leg up into first quarter 2014.

Y'all enjoy your weekend!

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.

Bron Suchecki on the liars, cartel apologists, and the Perth Mint

Posted: 27 Nov 2013 05:16 PM PST

8:15p ET Wednesday, November 27, 2013

Dear Friend of GATA and Gold:

The Perth Mint's Bron Suchecki replies tonight to the complaint two weeks ago by the TF Metals Report's Turd Ferguson about the gold cartel's liars and apologists, commentary called to your attention by GATA here:

http://www.gata.org/node/13225

Perhaps more interestingly, Suchecki describes the Perth Mint's unusual position in the gold market as a government institution that does better with a rising gold price than a declining one but that can't do the sort of agitation that gold needs to fend off its enemies in government. Suchechki's commentary is headlined "So Who Are the Liars and Cartel Apologists?" and it's posted at his blog, Gold Chat, here:

http://goldchat.blogspot.com/2013/11/so-who-are-the-liars-and-cartel.htm...

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



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Gold Market Update

Posted: 27 Nov 2013 05:00 PM PST

Nichols on Gold

"We Are Playing Economic Russian Roulette"

Posted: 27 Nov 2013 04:15 PM PST

Submitted by Brandon Smith of Alt-Market blog,

By any reasonable measure, I think it is safe to say that the last quarter of 2013 has been an insane game of economic Russian Roulette.  Even more unsettling is the fact that most of the American population still has little to no clue that the U.S. was on the verge of a catastrophic catalyst event at least three times in the past three months alone, and that we face an even greater acceleration next year. 

The first near miss was the Federal Reserve's announcement of a possible “taper” of QE stimulus in early fall, which sent shivers through stock markets and proved what we have been saying all along – that the entire recovery is a facade built on an ever thinning balloon of fiat money.  Today, markets function entirely on the expectation that the Fed will continue stimulus forever.  If the Fed does cut QE in any way, the frail psychology of the markets will shatter, and the country will come crashing down with it.

The second near miss was the possible unilateral invasion of Syria demanded by the Obama Administration.  As we have discussed here at Alt-Market for years, any invasion of Syria or Iran will bring detrimental consequences to the U.S. economy and energy markets, not to mention draw heavy opposition from Russia and China.  Though the naïve shrug it off as a minor foreign policy bungle, Syria could have easily become WWIII, and I believe the only reason the establishment has not yet followed through with a strike in the region is because the alternative media has been so effective in warning the masses.  The elites need a certain percentage of support from the general public and the military for any war action to be effective, which they did not receive.  After all, no one wants to fight and die in support of CIA funded Al Qaeda terrorist cells on the other side of the world.  The establishment tried to hide who the rebels were, and failed.  

The third near miss was, of course, the debt ceiling debate, which has been extended to next spring.  America came within a razor's edge of debt default, which many people rightly fear.  What some do not yet grasp, though, is that debt default of the U.S. was NOT avoided last month, it is INEVITABLE.  Debt default will ultimately result in the death of the dollar as the world reserve currency, and the petro-currency.  This final gasp will lead to hyperstagflation within our financial system, and third world status for most of the citizenry.  It is only a matter of time, and timing.

“Timing” is truly what we are all concerned about.  Those of us in the field of alternative media and economics understand well that the U.S. is on a collision course with disaster; it is a mathematical certainty.  We no longer think in terms of “if” it happens - we only question “when” it will happen.  Our fiscal structure now hangs by the thinnest of threads, a thread which for all we know could be cut at a moments notice.  However, economic and political storms appear to be brewing with the year 2014 as a target. 

Globalists have been openly seeking the destabilization of U.S. sovereignty, and they have openly admitted that the destruction of the dollar and our economic foundations will aid them in their goal.  It is important to never forget that international financiers WANT to absorb America into a new global economic structure, and that the U.S. must be debased before this can be accomplished.   Here are a few reasons why I believe 2014 may be the year they make their final move...       

Debt Debate On Steroids

Nothing concrete was decided during the highly publicized “battle” between Democrats and the GOP on what would be done to solve the U.S. debt addiction.  Some people might assume that the fight will go on indefinitely, and that the “can” will be kicked down the road for years to come.  This assumption is a dangerous one.  If you thought the last debt debate was hair raising, the next is likely to give you a coronary.  Think of 2013 as a practice run, a warm up to the main event in 2014.  Why will next year be different?  Because the motivations behind a debt ceiling freeze (and thus debt default) are now supported by the obvious failure of Obamacare.

Funding for Obamacare was the underlying issue that gave strength to the push for new debt ceiling extensions.  The U.S. government has overreached financially in ever way imaginable.  We have long running entitlement programs that have been technically bankrupt for years.  But, Obamacare was so pervasive during the debt debate that we heard nothing of these existing liabilities.  Ultimately, Obamacare is the primary reason why so many Americans on the “left” want unlimited spending and inflation, and why so many Americans on the “right” are actually seeking debt default. 

We all know that at the top of the pyramid the debt debate itself is false left/right theater, but it is still theater with a purpose.

In my articles 'The Socialization Of America Is Economically Impossible' and 'Obamacare: Is It A Divide And Conquer Distraction', I discussed why universal healthcare could not be implemented in America, and I predicted in advance that Obamacare was actually a farce that was designed to fail.  The program's only purpose is to provide a vehicle by which divisions between the fake left and the fake right could be solidified in the minds of the common populace.  A lot of cynicism was directed at the notion that the government might create a socialized healthcare initiative and then allow it to fail.  Of course, we now know that is exactly what they had in mind.

During the last debt debate, Obamacare was just a policy waiting to be implemented; next debate, that policy will be rightly labeled a train wreck.  Obamacare is falling apart at it's very inception, and evidence makes clear that the White House KNEW in advance that this would occur.  In the days before it's launch, performance tests on the Obamacare website showed conclusively that the system could not handle more than 500 users.

Obama promised that preexisting healthcare plans would be retained by Americans and that the Affordable Care Act would not do damage to established insurance models.  He made this promise knowing full well that he could not or would not keep it.  This dishonesty has resulted in rebellion by Democrats who have sided with Republicans to pass a bill which obstructs the erasure of existing health coverage.

States once disturbingly loyal to the White House are now moving to limit the application of the Obamacare structure.

The White House had foreknowledge that the program was nowhere near ready, yet, they moved forward anyway.  Why wouldn't they stall?  Why would Obama knowingly unleash his “opus” before it was finished?  He had it in the bag, right?  He won, right?  All he had to do was build a functioning website and keep his promises at least long enough to sucker the majority of Americans into the system.  Instead, he throws the fight and hits the canvas before he's even punched?  Why?

It all sounds rather insane if you aren't aware of the bigger picture, and I'm sure the average Democrat out there is wide-eyed and bewildered.  Some might blame it on “ego”, or “hubris”, but this makes little sense.  Obamacare is an American socialist's dream.  With a simple working public interaction model, Obama would be worshiped by leftists for decades to come as the next Franklin Delano Roosevelt.  Hubris should have ENSURED that the White House launch of Obamacare would be flawless. 

