Financial Sense Home l Broadcast l WrapUp l Storm Watch l About Us l Contact Us
LETTING IT ALL HANG OUT!
by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
August 12, 2004
|
August 12 - Gold $393.90 down $1.50 – Silver $6.53 up 2 cents "...I do not see that one can blame the majority of Germans who, in 1933, believed that the Reichstag fire was the work of the Communists. [The Parliament burned down and a convenient Communist arsonist was fingered, which the Nazis used as the excuse to unleash police-state tactics against all opponents.] What one can blame them for, and what shows their terrible collective weakness of character clearly for the first time during the Nazi period, is that this settled the matter. With sheepish submissiveness the German people accepted that, as a result of the fire, each one of them lost what little personal freedom and dignity was guaranteed by the constitution; as though it followed as a necessary consequence." Sebastian
Haffner, Defying Hitler, 1939 Wake up America! It time to realize what your government has been up to (and for some time) before it is too late! Remember when you were a kid, and as you were taught history, you thought. “How could the average German ever have let that happen?” Well . . . your kids and grandkids are going to be reading history books many years from now. And they are going to ask how YOU could have ever let Washington and Wall Street do what they are doing to America today. Chris Mathews, of CNBC’s HARDBALL, recently said on his acclaimed show that he had traveled around the world of late and found that "America is hated." It is NOT for no reason. It is time for our once great nation to wake up to what the financial/political powers have done and keep doing - all for the WRONG reasons! As long as this sort of suspicious attitude prevails in the poor areas of the world, America is going to find itself in deeper and deeper trouble as the years go by in this new "era of terrorism." KHARTOUM, Aug 12 (Reuters) - Sudanese President Omar Hassan al-Bashir on Thursday accused Western nations of interfering in its troubled western Darfur region to try to exploit Sudan's gold and oil resources. Sudan is under intense international pressure to rein in Arab militias, accused of looting and burning African farming villages, and provide security for more than 1 million people displaced by the fighting in the remote area bordering Chad. If not, the U.N. Security Council in a July 30 resolution says Khartoum could face unspecified sanctions. There has also been talk of possible foreign troop intervention in Darfur. Bashir on Thursday said Western nations, especially Britain, were inflaming the Darfur fighting to destabilise wider Sudan. "There is an agenda to seek for petrol and gold in the region," he told a women's union meeting on Darfur in Khartoum on Thursday. –END- This is not anti-America diatribe on my part, it is pro-America and anti where the power structures in Washington and New York are taking our country. The way I see it, the question for the average American is, "If you were living in 1776, what side would you have fought on?" The establishment British or the Colonists? Would you have fought to preserve tyranny and the banking elitists or for freedom and your deserved rights? Like it or not, that is close to where we are in 2004 in many regards. Not only are Americans in peril of losing long cherished freedoms, the average Joe and Jane are in danger of losing a good deal of their hard earned money when the stock and real estate markets collapse – due to bursting "bubbles" engendered by the former strong dollar policy of Robert Rubin, rigged markets (most importantly the gold price) and deliberate misinformation emanating from Washington and Wall Street. It is time for America to wake up before it is too late! If the venerable Jim Sinclair has it right, it may already be too late. From this latest missive at www.jsmineset.com: Thursday,
August 12, 2004, 11:30:00 AM EST The final act in this drama will be the population taking down the new government of Iraq and demanding a Theocracy under the influence of Iran while the Kurds and other elements demand autonomy. The West will be rendered incapable by having their economies held in hostage via oil. The inflationary implications of this will deliver a spike up in gold of an enormous magnitude thanks to the manipulation by the powers that be that have so far prevented the normal market power of gold to unfold. The net result in markets for anything is to construct an internal coil of power that once released by such events will multiply the upside potential by orders of magnitude. Dan Norcini's read on the USDX extension on the downside will become a reality. All this might be closer than anyone is willing to accept. -END- Fellow Café members saw it (gold) this way early this morning: Hi,
Bill: Morning
Bill, The gold related news of the day was BULLISH all the way around, which you will read as you go on with the MIDAS. A list:
