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Gold Closes Above $400, $45 Oil!
Calm Before The Storm
by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
August 10, 2004
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August 9 - Gold $400.30 up $1 – Silver $6.71 down 3 cents The
wise are instructed by reason, average minds by experience, GO GATA!!! A note from this weekend.... After the US financial markets’ dramatic day on Friday (the result of a stunningly disappointing US jobs report), I thought I would pay special attention to how the pundits viewed the developments, like those on Fox TV’s Saturday morning business market shows. Several things stood out: *Most were still bullish, yet admitted confusion over the surprisingly lousy jobs number. That the economy has deteriorated so quickly the past month or two has them befuddled. It seems to have done so under the radar screen of Wall Street? Perhaps a number of them ought to subscribe to this column or read the very insightful King Report. What they might have picked up:
It’s Monday morning. As if to prove my point made over the weekend about gold being a key indicator for both Wall Street economists and the public, Bear Stearns chief economist, John Ryding, was on CNBC early on saying gold was his key inflation indicator. Thank you very much! It could not be more obvious why The Gold Cartel is suppressing the gold price. It’s called motive. One need only flip the page to another Wall Street apologist, CNBC’s Larry Kudlow, to give you some idea to what length The Gold Cartel has gone to suppress the price of gold. The following three year old piece says it all: LARRY
KUDLOW ON THE OIL/GOLD Ratio (June 2001) Today's barrel price for oil is $17, which looks to be just about right in terms of two economic models of oil-price behavior. First, the inflation-adjusted real price of oil has averaged $21.50 a barrel over the past decade. Real prices moved temporarily to $45 during the Persian Gulf War, and briefly fell to $10 a barrel in late 1998 during the global financial crisis that threatened world deflation and recession. The most recent spike was slightly above $30 a barrel this year, so a $17 barrel of oil averages nicely within this pattern. Second, the monetary model of oil prices that uses the ratio between gold and oil suggests that today's $17 per barrel spot price (or current price) for West Texas crude is also just about right. Gold is a useful benchmark because its monetary purchasing power is relatively constant over long periods of time. Hence, over time, an ounce of gold should buy roughly the same number of barrels of oil. In the past decade an ounce of gold bought seventeen barrels of oil, on average. Today, with gold at $275 per ounce, a $17 barrel of oil implies 16.2 barrels per gold ounce. This is actually below the average of seventeen oil barrels per ounce of gold registered over the past ten years. Therefore, a $16 per barrel oil price would be consistent with the decade-long trend. -END- http://www.nationalreview.com/kudlow/kudlowprint112101.html 17 barrels of oil times today’s price of $45 comes to a total of $765, or what gold should be per ounce according to his ratio formula. Kudlow and the rest of the mainstreamers on Wall Street have selective memories. Yes, gold should be at $765 per ounce today. Why aren’t the Kudlows of the world suggesting something seems to be very wrong with the price of gold from a historic perspective? This is what The World Gold Council and the entire gold industry ought to be jumping all over as even more anecdotal evidence of a nefarious gold price suppression scheme. Once again we see how PRICE ACTION MAKES MARKET COMMENTARY – commentary the price managers want the public to read – and that is gold continues to lose its historic value in terms of oil, inflation and safe-haven investing. Not only is this an outrage, it is disingenuous to the extreme, and is only postponing the inevitable truth/result. The gold price is going to go bonkers when the crooks lose control of their scam. A big thanks to Lois Ringel for bringing this old Kudlowism to my attention. The big news of the day was crude oil (it closed at $44.89 per barrel with a $44.98 high and up 94 cents), as it approached $45 per barrel. The news: 11:56
Iraqi oil official says southern oil output to remain shut until
fighting threat is lifted, reports Reuters AP)
- A radical Shiite cleric vowed to fight to the death as his loyalists
battled U.S. troops for a fifth straight day Monday, and bombings in
Sunni regions outside Baghdad -- including a failed attempt to
assassinate a deputy governor -- killed at least 10 Iraqis. The fighting
with Muqtada al-Sadr's Mahdi Army militia began to have economic
fallout. Iraq's southern oil company stopped pumping oil to the southern
city of Basra where militiamen were controlling main streets because of
threats to infrastructure, an official with the company said. 12:48