Once you realize that this is not about Obama, and that Obama is nothing but a middle-man for the globalists, and that the actual implementation of Obamacare never mattered to the establishment, the fog begins to clear.

With Obamacare in shambles, the dynamic of the debt debate theater changes completely.  Some Democrats may well show support for a hold on the debt ceiling, for, what reason do they have to champion more spending?  Obama has already made fools of them all, and the Obamacare motivator is essentially out of the picture.  The GOP will be energized and more unified than the last debate, giving more momentum to a debt ceiling lock.  The argument will be made that a resulting debt default will not be harmful, and that the U.S. can carry the weight of existing liabilities until the budget is balanced.
This is certainly a lie, but it is a fashionable lie that Americans will want to hear. 

Americans do not want to hear that our economy is too far gone and that any motion, to spend, or to cut, will have the same result – currency collapse and fiscal implosion.  They do not want to hear that pain must be suffered before a realistic solution can be applied.  They do not want to hear the the system will have to be brought down before it can be rebuilt.  And, they definitely do not want to hear that the system will be deliberately brought down and replaced with something even worse. 

Will the next debt debate in Spring 2014 end in debt default and the collapse that globalists desire so much?  It's hard to say, but many insiders appear to be preparing for just such a scenario...

The Fed's Buzz Kill

No one, and I mean no one, believes the private Federal Reserve will ever commit to a taper of fiat stimulus.  Hell, I barely believe it's possible, and I'm open to just about any scenario.  That said, I have to ask a question which few analysts seem to be asking – why does the Fed keep pre-injecting the concept of taper into the mainstream if they never intend to implement it?  When has the Fed ever pre-injected a plan into the MSM which it did not eventually implement? 

The banksters have the markets in the palm of their hand, or at least they seem to.  Stocks now rise and fall according to whatever meaningless press release the central bank happens to put out on any given morning.  What do they have to gain by consistently shaking the confidence of investors around the world by suggesting that the fiat party they created will abruptly end?

The impending approval by the Senate of Janet Yellen, a champion of the printing press, would suggest to many that QE-infinity is assured.  We know that the black hole generated by the derivatives implosion cannot be filled (debts still exist in the quadrillions of dollars), and that the Fed will have to print endlessly in order to slow the deterioration of the the banking sector.  We know that none of the currency flows created by the Fed are trickling down to main street, which is why credit remains mostly frozen,  real unemployment counting U-6 measurements remains at around 25%, food stamp recipients have risen to around 50 million, and the only sales boosts to property markets are those caused by big banks buying bankrupt houses and then reissuing them as rentals.

We know that it makes sense for the central bank to continue QE, if only to continue pumping up banks and the stock market and hide the truly dismal state of the overall system.  But let's forget about what we think “makes sense” for just a moment...

What if the Fed no longer WANTS to hide the true state of the system anymore?  What if QE is now giving back diminishing returns, and will soon be no longer effective at hiding economic weakness?Central bankers surely don't want to take the blame for a collapse, but what if the perfect patsy is already lined up?  A patsy so hated and despised that no one would think twice about their guilt?  I am, of course, talking about the Federal Government itself.

Think about it; the failure of Obamacare promises a debt debate in the Spring of 2014 that will rock the very foundations of the global economy.  Both sides, Democrat and Republican, are ready to blame the other fully for any disastrous outcome, though “Tea Party” conservatives have been painted by the mainstream media as the lead culprits behind a financial catastrophe that began before the Tea Party was born.  The idea of “gridlock” leading to impasse and calamity is already built into the country's consciousness.  The general public's opinion of all areas of government has recently hit all time lows.  In fact, our opinion of government could scarcely go any lower than it already has.  Everyone HATES what government is, or what they think it is.  Most Americans would be happy to place the brunt of the blame for an economic disaster on the shoulders of Washington DC.

The genius of it is, they deserve a large part of the blame.  They helped to make possible all of the horrors the citizenry will face in the coming years.  The problem is, the public may become so blinded with rage over the failure of the political system, that they may completely forget about the role of international and central banks and turn on each other instead. 

Why is the Fed now discussing, just before the possible confirmation of Janet Yellen, a stimulus dove, the need for taper measures by 2014?

Is it just coincidence that the taper discussion is taking place parallel to the debt ceiling battle, or are these two things related?  What if the Fed plans to apply QE cuts during or after the renewed debt debate in order to make the market effects even more negative?  What if the Fed is timing the taper to give energy to a debt default?  What if the Fed wants to reduce support, so that later, when all hell breaks loose, we'll come begging them for support?

Whether you believe a debt default will be deliberately induced or not, certain foreign investors have been preparing for such a U.S. breakdown for years, and once again, the apex investor, China, has made plans for dramatic economic policy changes to take place in 2014...              

China Is Ready To File For Divorce

The economic marriage between China and the U.S. has been touted Ad nauseum as an invincible relationship chained in eternity by unassailable interdependency.  I've just never bought this fanciful tale.  For years I've written about the likelihood that China will decouple from the American dollar apparatus, and so far, most of my warnings have come to pass. 

China has pushed forward with massive physical gold purchases despite all arguments by skeptics that gold is no longer necessary or prudent as a safe haven investment.  Apparently, the Chinese know something they do not.  China is on pace to become the largest holder of gold in the world as early as 2014.

China has now issued Yuan denominated bonds and other assets around the globe, and its central bank has expanded its total balance sheet to at least $24 Trillion, outmatching the reported increased balance sheets of all other central banks:

Now, some feel that this Chinese liquidity should be considered a massive bubble on the verge of exploding, and that it will be Chinese instability, not U.S. instability, that triggers renewed crisis.  I would like to offer an alternative view...

I am not shocked at all by this incredible spike in Yuan circulation.  In fact, I expected it.  The fall back argument against China dumping the dollar as the world reserve has always been that there is no alternative currency that boasts as much liquidity as the dollar.  Well, as we now know, China has been raining Yuan down on every continent.  International banks like JP Morgan have been HELPING them do it.

China is not desperately attempting to prop up its own markets like we are in the U.S.  China is DELIBERATELY generating massive liquidity because they seek to aid the IMF in its longtime plan to replace the greenback as the world reserve currency.  These are not the activities of an investor that wants to stick with the U.S. or the dollar.  These are not the activities of a nation that wishes to continue its limited role as a source of cheap industrial labor.    

China, being the largest importer of petroleum surpassing the U.S., is now planning to price its crude oil futures in Yuan, instead of the dollar.

And, the Chinese central bank has announced that it now plans to stop all purchases of U.S. dollars for its reserves.

These decisions are part of a precision strategy, a formula which was finalized during a little discussed and very secretive economic policy meeting which took place in China this past month.