Gold? It shot up early and then THE GOLD CARTEL launched one of their price-capping assaults, taking it from up $2.60 to down $1.50, where they sat on it for most of the entire trading session. The Kitco daily chart looks line another flatline brainwave of a dead person. Gold, after making its high AGAIN in the first half hour, barely traded for the entire session after its takedown. And that is with the stock market cratering and oil surging. ONCE AGAIN, we see gold manipulated by the cabal RIGHT at the time gold should be taking off. You have to wonder how desperate the devious crooks are I think REAL desperate. The US economy is weakening, the dollar is shaky, the effects of the last few years of stimulus are over, oil is soaring and Iraq is a mess. The geopolitical and economic/financial market news is very likely to worsen from here on in through the rest of the year. Can’t see the bums being able to hold gold down too much longer. The creeps are going to be blown out of the water. A potential BIG plus for the bull side of the gold market: The option writers on the gold floor have been writing calls on the metals markets with impunity as of late. By the way they are writing the options, it appears they don’t believe gold will make a move in the next half year. This could be a source of panic short-covering in the months ahead. The gold open interest fell 901 contracts to 218,161. Silver was quiet most of the session after falling back 10 cents from its opening. Its open interest fell 1575 contracts to 95,616. Good news on the warehouse stocks front. After a 600,000+ ounce build yesterday, the silver stocks fell 1,193,826 ounces this afternoon to register a new low of 110,416,153. Still going the right way! The
John Brimelow Report Indian ex-duty premiums: AM $6.32, PM $6.64, with world gold at $395.85 and $396.15. Ample for legal imports. India is a strong importer at these prices. Mitsui-London noted that yesterday: "Gold was bid initially through NY with decent spec buying but Euro weakness spurred dealers and locals to hunt down weak longs. Aggressive physical buying from Turkey and India provided support." (JB emphasis) Some interesting light is shed today on the state of the physical market by a report in a Gulf newspaper today that a jewellery show in Jordan last week saw record sales, more than twice the usual in the event’s 5 year history. Jordan, of course, has no oil, and is in the unenviable position of being sandwiched between Israel and Iraq. However, this has meant boom times for the Jordanian trucking industry, supplying the occupation forces. Your US tax dollars at work! See TOCOM continues unimpressed. Volume fell 25% to only equal 9,244 Comex contracts, and the active contract was down 10 yen. Open interest slipped another 789 Comex equivalent. World gold stood 80c above the NY close at the end. (NY yesterday traded 48,754 lots: open interest slipped 901 contracts.) Yesterday saw powerful selling after the US data, with more than half the estimated volume going through in the first 90 minutes of Comex. Refco Research blames "fund and dealer" selling, while Standard London, in an unusually frank commentary, appears to suspect short selling: "Gold opened in Asia almost 2 dollars lower and it was evident what were on the Asian dealers mind. One could almost see the glint of their smiles while rubbing their hands as they were finally having the first chance to direct the gold’s movement. So gold opened at 397.70 bid and dealers initially sold it cautiously…Gold was soon banging at 396 but physical demand underpinned the market there …With all things considered, 397 seemed like a pretty good level to get short for the day and so the European dealers gamely started selling it as well. …After COMEX opened… everyone scrambled to sell some gold before the prices became unattractive. Gold was pushed lower gradually and eventually established the day’s low at 393.20 offer. Without fresh selling interest, gold recovered its composure to close at 395.40 bid, which technically is a bearable closing as it did not close below 395." This simply seems unwise in view of the buoyancy of the physical market. Brightening up a day in which another dreary round of trench warfare seems to be underway between Eastern physical buyers and North Atlantic sellers is a piece by Jessica Cross of Virtual Metals, published late last night on Reuters. Most of this is a complaint about the shrinkage in the bullion dealer community, a.k.a. possible buyers of VM’s service. However, the occasion of the report is the publication of the "Hedge Book" survey VM does for Mitsui. This shows that producer hedges were cut by more than expected in Q2 ’04: "A Hedge Impact reduction of no less than 4.6 Moz was substantially more supportive of the gold price than a simple committed ounce measure would have suggested. And yet the price over the period fell from $427/oz to $393/oz. This tells us that in the absence of this decline in hedging, the gold price would have most likely fallen further and faster than it did...As US interest rates turned up, signalling to many observers the end of dollar weakness, so it appears that the speculative side of the gold market went short in volumes that swamped the supportive 4.6 Moz of dehedging and resulted in the subsequent price vulnerability." (Cross maintains, no doubt correctly, that the hedge reduction impact was accentuated by the gold price decline and lease rate changes, which influence the "delta".) The problem with the claim that this powerful uplifting influence was offset by spec shorts is that there is absolutely no evidence that such shorting occurred. Indeed, the CFTC data showed just the reverse, and was widely thought to be replicated on a larger scale OTC. And, as Cross notes, lease rates remain "glued to the floor". Lower prices + big producer hedge reduction + no huge spec short increase = Undisclosed Central Bank activity A conclusion from which establishment publicists like Virtual Metals always shrink. JB The complete Virtual Metals report follows for your perusal: The Hedge Book Q2 04.pdf