Reuters reports YUKOY's main unit Yugansk seized again by bailiffs Incredibly, thanks to the price managers, and after a lower opening, gold yawned and only drifted higher as the day wore on. Volume was very light. The gold open interest only rose 2038 contracts on Friday to 219,618. This tells us there was a fair amount of short-covering and not much new buying as the price ran up so quickly. Once at the $400 level, the price-cappers did their thing. This is VERY good news as there is room for 100,000 specs to come in on the long side to bury the bums. Perhaps it will take the specs a little more time to get their nerve up. Most have to be sick and tired of the cabal picking their pockets. Silver was wobbly above $6.70 on Friday and stayed that way. Early on a 200 lot order took the price down to $6.55. There were no bids, however, selling dried up and silver recouped most of these early losses. The silver open interest rose 141 contracts to 98,325. A nice silver plus for the day: the Comex warehouse stocks fell a sizeable 2,117,277 ounces to 111,548,374, a new LOW for the move. Just what MIDAS has been looking for and advertised at the end of June. The way I see it, this is the calm before the storm. Certainly, this is a time to have your ducks in the water as far as gold and silver are concerned. It is our ducks' kind of weather. The
John Brimelow Report Indian ex-duty premiums: AM $4.26, PM $3.91, with world gold at $398.50 and $398.40. Slightly below legal import point. The rupee weakened in afternoon. Premium compression, of course, is to be expected when world gold rises abruptly. The Shanghai Gold Exchange moved to actual discounts on world gold. Standard London continues to show premiums on their kilo bar Dubai prices. Despite the some times gold-friendly weakening of the yen since Friday’s Tokyo close, TOCOM showed no enthusiasm: on volume of only 13,393 Comex equivalent (up 35% on Friday, however) the active contract was up 5 yen but world gold was down 75c on the NY close at the end of trading. Open interest fell the equivalent of 995 Comex lots to only 95,090 Comex equivalent, and preliminary indications are that this may understate the degree of liquidation by the public. (NY on Friday traded 65,334 contracts; open interest increased 2,038 lots to 219,620.) On Friday, gold following the employment data essentially tracked the dollar, a number of commentators noting the failure to make progress in other currencies. The small open interest increase given the $7.30 jump in gold suggests that fresh buying was largely satisfied out of short liquidation. One remains bemused as to why commercially-motivated shorts would go short in the teeth of the premium data around last week – maybe they were not aware of it. The highly professional Rhona O’Connell in her weekly column on Thebulliondesk does not mention the huge and dramatic July Turkish gold import number available last Thursday, which appears to suggest huge Middle Eastern demand. In general, neither the enemies nor the weary friends of gold were particularly impressed by Friday’s superficially dramatic gold action. Australia’s Privateer notes dourly: "The most important feature on the weekly chart is the fact that the 40 week moving average (MA) is firmly above the 20 week moving average… The August 6 up move has pushed Gold back above its 20 week MA but not yet back to its more important longer-term 40 week MA…a level above $US 410 is necessary before Gold can mount any challenge to its February/April 2004 highs in the high $Us 420s (spot future closing price basis)." "The point and figure chart has keeled over from its distribution zone in the mid $US 400s and has slid all the way back down to just below the uptrend line. With the $US 4.00 gain on Friday, the chart has turned up again and now rests just below the line." "The biggest change in the point and figure chart is the simple fact that with the rise on August 6, Gold is once again well above its uptrend line…On this chart, a move above $US 410 in the absence of any more distribution would be a sign of drastic increase in upside strength. We'll wait and see." This diffidence on the part of gold’s friends is perhaps the strongest short term Bullish argument. JB CARTEL CAPITULATION WATCH Two minor "Hail Mary" late DOW rallies failed. Each time the DOW was lifted to 40 higher on the day, it gave up the ghost, closing at 9815, down 1 and on the lows of the session. The DOG was unable to gain any traction at all, losing 2 to 1775. The dollar rose .03 to 88.49, while the euro dropped .04 to 122.65 ahead of tomorrow’s FOMC meeting. Wall Street is waiting to hear what the Fed has to say tomorrow. Why? Greenspan and his recent comment to Congress about the economy being in a "temporary soft spot" and high oil prices being "transitory" was about as far off as you could get in a short period of time. What Wall Street wants is spin – Goldilocks pabulum. If they get it, Greenspan will look even worse down the road than he does now. Lose, lose for the Fed no matter what they do or say. The shocker will be if they tell it as it really is! Long the stock market? Get ready for a Nagasaki to shake you up any day or week now! Economic news items of interest: Cement
shortages spread and start to impact pricing says the WSJ DIS'
Miramax to lay off about 35% of workforce this week reports the NY Post 10:00
June Wholesale inventories reported 1.1% vs. consensus 0.6% The inventories increase was unexpected and not inconsequential. Goods are not moving off the shelves as hoped for. Buffett increases bet against dollar to $19 bln NEW YORK, Aug 9 (Reuters) - Warren Buffett increased Berkshire Hathaway Inc.'s bet against the U.S. dollar to $19 billion at the end of the first half of 2004, his holding company disclosed in a regulatory filing. The value of the Omaha, Nebraska-based company's contracts in foreign currency had increased by $8 billion by June 30, the company said its quarterly filing with the U.S. Securities and Exchange Commission. Buffett previously disclosed making investments in five foreign currencies in a belief the dollar will decline in the long run as a result of the United States' ballooning trade deficit. He has never specified which currencies he was investing in, only saying they were major…. –END- Warren Buffet has become the second richest person in the world for very good reasons. Betting against him is a sure way to the poor house. GATA’s Mike Bolser: Bill: They HAVE been all over the bond rig, making sure the 30-year yield stays almost exactly on 5%. Oil continues to track above $44/bbl at this hour and there's no relief from Venezuela. Indeed, if the administration thought they were going to install a puppet regime in Caracas by stirring things up, it seems to have backfired according to this story: Why