While much of the media was focused on China's call for softer restrictions on its one-child policy, they ignored the thrust of the meeting, which was to establish Chinese consumption over exports, and internationalize the Yuan.  All that is left is for China to “float” the Yuan's value on the open market, which is an action the head of the PBOC, Zhou Xiaochuan, says he plans to expedite.

All of the reforms discussed at China's Third Plenum meeting are supposed to begin taking shape in...that's right...2014.

A Storm Of Septic Proportions

As I have always pointed out, economic collapse is not necessarily an event, it is a process.  The most frightening elements of this process usually do not become visible until it is too late for common people to react in a productive way.  All of the dangers covered in this article could very well set fires tomorrow, that is how close our nation is to the edge.  However, the culmination of events so far seems to be setting the stage for something, an important something, in 2014.  If the worst is possible, assume the worst is probable.  The next leg down, or the next economic carpet bombing.  Maybe slightly painful, maybe mortal.  Sadly, as long as Americans continue to remain dependent on the existing corrupt system, global bankers can pull the plug at their leisure, and determine the depth of the wound with scientific precision.

SILVER Elliott Wave Technical Analysis

Posted: 27 Nov 2013 04:03 PM PST

Last week's analysis of Silver expected more downwards movement towards a target at 18.591 to 18.353. Price did move lower but has failed to reach the target. Downwards movement may have ended at 19.595, 1.004 short of the target zone. Read More...

A Closer Look at Gold and Silver

Posted: 27 Nov 2013 03:16 PM PST

During the final blow-off stage for silver in April of 2011, we caught our fair share of criticism and rebuke for pointing out what appeared to be a terminal run for the silver bullet. We heard from many of the usual suspects that ... Read More...

Market Monitor – November 27th

Posted: 27 Nov 2013 03:04 PM PST

Top Market Stories For November 27th, 2013: Silver & Gold: When Money Is Corrupted – Hidden Secrets Of Money 5 - Mike Maloney Gold Bullion ETF and Fund Drains From the Beginning of 2013 – Comex Registered at 69 to 1 - Jesse's Cafe Inflation is Raging – If You Know Where to Look - John Rubino Why [...]

Silver's Long-Term Support Line Has Been Reached. What's Next?

Posted: 27 Nov 2013 02:13 PM PST

In our previous essay on silver, we examined long- and short-term charts of silver to find out what the outlook for the white metal was. Read More...

David Stockman Fears “Panic” When The “Lunatic” Fed “Loses Control”

Posted: 27 Nov 2013 01:24 PM PST

27-Nov (ZeroHedge) — “It’s only a question of time before the central banks lose control,” David Stockman warns a shocked CNBC anchor, “and a panic sets in when people realize that these values are massively overstated.”

The outspoken author of The Great Deformation rages “the Fed is exporting its lunatic policies worldwide,” as central banks around the world have followed the Fed’s lead, “for either good reasons of defending their own currency and their trade and their exchange rate, or because they’re replicating the Fed’s erroneous policies.”

If one cares to look, Stockman adds, “there are bubbles everywhere,” citing Russell 2000 valuations of 75x LTM earnings as an example, “that makes no sense. It’s up 43% in the last year, but earnings of the Russell 2000 companies have not increased at all.” This is dangerous, he strongly cautions, “I haven’t seen too many bubbles in history” that haven’t ended violently.

“I’m not drinking the Kool-Aid…”

“Central banks all over the world have been massively expanding their balance sheets, and as a result of that there are bubbles in everything in the world, asset values are exaggerated everywhere.”

[source]

PG View: Former OMB Director Stockman’s view is in sharp contrast to the “benign QE trap” referenced in the previous post. If you’re looking to hedge exposure to one bubble or another, nobody thinks gold is a bubble anymore.

Gold Seeker Closing Report: Gold and Silver Erase Overnight Gains and End Slightly Lower

Posted: 27 Nov 2013 01:13 PM PST

Gold climbed $12.40 to $1254.50 at about 5AM EST, but it then fell back off for most of the rest of trade and ended near its late session low of $1236.33 with a loss of 0.33%. Silver slipped to as low as $19.63 and ended with a loss of 0.86%.

Why Gold and Silver Hate Easy Money

Posted: 27 Nov 2013 01:10 PM PST

Ben Bernanke recently provided some clarity to the confusion surrounding the Fed's QE stimulus program. He indicated that the near-zero Fed Funds rate will likely remain at that level long after ending asset purchases under quantitative ... Read More...

At a Crossroads

Posted: 27 Nov 2013 01:09 PM PST

Despite its recent weakness, the world is still viewing gold as a store of value. Overall demand remains strong. As Eric Sprott points out, " It's staggering to think demand for gold is twice global mine production." Read More...

Why gold and silver hate easy money

Posted: 27 Nov 2013 12:57 PM PST

Ben Bernanke recently provided some clarity to the confusion surrounding the Fed's QE stimulus program. He indicated that the near-zero Fed Funds rate will likely remain at that level long after ending asset purchases under quantitative easing (QE). This satisfied Wall Street and provided much relief, allowing a mini-rally to transpire in equities but providing additional selling pressure for gold and silver.

Bitcoin: The Prison Cigarette of Global Currencies

Posted: 27 Nov 2013 11:43 AM PST

The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more common currency item, along with any inexpensive, popular item that has a round number price, such as 25 or 50 cents. Mylar foil packets of mackerel fish, or ‘macks,’ are one such item.”

Cigs, stamps, macks? Doesn’t seem very cool, like, say, a gold doubloon, but the market decides what’s cool, despite what Matthew O’Brien at The Atlantic thinks. Apparently, he’s not a big fan of the cybercurrency Bitcoin.

He writes that only techno-libertarians will transact business in Bitcoin, and compares the cybercoin of the virtual realm to Segways. O’Brien reminds us these stand-up motorized vehicles were at one time thought to become a big deal. I only see cops whiz by on them at the Hartsfield-Jackson airport in Atlanta.

Senators, being senators, worry about things like whether the cybercurrency is financing terrorism or whether Bitcoins can be used to evade taxes. Neither is likely.

O’Brien describes Bitcoin as “inherently ridiculous.” The price swings alone make the cybercurrency look more like a dot-com stock than money. What The Atlantic senior associate editor can’t explain is why the price of Bitcoin has exploded recently. He writes something about demand from China and the Fed’s seizure of Silk Road’s considerable Bitcoin stash.

But he’s not paying attention. “Senior U.S. law enforcement and regulatory officials said they see benefits in digital forms of money and are making progress in tackling its risks,” Ryan Tracy reports for The Wall Street Journal. “The price of Bitcoin, the most common virtual currency, soared to a record following the comments.”

That won’t sway The Atlantic writer’s mind. O’Brien believes “Bitcoin… has deeper problems. Its product doesn’t work.” However, Washington has had a dog in the Bitcoin fight ,since it seized 26,000 of them from Silk Road. At around $18 million, it’s enough to keep the Department of Justice interested. So count DOJ attorneys along with the libertarian nerds rooting for the cybercurrency.