Another gold industry joke, this Virtual Metals. Perhaps hoax on the industry is more like it. This report is completely disingenuous as it fails to deal with the real reason the gold price tanked in the second quarter. To blame the specs going short as a reason is ludicrous. For years Ms. Cross, now of Virtual Metals, dealt with the large BIS gold derivatives numbers as being related to the hedgers. Now that the hedgers have sharply reduced their positions over the past few years while the derivatives have not gone down, she says nothing and shies away from the issue. The gold price is suppressed because there is a Gold Cartel out there surreptitiously feeding central bank gold into the market to keep the price from rising. How clear can that be? By the way, for new Café members, Ms. Cross is married to the former number two at the South African Reserve Bank. During my tour of South Africa I met with the bank’s number 3 and 4 in a government building in Pretoria to lay out the gold scam story in an effort to expose the fraud and free the gold price. The main beneficiary of a sharply rising gold price (then about $258) would be the people of South Africa. The two bankers giggled part of the time like a bunch of school kids when they thought I wasn’t looking. CARTEL CAPITULATION WATCH The dismal US economic news: 08:30
July Retail Sales reported 0.7% vs. consensus 1.2%; ex-Autos reported
0.2% vs. consensus 0.4% (This is old news, however it is negative because it reveals a weakening trend, one which won’t be helped in the months to come by sky high oil.) The
Bank of Korea cut its key interest rate Thursday, stunning markets, in
an attempt to bolster the flagging South Korean economy despite the
threat of rising prices 8:59
Moscow court denies YUKOY more time to repay its $3.4B tax Reuters: 10:25
Yukos local shares halted for trading at 10 minutes after this hour A monster disappointment: Aug. 12 (Bloomberg) -- Hewlett-Packard Co., the world's No. 2 maker of personal computers, said third-quarter profit rose to $586 million, less than analysts expected, as sales of its server and storage computers fell. The shares declined as the company cut its forecast for the current quarter. Results are ``unacceptable'' and Hewlett-Packard will make ``immediate management changes,'' Chief Executive Carly Fiorina said in a statement that included preliminary results…. – END- Even the high end is suffering: Tiffany & Co misses by $0.04, guides Y04 below consensus (TIF) 31.80: Reports Q2 (Jul) earnings of $0.25 per share, $0.04 worse than the Reuters Estimates consensus of $0.29; revenues rose 7.7% year/year to $476.6 mln vs the $496.8 mln consensus. Company issues downside guidance for Y04 (Jan), sees EPS of $1.55-1.60 vs. Reuters Estimates consensus of $1.64… - END- China has its problems too. Will they send them our way? Bill; Aug. 12 (Bloomberg) -- China's consumer prices rose last month at their fastest pace in more than seven years as food costs surged, making it harder for the central bank to avoid raising interest rates. Bonds fell after the report. ......... .....``The inflation pressure is transitory,'' said Chris Leung, an economist at DBS Bank Ltd. ``Why raise interest rates when the economy is already slowing?''.. Monkey
see, monkey do. Wall Street pundits were hoping yesterday that the inventory numbers would show healthy decreases. They didn’t get them: 10:00
July Business Inventories reported 0.9% vs. consensus 0.6% WASHINGTON, Aug 12 (Reuters) - Inventories at U.S. businesses rose more than expected in June, marking their largest gain in four years and their tenth consecutive monthly rise, a government report showed on Thursday. The Commerce Department said June business inventories rose 0.9 percent to $1.234 trillion while sales at manufacturers, retailers and wholesalers grew 0.1 percent. Wall Street economists had expected a milder 0.5 percent rise in June stocks. The June business inventory gain, the largest since a matching rise in June 2000, pulled a key measure of inventory leanness from recent lows. The stock-to-sales ratio, which measures how long it would take to deplete stocks at the current sales pace, rose to 1.31 months in June from 1.30 months in May…. –END- More bad economic news: "The
Federal Reserve Bank of Chicago said its index of manufacturing activity
moved 0.7 percent lower in June compared to May's levels. Three of the
four sectors followed by the index declined in June while the fourth
group was unchanged. The May reading was revised to show a 0.1-percent
tick higher." The energy problem is not only about oil: US
coal prices soar as output declines US coal prices are rising rapidly as unexpected growth in demand this year is undermined by declining domestic production, according to Standard and Poor's. The ratings agency says in a report to be released on Thursday that demand has risen because of the stronger economy, weather-related usage and the running of coal plants at higher capacities as utilities have increasingly switched to the fuel to avoid paying skyrocketing natural gas prices. Yet US production to meet this demand has been declining over the last few years and coal exports have increased, with high-grade thermal coal being marketed for Asia's surging steel production needs at a time when the depreciation of the US dollar makes it attractive. Efforts to build up coal inventories are being hindered as US railroads experience severe congestion, with demand for all commodities higher than expected. Coal inventories already are at historic lows, with coal-fired generation outpacing coal production. Some utilities report inventories of only about one month. "Inventories will reach an all-time low by year-end 2004, potentially causing further volatility in spot prices," said Aneesh Prabhu, S&P credit analyst. -END- Remember when our Café source told us months ago the Chinese have tied up huge coal supplies out of West Virginia and Alabama and were shipping them back to China? GATA’s Mike Bolser: Hi