Hugo Chávez is heading for a stunning victory To the dismay of opposition groups in Venezuela, and to the surprise of international observers gathering in Caracas, President Hugo Chávez is about to secure a stunning victory on August 15, in a referendum designed to lead to his overthrow. END And
the reason why this will happen can be found here: In a phrase: US internal meddling. Congressman Ron Paul objects to this kind of government intervention. As I mentioned in Friday the Fed is leveling off their 200-day ma at DIVG=343 and as a result of the heavy selling needed to accomplish that the Fed is in a weakened state. No one can say what they will do from here but a move back down is highly unlikely so IF one were waiting to get on board with physical NOW is the time. Mike Chuck checked in on Saturday: Just wanted to pass on an observation regarding Newmont yesterday. When has it been on the most up list with the stock market down sharply. This contrasts starkly with the previous days as Newmont weakened with the market. My guess is that it should be proctored for its relative strength. A sharp move up above the $43 level and a weak market would be immensely positive. The Rydex PM Fund is a point only seen at major lows. The XAU and HUI look like 2002 revisited after the crash. If so, we should start to see very positive action in the golds. Jay (Taylor), if that is the gist of what Jim Rogers wrote, it reeks with smugness and pride. As we know, "Pride goes before a fall, and a haughty spirit before destruction." Take a look at the world markets after last week. It is pretty frightening. It looks like a panic coming up. Keep looking at NEM and the other major listed stocks for real divergence. If we don't bounce after the opening on Monday, we might be into it. Chuck http://www.decisionpoint.com/prime/dailycharts/03osex.html and then again this early afternoon: So far the market has behaved as hoped. I assumed that the market would try to rally all day especially with the Fed meeting. It has a very heavy feel to you considering the drop of the past few days. Also, I liked to see the major article in Barrons on a bank positively comparing it to Citigroup. And for gold, given the bounce in the dollar and the Pavlovian drop in the shares, it is also performing well, now over $400 even with some upward pressure in the buck. I would assume that the dark forces will try to close it under the round number and say "so there." But the next move might follow the Fed's rate decision. They are between the proverbial rock and a harder place at this point. I am assuming that any decision will have negative consequences upon the market, but I have said this before. One day soon, the calm and confidence will give way to a scary volatility. I believe we are in transition here. Chuck A potentially devastating development for US financial markets: WASHINGTON Aug 8 : Voracious purchases of US Treasury bills by Asian central banks are coming under scrutiny ahead of presidential elections amid concerns over national security and a ballooning current account deficit. Led by Japan and China, Asian economies have been gobbling up US dollar based assets, particularly US Treasuries running into hundreds of billions of dollars, over the last two years. By investing in US securities, the Asian economies stash away proceeds from selling their own currencies in an attempt to prevent them from rising against the dollar and so making their exports cheaper and more appealing to American consumers. Some say that while the massive Asian holdings may keep US interest rates low and help bankroll America's debts, they are propping up the US record 541.8 billion dollar current account deficit -- the balance of goods and services between US and the rest of the world. Others fear that such immense US wealth in foreign hands could boomerang if, for example, the assets are unloaded abruptly in a deliberate attempt to destroy the American economy. Lawrence Summers, Harvard University President and US Treasury Secretary under ex-President Bill Clinton, likened the Asian purchases to hoarding of gold by European states centuries ago. "Much has been made of US dependence on foreign energy, but the country's dependence on foreign cash is even more distressing," Summers said in the latest issue of the US magazine, Foreign Policy. "In a real sense, the countries that hold US currency and securities in their banks also hold US prosperity in their hands," he said. "That prospect should make Americans uncomfortable." Foreigners
already hold almost 40 percent of marketable US Treasury debt. The Asian
central banks have increased their holdings of US assets to about one