In a testimony before the Senate Homeland Security and Governmental Affairs Committee, Mythili Raman stated, “The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce.” Raman is the current acting assistant attorney general for the department’s criminal division.

Bitcoin and virtual currencies are a direct attack on central bank monetary management. Yet even Ben Bernanke, in a letter to senators, said virtual currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system.”

Senators, being senators, worry about things like whether the cybercurrency is financing terrorism or whether Bitcoins can be used to evade taxes. Neither is likely.

What Bitcoin can do is be moved instantaneously around the world. With something as simple as cellphones thousands of miles and many time zones apart, the cybercurrency can be transported via Skype.

Try moving dollars through your bank. You have to fill out forms, show ID, and have a human being input data. Then more of the same happens on the other end — when the bank opens, that is. Bitcoin has shown the Federal Reserve how it’s done. In a report called Payment System Improvement — Public Consultation Paper, the Fed calls for banks to speed up payment systems. The central bank wants to see “a ubiquitous system for near-real-time payments.”

End-users, the Fed points out, want real-time validation of payment and posting, assurance the payment will not be returned, timely notification, and “masked account details, eliminating the need for end-users to disclose bank account information to each other.”

This sounds familiar to anyone who uses Bitcoin. Validation of transactions is nearly instantaneous in the blockchain. Bitcoin transfer is not a credit transaction, but a transfer of assets. There is no third party in the middle to return a payment. And of course, payments are done anonymously. No financial disclosures are required.

So while end-users tell the Fed they want assurances against returned payments, O’Brien writes that a weakness of Bitcoin is there is no third party making sure everyone is satisfied. Financial intermediaries “make sure buyers and sellers are both trustworthy, and handle any disputes,” writes O’Brien, who wants to make sure people can get their money back if things go awry.

He actually doesn’t believe people will use the cybercurrency to pay for things at all. Thus his quip, “Bitcoin is a Ponzi scheme libertarians use to make money off each other — because gold wasn’t enough of one for them.”

Maybe he doesn’t realize more and more merchants are accepting the alternative currency. O’Brien doesn’t know that two Bitcoin advocates, Austin and Beccy Craig, lived and traveled for several months paying for everything with Bitcoin. He hasn’t heard the highly connected Winklevoss twins are seeking approval for a Bitcoin fund. O’Brien doesn’t read The Wall Street Journal, which recently listed six Bitcoin-related venture capital deals funded just between mid-August and mid-November of this year.

The deflationary bias, O’Brien says, means the price will be volatile. The limited supply of Bitcoin will mean it will rise in value against the dollar, but early speculators will then sell, driving the price down “quite violently.” From there, he voices his incorrect analogy to Mr. Ponzi.

Because of Satoshi Nakamoto, we have the rare opportunity in history to watch the birth of a currency. It’s not always a smooth process. In his book, Principles of Economics, Carl Menger, the father of Austrian economics, wrote about how any commodity can be traded as money because of its greater marketability:

“This knowledge will never be attained by all members of a people at the same time. On the contrary, only a small number of economizing individuals will at first recognize the advantage accruing to them from the acceptance of other, more saleable, commodities in exchange for their own whenever a direct exchange of their commodities for the goods they wish to consume is impossible or highly uncertain.”

As people become successful trading any good or commodity as money, more people will in turn trade fewer marketable goods for that more marketable one. “Since there is no better way in which men can become enlightened about their economic interests than by observation of the economic success of those who employ the correct means of achieving their ends,” writes Menger.

The Bitcoin market is tiny compared with government currencies, especially the dollar. As the new cybercurrency gains acceptance, its price in dollars can reasonably be expected to be volatile. But as futures markets develop and ways to sell Bitcoin short are created, the price action for the cybercurrency will smooth out.

The question isn’t whether Bitcoin is a Segway, but whether it’s a prison cigarette or a gold doubloon. Either way, Bitcoin is money.

Sincerely,

Doug French
for The Daily Reckoning

Ed. Note: The future of Bitcoin remains to be seen. But rest assured, the Laissez Faire Today email edition will be following it very closely. If you want to most up-to-the-minute research on this and other free-thinking ideas, you’d owe it to yourself (and your portfolio) to sign up for the FREE Laissez Faire Today email edition.

Original article posted on Laissez Faire Today

At A Crossroads

Posted: 27 Nov 2013 11:12 AM PST

Despite its recent weakness, the world is still viewing gold as a store of value. Overall demand remains strong. As Eric Sprott points out, "It's staggering to think demand for gold is twice global mine production." China is now the largest gold buyer and producer in the world. And with their economy looking better, gold continues getting a big boost from this area.

A Quick Note on Inflation, Unemployment, and Fed Targeting

Posted: 27 Nov 2013 11:00 AM PST

Nichols on Gold

Gold Daily and Silver Weekly Charts - Quiet Holiday Trade

Posted: 27 Nov 2013 10:36 AM PST

Gold Daily and Silver Weekly Charts - Quiet Holiday Trade

Posted: 27 Nov 2013 10:36 AM PST

The Daily Market Report: Gold Remains Confined to Monday’s Range

Posted: 27 Nov 2013 10:33 AM PST


27-Nov (USAGOLD) — Gold remains confined to the range established on Monday as thin holiday trading persists. The yellow metal jumped overseas as the euro continued its relentless retracement of the losses seen when the ECB cut the refi rate late in October. Euro gains caused the dollar to come under pressure, which buoyed the yellow metal.

However, a strong currency is the last thing the eurozone needs as it attempts to sustain its exit from recession. Draghi and his minions have been desperately trying to derail the single currency’s recovery with threats of further easing, a negative deposit rate and another LTRO, and yet EUR-USD set a new three week high above 1.3600 earlier today, nearly completing a 61.8% retracement of the losses from 1.3832 to 1.3294.

Amid continued reluctance on the part of the Germans to provide ever-easier monetary policy, the market seems inclined to test the ECB’s resolve. Nonetheless, today’s latest talk of another LTRO knocked the euro off its highs, boosting the dollar and erasing the early gains seen in the gold market.

Additionally, the ECB fretted in it’s twice-yearly stability report about the ramifications for the eurozone if the Fed commenced tapering. The not so thinly implication is that other central banks might have to offset any dialing back of U.S. QE with greater QE elsewhere.

Ever since Ben Bernanke first raised the specter of tapering back in May, we have steadfastly maintained that the age of easy money would not be ending any time soon. We in fact doubted that the taper would commence back in September, even thought the market seemed convinced that it would.

Interminable easy monetary policy and central bank balance sheet expansion leads to asset bubbles and global imbalances that will almost assuredly bring the global economy back to the brink of catastrophe once again. No one can say for sure when that might occur, so maintaining some gold in your portfolio provides a critical hedge. Amid mounting concerns about the sustainability of recent stock gains, and with gold trading toward the low end of its recent range, now may be the best time to make key portfolio adjustments going into year end.