Bill: The DOW's 30-day ma has slipped to a new low for the move and this is interesting and suggests that the Fed may not be as well off as they imagine. The relatively large add today hints at things to come and we will have conclusive evidence that the Fed is in trouble when they run the repo pool up over $50 Billion again. Richard Russell keeps advising investors to obtain gold in metal form and so do I. Think not in terms of how many pieces of colored paper will buy an ounce but in how many ounces one can get and still meet one's other expenses. Inflation ravaged countries in Europe know this drill all-too-well. The day of reckoning is in the future so it makes little sense rushing to count gold "profits" in dollar terms. Accumulation is all that "counts". Derivatives explosion or COMEX closure? The interest rate derivatives held at JP Morgan top $29 Trillion in the latest quarter and much of that contract load is gold linked. The language stipulates that "a pricing mechanism must exist" in order for the contract to remain valid. This extremely odd language insertion attracted my attention when I first saw it and I asked...why is this here? Well, the cynical view is the phrase is there as an escape clause after the authorities close the COMEX and other big gold markets under their control to precious metals trading. Until there's a better explanation, I'm sticking to this expectation so investors ought to beware of precious metals options and futures as an avenue to prosperity. Under such a scenario, metal itself will deliver its own very high leverage. Philosophically, the Fed's goons would make sure, by design, that their arch enemies in the gold bug army made no profit when the price finally ran away. They would deliver a scorched earth. D-Day When... is the key question everyone wants to know, not if. The wild mutations in historical ratios such as oil/gold and gold/real interest rates have prompted even mainstreamers to comment of late. Something isn't right all-too-few of them say. By watching the Fed's every move using proprietary metrics, many of which have yet to be published, I attempt to guess where they are going. Right now the Fed has just changed from up to flat in the DIVG ma even as they are forced to keep M1 rising and suffer massive budget and trade deficits that are, by all assessments, out of control. They took from May 24th until this week to transition so they were not in too big a hurry as they gently added more and more selling pressure. I don't think they can hold this for very long without some external event to cover their next move which needs to be designed to halt the need for gold sales. It could come in weeks or months...no one can say. I do not believe that D-Day will bring the same kind of failure we experienced in 1979 because the Fed is dedicated to preventing just such an un coordinated retreat from ever happening. They often speak of how things are different today. Perhaps the biggest difference between 1979 and 2004 is that the Fed feels much better about bending economic truth and therefore has become a full adversary to those holding wealth. Don't waste your time listening to the Masters words...use his pieces of colored paper to obtain metal while you can. DOW 11,750? By Labor Day? It's all but a blown forecast but I'll concede defeat when the time comes. I'm guessing that the election has been conceded so the Fed may have chosen not to push things any harder. This DOW 11,750 defeat is one I'll gladly accept. BTW the democratic presidential contender took a slight lead in the Florida polls today and IF the hurricane does appreciable damage here, lightly motivated folks will be absorbed in rebuilding first and voting second. Mike The amazing Mahendra has done it again. He just recently called for a short-term sharp soybean rally. August beans closed up 50 ½ cents to $6.87 ½. Then, he recently called for the dollar to weaken, except against the South African Rand, which he said would weaken against the dollar. Sure enough, the SA Reserve Bank lowered interest rates today and the Rand weakened against the dollar, while the dollar fell against most other currencies. Now, if only we could get the Gold Cartel to shoot themselves in the foot so his gold prediction can pan out. From Richard Russell last evening: "But what ever happened to the long-promised gold ETFs? When it comes to gold and silver, the authorities will do everything they can to keep the precious metals out of the hands of the public. When you buy the not-yet approved gold ETC, you actually take an ounce of gold off the market, reducing supply. The authorities don't want that." This is exactly what GATA said the US would do to this World Gold Council, New York Stock Exchange product years ago when it was first proposed. It will be two years behind schedule as of this fall. Once again GATA finds more anecdotal evidence of a coordinated mass conspiracy to denigrate gold and keep it off the average American investor’s radar screen. Either that, or the World Gold Council is proving once again it is among the least effective