trillion dollars, according to market estimates…. Meanwhile Summers, one of the major proponents of the gold price suppression scheme and the US strong dollar policy, is going to have to crawl into a hole one day when it is exposed how he was instrumental in cultivating what is ahead. He and Robert Rubin will go down as some of the baddest financial market characters in the history of our once great nation. With Iraq completely falling apart, it was hard to pass this one up too: In his memoirs, "A World Transformed," written five years ago, George Bush Sr. wrote the following to explain why he didn't go after Saddam Hussein at the end of the Gulf War. "Trying to eliminate Saddam...would have incurred incalculable human and political costs. Apprehending him was probably impossible.... We would have been forced to occupy Baghdad and, in effect, rule Iraq.... There was no viable "exit strategy" we could see, violating another of our principles. Furthermore, we had been consciously trying to set a pattern for handling aggression in the post-Cold War world. Going in and occupying Iraq, thus unilaterally exceeding the United Nations' mandate, would have destroyed the precedent of international response to aggression that we hoped to establish. Had we gone the invasion route, the United States could conceivably still be an occupying power in a bitterly hostile land." If only his son could read!!!!! Latest Iraq scorecard:
Some thoughts from a Swiss Café member on Sunday: Bill, The Fed may be able to manipulate many things, but oil may not be one of them, (currently at any rate). In this respect another key event is looming in this critical month of August, the Venezuelan vote on August 15th.Latest indications are Chavez may win. Chavez's popularity has gained recently as he has pumped increasing oil revenue(from the rising oil price) into social programs into the economy. Chavez
Likely to Win August Recall-Venezuela Poll The Fed's decision next week on whether to raise interest rates or not looks increasingly to be a lose-lose situation for them. If they raise rates, the already weekend DOW may decline in an orderly fashion, or even crash. If they don't raise, the $ may crash and they could lose control of the POG. Similarly the Chavez vote could lead to higher oil prices no matter the outcome, once the uncertainty of the vote is removed. If Chavez wins, the threat of a potential oil embargo against the US will hang over the markets, if Chavez perceives the US moving against him. If he loses, there is a heightened risk of unrest and oil production disruptions. Facit: "Cave Ides Augustus" Beware the ides of August, and talking of soothsayers, it would be interesting to hear Mahendras latest thoughts on the oil price situation? August 15th I will be on Chavez / oil watch. All
JMHO and definitely not investment advice. Bill, "The United States is the biggest single buyer of Venezuela's oil, but Chavez accuses President Bush of trying to topple him and has threatened to cut off oil shipments if the United States intervenes in its affairs. Washington rejects these accusations. SAYS OPPOSITION INCAPABLE Dismissing
his opponents as incapable of ruling, Chavez warned the U.S. government
that defeat for him in the referendum could trigger unrest and
instability in Venezuela, which could send already high oil prices
shooting up to $100 a barrel." Best Here
is a link to Wm. J. Murray’s (not to be confused with Wm. J.
Murphy’s) web site on silver: One precious metals company after another is reporting disappointing earnings. Relative to companies in other financial market sectors, these disappointments rank our sector near the bottom as far as under achieving for the last quarter is concerned. Costs keep going up, while the prices of gold and silver are capped. The CEOs of these companies should be screaming bloody murder about what The Gold Cartel is doing to their firms. What a bunch of powder puffs as a group! Shareholders ought to be irate about their bewildering silence. The outrage from my perspective continues on all counts. Here’s another example of disappointment in this inept and dysfunctional industry: NEW YORK, Aug 9 (Reuters) - Coeur d'Alene Mines Corp. (NYSE:CDE - News), which has made a $1.8 billion unsolicited bid for Canadian miner Wheaton River Minerals Ltd. (Toronto:WRM.TO - News), on Monday reported a wider quarterly loss and said it will restate its results for last year and the first quarter. The Coeur d'Alene, Idaho-based silver miner posted a second-quarter net loss of $5.4 million, or 3 cents per share. That compares with a net loss of $4.1 million, or 3 cents per share, in the same quarter last year when the company had fewer shares outstanding. -END- The psychology regarding the gold and stock market shares is extraordinary, interventionalism or no. After the news the market received on Friday and the resulting dramatic moves in the markets, one would have expected some follow-through in the early going today. Wrong! The US stock market was bid right up before the opening and the gold shares were hit fairly hard right off the bat. Investors refuse to dump their general market shares, holding on until they can recoup losses and yet, gold share investors can’t wait to sell. It is almost surreal. It is as if the investment world is in complete denial of the realities of what is really going on out there from an economic, financial market viewpoint. The gold shares regained most of their early losses on light volume. The HUI finished at 183.27, down .35, while the XAU lost .36 to 86.32. Gold has become pressure cooker-like, yet off the radar investment screen for most. This is extremely bullish. It could blow at any time! GATA BE IN IT TO WIN IT! MIDAS Copyright
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