'The future of money'? Try the dump

Posted: 27 Nov 2013 10:28 AM PST

Missing Hard Drive Containing Bitcoins Worth L4 Million in Welsh Landfill

By Alex Hern
The Guardian, London
Wednesday, November 27, 2013

http://www.theguardian.com/technology/2013/nov/27/hard-drive-bitcoin-lan...

Buried somewhere under 4 feet of mud and rubbish, in the Docksway landfill site near Newport, Wales, in a space about the size of a football pitch is a computer hard drive worth more than L4 million.

It belonged to James Howells, who threw it out when he was clearing up his desk in mid-summer and discovered the part, rescued from a defunct Dell laptop. He found it in a drawer and put it in a bin.

And then last Friday he realised that it held a digital wallet with 7,500 Bitcoins created for almost nothing in 2009 -- and then worth about the same.

... Dispatch continues below ...



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"You know when you put something in the bin, and in your head, say to yourself 'that's a bad idea'? I really did have that," Howells, who works in IT, told the Guardian. "I don't have an exact date, the only time period I can give -- and I've been racking my own brains – is between 20 June and 10 August. Probably mid-July."

At the time he obliviously threw them away, the 7,500 Bitcoins on the hard-drive were worth around L500,000. Since then, the cryptocurrency's value has soared, passing $1,000 on Wednesday afternoon.

Although Bitcoins have recently become part of the zeitgeist -- with Virgin saying it will accept the currency for its Virgin Galactic flights, and central bankers considering its position in finance seriously -- Howells generated his in early 2009, when the currency was only known in tech circles. At that time, a few months after its launch, it was comparatively easy to "mine" the digital currency, effectively creating money by computing: Howells ran a program on his laptop for a week to generate his stash. Nowadays, doing the same would require enormously expensive computing power.

That lost hard drive, though, contains the cryptographic "private key" that is needed to be able to access and spend the Bitcoins; without it, the "money" is lost forever.

And Howells didn't have a backup.

Howells stopped mining after a week because his girlfriend complained that the laptop was getting too noisy and hot while it ran the programs to solve the complex mathematical problems needed to create new Bitcoins.

In 2010, the Dell XPS N1710 broke after he accidentally tipped lemonade on it, so he dismantled it for parts. Most were thrown away or sold, but he kept the hard drive in a desk drawer for the next three years -- until that fateful summer day when he had the clearout.

Howells didn't realise his mistake until Friday. Since then, he said, "I've searched high and low. I've tried to retrieve files from all of my USB sticks, from all of my hard drives. I've tried everything just in case I had a backup file, or had copied it by accident. And ... nothing."

He even went down to the landfill site itself. "I had a word with one of the guys down there, explained the situation. And he actually took me out in his truck to where the landfill site is, the current ditch they're working on. It's about the size of a football field, and he said something from three or four months ago would be about three or four feet down."

After he stopped mining Bitcoins in 2009, Howells hadn't given the currency much thought. "I hadn't kept up on Bitcoin, I'd been distracted. I'd had a couple of kids since then, I'd been doing the house up, and forgot about it until it was in the news again."

Howells considered retrieving the hard drive himself, but was told that "even for the police to find something, they need a team of 15 guys, two diggers, and all the personal protection equipment. So for me to fund that, it's not possible without the guarantee of money at the end." As such, he's resigned to never getting the virtual money back.

"There's a pot of gold there for someone. ... I'm even thinking of registering www.returnmybitcoin.com. It's available," he said. He has also set up a Bitcoin wallet for donations aimed at recovering the hard drive.

"If they were to offer me a share, fair enough," he said. "If they were to go out and find it for themselves ... it's my mistake throwing the hard drive out, at the end of the day."

A spokeswoman from Newport council emphasised that any treasure hunters turning up to the landfill site wouldn't be allowed in, but "obviously, if it was easily retrieved, we'd return it."

"I'm at the point where it's either laugh about it or cry about it," Howells says. "Why aren't I out there with a shovel now? I think I'm just resigned to never being able to find it."

Nonetheless, he continues to believe, as he did four years ago, that Bitcoin is the future of money. "I still think it's going to go higher. I just think it's the next step of the Internet, which is why I mined it in the first place. When I first came across it, I knew straight away. We had everything else at the time; Google, Facebook, they were already the market leaders in their areas. The only thing that was missing was an Internet money."

* * *

Join GATA here:

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Sunday-Monday, January 19-20, 2014
Vancouver, British Columbia, Canada

http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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

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

Or by purchasing a colorful GATA T-shirt:

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

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

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Poor Venezuela doesn't understand its leverage

Posted: 27 Nov 2013 10:18 AM PST

Instead of pawning its gold, Venezuela should try demanding gold as payment for its oil. The banks would start paying Venezuela monthly protection money just for the country's refraining from doing that.

* * *

Goldman, Bank of America Pitch Venezuela Gold Deals to Drum Up Dollars

By Michael J. Moore, Corina Pons, and Nathan Crooks
Bloomberg News
Wednesday, November 27, 2013

http://www.bloomberg.com/news/2013-11-27/goldman-to-bofa-pitch-venezuela...

Goldman Sachs Group Inc. and Bank of America Corp. are among Wall Street firms that offered deals to help Venezuela obtain U.S. dollars amid a plunge in the nation's foreign reserves.

A swap proposed by Goldman Sachs would provide $1.68 billion in cash and be backed by $1.85 billion of the central bank's gold, documents obtained by Bloomberg News show. Bank of America said it could be an intermediary for $3 billion in payments to firms seeking U.S. dollars, documents show. Neither deal has been completed, a government official with direct knowledge of the matter said, requesting anonymity because the talks are private.

Dollars are becoming scarce in Venezuela, limiting the supply of products from medicine to toilet paper in a nation that imports about three-quarters of the goods it consumes. Foreign reserves dropped 28 percent this year, touching a nine-year low of $20.7 billion this month, largely because 70 percent of the assets are in gold. The metal plunged 26 percent in the period.

... Dispatch continues below ...



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"The fact you have dollar shortages is symptomatic of an economy that's completely broken down," Robert Abad, who helps oversee $53 billion in emerging-market debt at Western Asset Management Co., said yesterday in a telephone interview from Pasadena, California. "This is something that's just incredibly unnecessary, very unfortunate, and the victim of all of this is the real economy, real people."

Goldman Sachs' total-return swap would bear interest of 7.5 percent plus the three-month London interbank offered rate, for $818 million in estimated financing costs over seven years, the documents show. The swap would allow Venezuela to keep its exposure to gold, with the nation posting the precious metal or cash to a margin account if the price falls and Goldman Sachs posting U.S. dollars if it rises, the documents show.