industry organizations in history. The most likely reason for the delay is a combination of both reasons. It is time for the gold producers in the WGC to withdraw their support and get behind a new organization to fight the gold price suppression scheme, a scheme which is destroying their profits and demoralizing their shareholders. If you are one of those disgusted shareholders, don’t just sit there! Get on the phone and raise "Cain" with the CEO’s of your gold companies; have them do something about this nightmare. If you don’t make any effort to end this fraud, fine. Just sit there, complain, and stay miserable! Robert Rubin’s Citigroup (a Gold Cartel honcho) has itself in some hot water in Europe due to alleged market shenanigans (what else is new). FT The controversial trans-actions by Citigroup that have stunned the eurozone government bond market came at a challenging time for the fixed-income markets, provoking an unusually emotive response from many rival banks. After a period of exceptionally low interest rates, which helped make fixed-income desks significant revenue generators for investment banks, the cost of borrowing has begun to rise. Meanwhile, profit margins in the inter-dealer, or wholesale trading, of eurozone government bonds have dwindled as pricing in the maturing market has become more efficient. This has been driven by a move to electronic and internet-based trading, which cut costs and incr-eases pricing transparency. "Market-making has be-come very tough," said a trader at a European bank. "Five years ago, you could expect to make 4-5 cents [per Euro] on a €100m transaction in German Bunds. Now it's about 1 cent." But unwelcome though they may be to rivals, large trades of this sort are probably here to stay. Citigroup's market coup reflects the growing power of a handful of leading banks in the capital market arena. A combination of their large balance sheets with electronic technology and sophisticated financial modelling allows them to put together deals that leave lesser players gasping…. -END- Don’t think for a moment the hedge funds are cleaning up these days: Benton's Andor Fund Assets Fell Almost 50% in July, People Say Aug. 12 (Bloomberg) -- Dan Benton's Andor Capital Management LLC, the eighth-biggest hedge fund at the end of 2003, lost almost half its assets in July, people familiar with the New York- based fund said. Assets in the fund, after 18 months of losses in its main Andor Technology Fund, fell 46 percent in July to $3.5 billion, the people said. Investor withdrawals of $1.5 billion led the decline as two of Andor's portfolio managers left and Andor decided to close the funds they ran, the people said. At Andor's annual meeting in May at the New York Public Library, Benton asked investors to ``ride the technology wave'' with him. Computer and telecommunications shares plunged in the following two months, contributing to a 5.4 decline in net assets this year through July for Benton's $1.7 billion Andor Technology Fund. -END- Modest gold supply increase: China's gold output expected to hit 210 Gold output in the Chinese mainland is expected to reach 210 tons this year, according to an industry organization. The figure will be up from 200.598 tons last year, said sources from the China Gold Association. *** To give you some idea of how insignificant this increase is, compare it to Turkey importing a record 30 tonnes in just one month. Forked tongue stuff: Bill,
The $343.82B increase in the debt held by the public (mostly the bond market) is close to the announced $395.78B, so I am assuming they are using that, with some unknown fudge factor, possibly excess Medicare receipts. The $189.51B increase in Intragovernmental Holdings represents the various federal pension fund receipts in excess of the amount needed to pay current benefits. Mostly this is Social Security. Their web site explains it all in detail. They seem to be implying that they don't really owe the Social Security trust fund the money they borrow from it, they simply use it as a cash cow, knowing that some day they'll simply renege on it. What other explanation could there be for not including it in the deficit? On the other hand, they can't play those games with the debt, since by law it is defined as anything they borrow that they must pay interest on. That's why periodically, when they must raise the debt ceiling, they borrow from other internal accounts while the bill works it's way through Congress, and the numbers posted at the above web site virtually freeze until the bill passes. They don't pay interest to those other internal accounts, and so can get around the law that way until they run out of those sources. If I were in charge, I'd change the law to require the excess SS funds be invested in hard money, money that can't be reneged on. I think you know which money I'm referring to. And I'd start selling those treasuries and use the proceeds to buy more of the same. I know, fat chance. Oh
what a sight it will be to see the printing presses in high gear in
2020. This is a bit scary and food for thought: Forward
Planning: Two