"This is your classic, emerging market, non-transparent story," Abad said of the possibility that Venezuela would seek to monetize its gold reserves. "You have to use deduction to try and guesstimate where things are going."

Jeffrey Currie, head of commodities research at Goldman Sachs, predicted last month that gold will fall next year, calling it a "slam dunk" sell for 2014 as the U.S. economy extends its recovery. After a decade-long gold rally rewarded Venezuela, the metal's fall this year has compromised the government's ability to repay foreign debt.

Bank of America would pay Venezuelan companies less than the official exchange rate for bolivars they seek to trade, according to the documents. The Charlotte, North Carolina-based lender would get a 1.25 percent commission as intermediary, allowing the central bank to avoid directly dealing at an exchange rate weaker than the official one.

Kerrie McHugh, a Bank of America spokeswoman, and Goldman Sachs' Michael DuVally declined to comment. A Venezuela central bank official, requesting anonymity in keeping with ministry policy, said she had no information about the proposals. The nation's finance ministry didn't respond to a telephone message seeking comment on the proposals.

Former President Hugo Chavez, who died of cancer in March, stepped up Venezuela's bet on gold in an effort to move away from what he called the "dictatorship of the dollar."

From 1999, Chavez's first year in office, through 2012, Venezuela bought 75.3 metric tons of gold, according to data on the International Monetary Fund's website. Those purchases cost $1 billion based on average annual gold prices and would be valued at $3.03 billion at today's price of $1,251.96 an ounce, meaning the additions would have made $2.03 billion. The country also sold 13.1 tons of bullion during that period, the IMF data show.

Venezuela's gold reserves total 367.6 tons, making it the 14th largest holding by country, according to the London-based World Gold Council. The metal accounts for 70 percent of the nation's foreign reserves, compared with 7.6 percent for Argentina and less than 1 percent for Brazil.

"It's our gold," Chavez, a self-proclaimed socialist who nationalized hundreds of companies and imposed curbs on currency trading, said on state television in November 2011. "It's the economic reserve for our kids. It's growing and it's going to keep growing, both gold and economic reserves."

Venezuela's currency board, known as Cadivi, sells greenbacks at the official exchange rate of 6.3 bolivars per dollar. The government, which devalued the bolivar by 32 percent in February, has failed to stem the currency's slide on the black market, where companies and people not authorized to use the official rate pay about 60 bolivars per dollar.

Cadivi has fallen behind on payments to companies and has yet to distribute about $8.2 billion that already has been approved, Asdrubal Oliveros, director of Caracas-based consulting firm Ecoanalitica, said in a telephone interview.

Venezuelan President Nicolas Maduro, who succeeded Chavez, used the military this month to order stores to reduce prices after annual inflation accelerated to 54 percent in October, the highest rate in 16 years and the fastest in the world. The former bus driver on Nov. 19 obtained authorization from Congress to pass economic laws by decree.

Average prices of Venezuelan crude exports, responsible for 95 percent of the nation's foreign-currency earnings, fell to a 16-month low this month and ended last week at $93.98 a barrel. Each $1 dollar decline in a barrel of oil costs Venezuela about $700 million per year, according to estimates from state-owned Petroleos de Venezuela SA.

Venezuela's debt securities have declined 7.7 percent this month as borrowing costs touched a 22-month high of 14.56 percent, according to JPMorgan Chase & Co. The extra compensation that investors demand to own Venezuelan bonds instead of U.S. Treasuries rose to 11.68 percentage points this month, the highest in emerging markets, according to JPMorgan.

PDVSA, as the state oil company is known, this month sold $4.5 billion of new bonds in a private placement to the central bank and oil-service providers. The sale was the first by a state entity since May 2012.

El Nacional, the Caracas-based newspaper, reported on the talks between Goldman Sachs and the central bank last week.

* * *

Join GATA here:

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Sunday-Monday, January 19-20, 2014
Vancouver, British Columbia, Canada

http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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...


Mike Kosares: Gold's organized retreat -- who benefits?

Posted: 27 Nov 2013 10:00 AM PST

12:53p ET Wednesday, November 27, 2013

Dear Friend of GATA and Gold:

Mike Kosares of Centennial Precious Metals in Denver today muses on the question of who is benefiting from the recent retreat in the gold price. Kosares seems inclined to think that it has had something to do with the need to repatriate Venezuela's and Germany's foreign-vaulted gold reserves. Whatever the cause, Kosares writes, the gold price suppression perpetrated by the London Gold Pool in the 1960s and by the gold sales of the United States and the International Monetary Fund in the 1970s "collapsed in a heap and gold rose in multiples, and both events represented the calm before a major monetary storm."

GATA doesn't know if any of us will live to see that day. All we can do is try to hasten it and thereby restore free markets, liberty, democracy, fairness, and progress.

Kosares' commentary is headlined "Gold's Organized Retreat: Who Benefits?" and it's posted at Centennial's Internet site, USAGold.com, here:

http://www.usagold.com/cpmforum/2013/11/27/golds-organized-retreat-who-b...

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



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http://www.jsmineset.com/2013/11/14/boston-qa-session-announced/



Join GATA here:

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Sunday-Monday, January 19-20, 2014
Vancouver, British Columbia, Canada

http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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

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

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

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

http://www.gata.org

To contribute to GATA, please visit:

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

Gold Mining Executives: “You Have To Be Able To Survive The Lows In Order To Reap The Benefit Of The Highs”

Posted: 27 Nov 2013 09:39 AM PST

I had the chance to connect recently with Bill Reid and Jason Reid, Chairman and President & CEO, respectively, of Gold Resource Corporation.

It was a fascinating conversation, as the father & son duo have operated a mining company with such a conservative fiscal framework with regards to capex spending that, "everybody rolls their eyes," in the industry, upon hearing the team's rule of a one-year payback time or less.

Speaking towards the cyclicality of the mining business, Bill noted that

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Gold’s organized retreat. Who benefits?

Posted: 27 Nov 2013 09:21 AM PST

trading office

OPINION

"There are insiders here who are in a position because of their inside knowledge to benefit from this intentional manipulation that is ongoing. These people, I suspect, are accumulating physical gold at artificially depressed levels.

Certainly we've noticed some of these suspects converting at very attractive prices their holdings of GLD into physical. This typically gets reported in the mainstream media as Soros, or name another elite, selling or reducing their stake. And this just isn't right. For the most part these entities are converting their (paper) gold into physical (gold) in lots of 100,000 (shares of GLD). They have the wealth to do that.

So that's the real picture, and of course that's not a bearish activity, that's bullish. But the mainstream media continues this propaganda of gold being in a bear market, when the reality is it's paper gold being manipulated down, and it's physical gold that is being hoarded at a frenetic pace. There is an enormous ongoing bull market in physical (gold) which exactly matches the manipulated paper bear market that we are seeing on the Comex."