Years (or less) to $125 Oil Oh, this is a for sure bummer: An Iranian oil expert makes the call at http://www.abc.net.au/rural/news/stories/s1172992.htm You can do the math, right? $45 goes into $125 2.77 times and with gas at $2.00 now, that would project $5.54 gasoline within 2-years. You need not be a genius to figure out that we are quickly coming to a major bifurcation point where the future will be wildly inflationary due to soaring oil - when we get three times the oil price, we get a kick of inflation that may exceed even the 1980's. On the other hand, oil prices could actually fall but that would imply a collapse of demand. As your people's economist I won't forecast which way things will break, but you see the point, right? Consumption can never outpace supply so if Peak Oil is here, stand by for the age of falling standards of living. No doubt, the soaring oil price figured into the Fed decision to raise rates yesterday. You see, it makes no difference to the government right now whether employment falls later on this year. Their immediate problem is to keep the string of carry trades intact, and thus keep the U.S. dollar firm enough so that it won't take much more than $45 a barrel to buy oil: http://business.scotsman.com/economy.cfm?id=923342004 The reality is that if the U.S. dollar falls, the price of oil denominated in dollars will quickly head much higher - and that would have a disastrous impact on what's left of the U.S. economy. It would make the oil shocks of '73 and '75-76 look like child's play. We can only hope that folks over at the Fed are reading the news in serious financial media - there is, it's coming out as we forecast, nothing transitory about oil prices. See Forbes article at http://www.forbes.com/business/services/feeds/ap/2004/08/11/ap1499798.html That Sir Alan and the crew would have been so foolish as to think that oil prices would be transitory has prompted us to add yet another word to our New Economic Reality Dictionary:… -END- Russ
Winter is very sharp. The following is a copper analysis from Russ
at: All questions I have pondered. Let's just take copper, because that's the most obvious and the one I'm playing actively. Backdrop: We have about 14 million MT consumed a year right now. We saw a 0.2% drop in production (let's just call it flat) in the 2nd quarter despite a $1.25 price. If we used Comex, LME and Shanghai inventories for draw down we can closely construct the supply-demand set-up for this market. Since production (supply) is flat we could probably give consideration to utilizing this to diagnose the global economy, they don't call it Dr. Copper for nothing. Maybe a little simplistic, but I think a good exercise. From my daily index card. May: inventory drawdown was about 78,000 MT: copper deficit is 936,000 annualized, or 6.7% of global demand. June: inventory drawdown was 72,000 MT; deficit 72,000, 864,000, 6.2% of global demand. Could it be argued that the world economy contracted 0.5% from May to June? I think so. July: drawdown is 55,000 MT, deficit is 660,000 annualized, 4.7% of global demand. August: 8 days showing about the same drawdown rate as July. Did the world economy contract 1.5% in July? That may be overstating it, but I'd still guess July was quite a contraction. Probably July saw the arrival of disrupted Grasberg supply, so that accounts for about half the down shift. I'd say 0.8% is my July-August SWAG. So I'll SWAG global GDP having contracted by 1 1/4% annualized from May to August. Sure that might give the market "pause", but now let's examine what's required to prevent the remaining 180,000 MT in LME, Comex, and Shanghai inventory from going to goose eggs. The July-August "economic contraction" draw rate is currently about 2600 a day, or 650,000 MT annualized. That's a bit over three months to get to zero. So if the world GDP contracted another 1% immediately, you would get about a 500,000 MT deficit. In otherwords to get the copper market back into equilibrium Dr. Copper (the economy) would have to contract by over 4% (a depression by any measure) from August. Could that be about to happen? Possibly, but I think you will see price rationing of the last 180,000 MT of inventory first. At any rate your first clue will be in the drawdown rate (spread out over a month or so). Remember there is no meaningful new supply, so if drawdown suddenly dropped to 35,000 a month, that might suggest a another serious economic deceleration was underway, 1.7% by my math. But let's just take a worse case, we are in mid-Sept, and the draw down has slowed to a 420,000 MT annualized deficit (1750 MT a day), and the global GDP is in deep retreat. We are now down to about 135,000 MT left in inventory. That's nearly four months to zero, a little better calendar wise, but worse in relative numbers. If you are a copper consumer (say China), aren't you going to be getting damn nervous, weak economy or not? And how about those hedge funds, wouldn't they be tempted to start a run, weak economy or not? Then just carry out this exercise on through. Conclusion: a severe depression (6% drop from last spring) will bring the copper market back into equilibrium at extremely low inventory levels. I think there will be a depression from this, but caused by price spikes from severe shortages, probably in both energy and metals, and in time even food (a subsistence item). New supply you say? That's several years away, and I don't see anybody whatsoever in a hurry to deal with that solution, do you? HUGO trades at 3.88 today, NTO at 1.96. They have two of the best undeveloped deposits in the world, and nobody seems lined up for them, at least today. -END- On this tumultuous day for most of the financial markets, and on one of the most blatant gold rigging days of all time, the following emails from Café members might help to put the big picture in focus: Bill: Bill, my take on the current situation is just the opposite. This is one hell of a complicated Chess game and I do not doubt that the