- William Kaye, former Wall Streeter (Paine Webber, Goldman Sachs), now Hong Kong hedge fund manager

King News interview

by Michael J. Kosares

There is quite a bit of speculation as to who might be benefiting from gold’s seemingly organized retreat. Some say the price has been driven down to fulfill Germany’s repatriation at lower prices. Then there are those who believe that others could be attempting get ahead of Germany knowing that physical availability is limited. In keeping with this line of thinking, there have been persisntent rumors of future Swiss, Dutch and Mexican official repatriations in the works.

The physical evidence, as reported here over the past several weeks, points to China as the chief culprit in the physical delivery game channeling massive amounts of gold through its London-Switzerland-Hong Kong pipeline (GLD liquidations) The reported deliveries through that pipeline do not match China’s reported imports. That might mean there’s a glitch, or delay, in the reporting mechanism, or it could mean that the gold is going elsewhere.

Kaye has an interesting take on the situation. John Paulson liquidated a portion of his GLD holdings (some 30 metric tonnes) and converted to swaps on the over the counter market (another paper instrument) — but this is small potatoes made large by the mainstream press, as are Soros' maneuvers and the rest of the hedge fund demand. By comparison China’s imports, according to some market watchers, are on the order of 2500 tonnes, nearly the equivalent of the annual global mine production.

If there is value in monitoring the hedge funds and global banks, it has to do with watching and emulating how a very savvy and well-connected segment of the market is reacting to the global currency wars and on-going physical gold deliveries. The trouble with this kind of analysis – attempting to get a grip on what's going on in the paper gold market — is that you never know the other side of the trades booked on the Comex, as they are mostly offset in London’s foggy over the counter market. A trading desk, for example, might be long on the Comex, but short in the London OTC — so its book is level. On the other hand, if it is long on Comex and short in London, it might be because of upcoming delivery obligations in London, and that could get cumbersome. Since the London OTC trades there are private contracts, we simply don’t get the full story. As a result, the door is open to all sorts of speculation, none of which can possibly be on sound footing simply because a good portion of the evidence is missing.

Any traction we can gain is usually based on anecdotal evidence that points us in a direction, but never quite gets us to the end of the yellow brick road. For example, if you look closely at the timing of the two biggest stair-step down trends in the gold market, they came just after Venezuela’s repatriation announcement in August, 2011 and Germany’s in January, 2013. What should have been bullish events became bearish instead. It’s difficult to believe that the timing of the announcements and the stiff down legs is simply a coincidence, but it is also impossible to prove that it isn’t. So, once again, speculation becomes rife, and there are as many theories on the internet on coincidences such as these as there are labels on chocolate chip cookies. What we do know for certain however is that at this time large amounts of bullion are being mobilized and headed, most assuredly, to strong hands whether they be European or Asian.

gold repatriation

Of course, for the prospective gold buyer, whether adding to existing holdings or getting started, it all gets down to a matter of belief:

First, whether or not you believe in gold as a “measure of wealth” as Richard Russell so elogquently puts it (see below); and

Second, whether or not you believe that the gold will be there for you to acquire should Kaye and those in agreement with him turn out to be right. After all, the pressure on existing physical supply is not occurring in a vacuum. We are in the middle of a jolting restructuring of international reserve assets.

On behalf or our family and the crew at USAGOLD, I would like to take this opportunity to wish all of you a very Happy Thanksgiving. It has not been the best year for gold from a price perspective, but corrections are events to be expected — and a sure sign of a healthy market. I do not believe that gold’s secular bull market is over by any stretch, and even if the gold price is being managed for nefarious purposes, it cannot be restrained for long. To support that contention, please consider the overt official restraints of the late 1960s (the London Gold Pool) and the mid-1970s (U.S. Treasury and IMF sales). Both efforts collapsed in a heap and gold rose in multiples, and both events represented the calm before a major monetary storm.

All the best, MK

____________

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.

Gold Bounces Back on China Data

Posted: 27 Nov 2013 09:07 AM PST

After dropping nearly 1% in the prior session, gold is bouncing back on data showing China's net gold imports from Hong Kong hit the highest in seven months in October.

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Gold price flat despite ytd gold import records for China and Turkey

Posted: 27 Nov 2013 08:41 AM PST

London Gold Market report: Thanksgiving Gold Volumes “Thin”, China & Turkey Import Record Tonnages

Read more….

Unexpected gold price rise despite poor technical picture

Posted: 27 Nov 2013 08:41 AM PST

As China reports another month of very high gold imports through Hong Kong, gold has seen a small price recovery although perhaps not sufficient to allay a weaker technical picture.

Read more….

Call to rollback gold import duty to 5% gathers momentum in India

Posted: 27 Nov 2013 08:41 AM PST

Though demand for gold continues to be high in India, jewellers run out of stock given the government’s many import restrictions resulting in 25% price differential which cannot be borne by the trade.

Read more….

Is gold company cost cutting mainly a detrimental fudge?

Posted: 27 Nov 2013 08:41 AM PST

Mining companies are being pushed into making huge cost cuts, but often these are too far too fast for the long term future of the industry.

Read more….

Can’t-miss headlines: Gold gains on good physical, Las Bambas bidders? & more

Posted: 27 Nov 2013 08:41 AM PST

The latest morning headlines, top junior developments and metal price movements. Today, gold goes up on physical demand and the latest buy by hedge fund Geologic Resource Partners.

Read more….

The Uranium Story You Haven’t Heard

Posted: 27 Nov 2013 08:22 AM PST

"No, no. It's not like that. My worry isn't this year's or even next year's, it's a long-term worry."

"Then it's not worth calling a worry. We live in an atomic age, Mr. Wormold. Push a button — piff bang — where are we? Another Scotch, please."

Our Man in Havana, Graham Greene

You remember the nuclear disaster at Fukushima? It was a horrible human tragedy that is still playing out — and in ways I am sure you will be surprised to learn.

The disaster also set back the so-called nuclear renaissance that was then in swing. Uranium prices fell like a piano tumbling down a flight of stairs, only recently crashing down to five-year lows and laying waste to uranium stocks.

But it's been over two years since the meltdown at Fukushima, and memory is short. Here is Barron's over the weekend, on its optimistic appraisal of Cameco, the world's largest publicly traded producer of uranium:

"Cameco shares recently rallied after stronger-than-expected third-quarter earnings, but are still flat for the year. They fetch just 15.2 times what the company has earned, well below its decade median of 24 times, and the low-cost producer generated net profit margins near 22% even when uranium prices slumped. Improving prices can only energize the stock."

Among the "reasons for optimism," Barron's included "gradual progress toward the cleanup in Japan."

Barron's piece inspired me to write to you today. As a long-term investor, I am not tempted — at all — by the apparent bargain in uranium stocks.

I want to preface what follows by saying I get the bullish case for uranium and nuclear power. I was a bull for a time and took positions in uranium stocks in February 2010, just before they started to lift.

The incident at Fukushima made me reverse course. We sold our uranium stocks in March 2011, shortly after the disaster. We took a 70% gain on Kalahari and saved a slim 7% profit on Paladin Energy. Kalahari got bought out and no longer trades. But Paladin, which I recommended selling at $3.29, is today 39 cents. In my Capital & Crisis newsletter, I also saved a 10% gain on Cameco and sold at $30. Today, it's $20.

As good as the uranium story sounds, I think there are bigger reasons to avoid the stocks as anything other than trades.

First, because the disaster at Fukushima could easily have an Act II that could be worse than anything we've seen so far.

The cleanup is not front-page news, but perhaps it should be. Here is a good summary of the challenges that remain, as reported by Kevin Zeese and Margaret Flowers in CounterPunch:

"There are three major problems at Fukushima: (1) Three reactor cores are missing; (2) radiated water has been leaking from the plant in mass quantities for 2.5 years; and (3) 11,000 spent nuclear fuel rods, perhaps the most dangerous things ever created by humans, are stored at the plant and need to be removed, 1,533 of those in a very precarious and dangerous position. Each of these three could result in dramatic radiation events, unlike any radiation exposure humans have ever experienced."

All three pose significant dangers, but the biggest threat is from No. 3.

The spent fuel rods weigh 400 tons and are packed tightly together like cigarettes. They hold the radiation equivalent of the atomic bomb that went off at Hiroshima — times 14,000.

They now sit in a damaged, tilting building, which is vulnerable to collapse. They must be removed. If they hit each other or break, they could explode and release massive amounts of radiation. They might have to evacuate Tokyo in such a case.

As The Japan Times reports,

"The consequences could be far more severe than any nuclear accident the world has ever seen. If a fuel rod is dropped, breaks or becomes entangled while being removed, possible worst-case scenarios include a big explosion, a meltdown in the pool or a large fire. Any of these situations could lead to massive releases of deadly radionuclides into the atmosphere, putting much of Japan — including Tokyo and Yokohama — and even neighboring countries at serious risk."

Aside from the terrible human costs of such an event — which I do not want to minimize — what do you think it would do to uranium stocks?

Besides, there are still ongoing effects of the disaster we are only now beginning to understand. See, for example, recent headlines about the damaged thyroids of California babies exposed to radiation that traveled 5,000 miles across the Pacific. Of course, the nuclear lobby is well-heeled and has its silver-tongued apologists who will do their best to discredit such stories. Beyond the despicable aspects of this, you should consider, from an investment point of view, the risk that the industry loses control of the public relations battle as more stories emerge — and legal consequences ensue.

The second reason I don't want to own uranium stocks long term: Because there is certainly another Fukushima, another Three Mile Island, in the deck. We just don't know when it will turn up.

Just look at the U.S., which produces more nuclear energy than any country on Earth. It has over 104 reactors. Most of them are old. Twenty-four of them have the same design at the Fukushima reactors.

The late Alexander Cockburn and Jeffrey St. Clair, again in CounterPunch, wrote in 2011 about the number of aging reactors on U.S. soil, several that sit on fault lines. They walk through a number of them, citing the age of the plants, past incidents and the potential for disaster.

The real takeaway for me, though, was the wisdom at the end:

"Look at the false predictions, the blunders. Remember the elemental truth that Nature bats last, and that folly and greed are ineluctable parts of the human condition.

"Why try to pretend that we live in a world where there are no force 8-9 earthquakes, tsunamis, dud machinery, forgetful workers, corner-cutting plant owners, immensely powerful corporations, permissive regulatory agencies, politicians and presidents trolling for campaign dollars?"

Yes, why indeed?

This reminds me of another bit of wisdom I heard from Paul Singer, the excellent investor behind the hedge fund Elliott Associates. He said this at the Grant's conference this fall:

"Trading as if the world is always poorly managed and you can't figure it out is right almost all the time… [However], never in my 37 years have I ever successfully timed a crash or a bear market, despite having a pretty good sense for what's going on in the world."

Human beings make many mistakes. We are a disaster-prone species, as any casual review of our bloody, imbecilic history will show. As an investor, is it not wiser to assume things will not go according to plan? Doesn't it seem better to assume that bad things will happen? And with nuclear power, we have clear potential for such errors, not to mention a record of rare but devastating disasters. Timing is the only thing that is uncertain.

If you adopt this kind of thinking, then uranium stocks are a no-go as a long-term investment.

Sincerely,

Chris Mayer
for The Daily Reckoning

Ed. Note: Whether you buy Chris’ argument about nuclear energy or not, the fact is there are still great energy and resource plays out there, for both the long and short term. Several of them are detailed every day in the Daily Resource Hunter email edition, which includes 3 chances for subscribers to discover actionable investment plays in every single issue. If you’re not a Daily Resource Hunter reader, you’re seriously missing out. Sign up for FREE, right here.

This article originally appeared at Daily Resource Hunter

Trading Antics and The Real Price of Silver

Posted: 27 Nov 2013 08:06 AM PST

If silver is ever freed from its paper price, the white metal could just be one of the best investments you ever make. Read More...

UBS short-term gold target downgraded to $1,180/oz

Posted: 27 Nov 2013 08:04 AM PST

UBS has downgraded the bank's short-term gold price targets to $1,180 an ounce for one month and $1,100 for three months.

Read more….

U.S. copper production up 10% YTD, gold up 6% – USGS

Posted: 27 Nov 2013 08:03 AM PST

Average daily smelter and electronic refinery copper production increased by 76% and 9%, respectively for the month of July, said the U.S. Geological Survey while gold output up 6%.

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Posted: 27 Nov 2013 08:00 AM PST

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Not so happy Thanksgiving as Hollister gold mine employees laid off

Posted: 27 Nov 2013 07:39 AM PST

The problems of the Hollister gold mine in Nevada have bankrupted one company, impacted the economies of two Nevada counties, and eliminated the jobs of a number of miners.

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In The News Today

Posted: 27 Nov 2013 07:32 AM PST

Dear CIGAs, The Story will be told here, early Wednesday morning from Dar es Salaam. 80.570 -0.080 (-0.10%) 2013-11-27 07:56:00, 30 MIN DELAY Jim Sinclair’s Commentary Gold moves from the West to East, and soon the East will make the physical price 24 hours a day. Hong Kong, Shanghai and Singapore will lead the Golden... Read more »

The post In The News Today appeared first on Jim Sinclair's Mineset.

Smart Metals Radio's Andrew Duncan interviews GATA Chairman Bill Murphy

Posted: 27 Nov 2013 07:29 AM PST

10:19a ET Wednesday, November 27, 2013

Dear Friend of GATA and Gold:

In an interview posted today, Andrew Duncan of the Hard Asset Alliance's Smart Metals Radio program talks with GATA Chairman Bill Murphy about gold market manipulation. The interview is 12 minutes long and can be heard at YouTube here:

https://www.youtube.com/watch?v=Uhj5bTxU2h4

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



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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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