bad guys are smart, ruthless and perhaps desperate, but they are not omnipotent, nor do they have complete control. I think they truly are cornered. The interest rate rise is the last thing they wanted right now. But it was that or a Dollar collapse. It was a move FORCED on them by the market. Just think: There is less than ONE OUNCE of Gold per person on this planet. After 5000 years of mining!!! Each month the US Trade deficit is $45+ Billion. If that had to be settled in Gold (as it was under the Gold standard) the US would have to ship 3000+ tonnes to its trading partners. Instead this deficit is settled in paper promises, aka Federal Reserve Notes or Treasury Paper. Think of it as a gigantic game of musical chairs. Each month the US issues 45 Billion new tickets to the game without increasing the number of chairs. The market knows this. So they probe for weakness. They are rebuffed and withdraw. They probe again, testing the Fed's resolve. So far this year, we've seen the Japanese save the Dollar, then the Chinese slowdown story saved the Dollar, then the Fed promised to raise rates to save the Dollar, then they actually had to do it twice. But these rate rises have real consequences, some obvious (like housing) others not so obvious but which we assume must be dramatic (like the interest rate derivatives). American power has many sources both economic and military but the most efficient instrument of that power is the US Dollar. For decades the American government has abused that power, allowing its citizens to live beyond their means. The strength of the Dollar is an illusion. American control over other nations depends on the continued belief that the Dollar is Money. It is the Fed's job to keep that illusion alive so that 45 billion new tickets can be absorbed each month. For those of us who understand this, it becomes obvious that we must secure a chair before the music stops. How close is that day? I certainly don't know but yesterday the October gold price closed only 10c above the Spot price. This is ominous. As Antal Fekete argues: "Backwardation in gold has a perverse effect. In the case of agricultural commodities backwardation provides a most powerful incentive for traders to sell the cash commodity and buy the futures. Not so in the case of gold. Rather than bringing out deliverable supplies of gold, backwardation tends to remove them. The more the gold basis falls the less likely it becomes that owners will exchange their cash gold for futures. Please remember that you have seen it here first. This perversion of the gold basis constitutes the self-destroying mechanism of the regime of irredeemable currency. The longs tend to take delivery on their gold futures contracts in ever greater numbers, and refuse to recycle cash gold into futures, regardless how low the gold basis may go. As it is not set up to satisfy demand for delivery on 100 percent of the open interest, the gold futures market will default. Exchange officials will declare a "liquidation only" policy to offset long positions in gol! d. At that point all offers to sell cash gold will be withdrawn. Gold is not for sale at any price. The shorts are absolved of their failure to deliver on their gold futures contracts." The
Gold price is down less that 8% from its high, yet somehow many gold
bugs have been convinced that the bull market is over. This is the power
of the Illusion the Fed feeds us. Don't listen. Trust Gold. Dear Bill, You may post this if you choose. I was around in the 1970s playing the gold and silver markets. Made some money but was self taught and got out mid 79 and left some on the table. This time around I started buying back in 1996 quite early. Lost some money but kept buying. Signed up with Lemetropole after you were about three months old. In 2000 we placed $ 300,000.00 more in the market and kept buying as was feasible. By 2003 with about $300,000.00 more invested. We took profits in November 2003 of 1.55 mill. And still have our original money in the market. We paid off the mortgage on our Holiday Inn and buying with all available funds back into the market. I am a few years older now, but still think I have time to beat these bums. But I if don’t my son sure as hell does. I would like thank you personally. We could not have done it with out you. So we have beaten them, and were going in for the kill. Can’t stop these boys’ come hell or high water. Don’t get discourage just keep buying. We will nail these bums. You have given a great service to mankind and I want thank you personally. TKT Great
commentary Bill, as always. Knowing the facts makes it easier to
deal with the absurdities in today's markets. I have been accumulating
gold shares since 2001, taking profits along the way but always
re-investing the proceeds. "Be prepared" is what I was always
told, and thus I am preparing. Thanks to people like you and your
efforts, the truth, one day, will be for all to see and those who
listened early on will be safe with their GATA press: Gold bugs waiting for price jump By
Jonathan Wegner Since
gold prices bottomed in 2001, the shiny metal has held steadily above
$300 per ounce, no thanks to the Federal Reserve System, says Bill
Murphy, chairman of the Gold Anti-Trust Action Committee. As long as they are talking about GATA and the rig.... The mainstream dismissal of what we have discovered is par for the course. NONE of these people have looked at any of our evidence. Their retorts are both mundane and of a noodle-brain mentality. A Goss is the same kind of person who pooh-poohed the notion Enron was a fraud. After all, Enron was lauded by Forbes year after year, and Ken Lay was a buddy of President Bush. Because the Fed doesn’t discuss gold in its conferences, gullible Goss says gold manipulation does not exist because the Fed is transparent. How naïve can you get? He and his ilk sound like kindergartners trying to explain to their daddies how the world works. This is why the general American investor is in such trouble. These are the types they look up to for some straight talk. Good grief! Some pictures of the Omaha story:
The gold shares bucked the general trend today and closed on or near their highs with the South Africans firmer due to the softening rand. The XAU gained .74 to 85.64 and the HUI rose 3.55 to 185.13. The HUI needs to take out the 190 area to conclusively negate its well established downtrend: See Chart As it ought to be, the huge shorts in Golden Star Resources have begun to cover. It closed at $3.99 up 29 cents. While today’s blatant price rigging was infuriating, the signs of the times say The Gold Cartel is in deep trouble as outside market forces are collectively going against them. We are a serious day closer to getting out the GATA stretchers. The gold and silver shares remain THE historic investment opportunity of a lifetime! GATA BE IN IT TO WIN IT! MIDAS Appendix August
12, 2004 August 12, 2004 -- THE U.S. economy is broken and needs to be fixed — now. The Federal Reserve was forced to raise interest rates on Tuesday simply because that's what everyone had come to expect. And because of some unique and historic problems with our economy, the Fed couldn't concern itself with the fact that growth is clearly slowing and its rate move was inappropriate. You've heard this elsewhere and read it here: Alan Greenspan's Fed is out of step with the reality of the American economy. But it isn't all Greenspan's fault. The economy just is not behaving as the textbooks say it should. Sadly, Greenspan is being forced to boost rates while Congress and the president appear to have done all that they can to help the economy. Last year's massive tax cuts and refunds did boost U.S. growth for a quarter or two. But that elixir's benefits wore off months ago. With tax relief now out of the question because of an exploding government deficit and the Fed stumbling belatedly — and, I think, inappropriately — toward raising borrowing costs, the economy right now is damaged. Broken. It's an economy that by all rights should be soaring, but isn't. Who broke it? It was the Democrats and the Republicans. People like you and me are to blame for buying inefficient cars all our lives and leaving our country at the mercy of the Arabs. You can also place some of the blame on greedy corporate executives who fleeced their companies and made investors doubt the integrity of the stock market. And leave some responsibility for corporate and Wall Street scammers who brought us all those over-hyped Internet stocks in the 1990s. Because of all this and more, the Federal Reserve was forced to keep interest rates too low for too long. And that's why now the Fed has little choice but to give reassuring words and take ridiculous action. A sudden, large drop in the price of oil might help, but that's unlikely to happen. So how do we fix the economy? First off, get better economic statistics. Most of the panic lately has been over the unexpectedly small growth in the number of jobs during June and July. Those weak jobs' numbers are as deceptive as were the remarkably good jobs' figures that came out in March, April and May. None of those numbers were legitimate. Second, come up with an energy policy that'll work. Democratic candidate John Kerry favors more fuel-efficient cars. President Bush wants to drill for oil in restricted areas. Both are right. Washington should undertake a massive campaign to force auto makers to offer fuel-efficient engines, like gas/battery hybrids, in all cars. In return for a push for more hybrid cars, environmentalists will have to accept more domestic oil wells. The real problem becomes: How do we get the economy moving now that more tax givebacks are out of the question and interest rate cuts aren't available? As I have suggested in this column a number of times, Americans should be allowed to withdraw some of the trillions that have accumulated in retirement accounts without being charged a penalty by the IRS. If the government can't give people money to spend in the form of tax relief, let people spend their own money. During fat times, Americans should be permitted to contribute greater amounts to retirement plans as a way to slow consumer spending and the economy. Whatever we decide, fixing the economy rather than just following the bouncing stats should be our priority. * Please send e-mail to: jcrudele@nypost.com From today’s New York Times, which is politically biased to the left, however it does not diminish the content in their lead editorial today. This is partly what MIDAS and other contributors to my column have been bringing to your attention for months: New
York Times Painting the Economy Into a Corner President
Bush reacted decisively to this month's shockingly bad employment report
- by quickly changing the topic to terror. The Federal Reserve chairman,
Alan Greenspan, also focused elsewhere, namely on rising oil prices. Mr.
Greenspan used inflationary energy costs as the rationale for raising
interest rates a quarter point, despite the drastic slump in hiring and
a recent slowdown in productivity growth.
|
||||||||||||||||||||
