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Gold Charges Higher with
Most Long-Term Gold Bulls BEARISH!!!
by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
December 7, 2004
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December 5 - Gold $455.40 - Silver $7.99 Years wrinkle the skin, but to give up enthusiasm wrinkles the
soul... GO GATA!!! What is going on in the markets at the moment is so striking, I decided to whip a MIDAS together to emphasize a few points because collectively they seem so important and, as such, may be of help to many Café members in the weeks, months and even years to come. First the latest gold news: Gold
Prices Soaring But Indians Continue Buying http://www.hinduonnet.com/thehindu/holnus/006200412051101.htm NEW DELHI -- Gold prices are soaring but this has failed to affect the buying spree in the Indian wedding season. In fact, people are buying more, fearing a further hike in prices, those in the business say. Contrary to popular belief that rising gold prices affect buying negatively, apprehensions of a further price hike have led to panic buying. This has resulted in higher sales as compared to the last few years, says Madan Mohan, a member of the Karol Bagh Jewellers Association. "People know that the gold rate in the domestic market is linked to international prices and beyond anybody's control here. So fearing a further hike, they are buying and there is no stopping," says Mohan. "Moreover, there are certain market segments which are not affected by prices -- the rich and those buying for wedding purposes. However, those buying for festive reasons would still buy, though in less quantity," says G.S. Pillai, president of Gold Souk. "Also, those who have more disposable income at hand are buying now," he says, adding, "The Gold Souk is experiencing amazing footfalls of 2,500 customers on average over weekends." "These are serious buyers who come for buying purposes irrespective of the prices," he says. Says Harman Dhillon from Tanishq, "November saw an increase of 40 percent in sales over the same period last year." Of course Café members have been way ahead of the pack in recognizing how strong Indian gold demand has been thanks to John Brimelow's focus on the Indian premiums. This is just what John was bringing to our attention for the past MANY months, even as your bullion dealer crowd pooh-poohed the notion gold demand in India was robust. Just another example of how poorly the gold market is reported. Could it be The Gold Cartel bullion dealers and others were downplaying the demand because of how short they are? Nah, they wouldn't stoop to that sort of deception and lies. Yeah, right! Well here they go again. A few months ago it was noise coming from the French about selling their gold. That didn't work, so now the establishment has gone the German route: GERMAN PRESS: Top Economists Urge ECB Dlr Intervention 12/05/04 FRANKFURT (Dow Jones)--Peter Bofinger, one of Germany's five economic wise men, and Hans-Werner Sinn, president of the Ifo economic research institute have called for immediate intervention from the European Central Bank to strengthen the U.S. dollar, weekly magazine Spiegel reports in an advance copy of Monday's edition. Sinn said that international capital flows are determining economic development "to an extent which is hardly bearable anymore," which is why the ECB would have to take action. In an advance copy of Monday's Berliner Zeitung, Bofinger also called on the Deutsche Bundesbank to sell its gold reserves as soon as possible. Instead of keeping gold reserves, Bofinger said the money would be better invested ineducation and people. Magazine
Web site: http://www.spiegel.de The Gold Cartel is working overtime to get this spin out there. Another slant on the same planted story: German "wise man" urges Bundesbank gold sale-paper BERLIN, Dec 5 (Reuters) - The Bundesbank should sell its gold holdings as quickly as possible, one of the German government's panel of independent economic advisers was quoted on Sunday as saying. "From a monetary policy point of view, there is no reason to retain these gold holdings," Peter Bofinger, one of the so-called government "wise men", was quoted as saying by the Berliner Zeitung. "It would certainly be sensible to invest the money in education and human capital." The newspaper also said leading members of the ruling Social Democrats parliamentary party were pressing for the sale of gold holdings and had been in regular contact with the Bundesbank. Bundesbank President Axel Weber said last month the Bundesbank would decide by the end of the year whether to use an option to sell any of its gold under an agreement with other European central banks. The European Central Bank Gold Sales Agreement, a five-year sales pact that came into force at the end of September, regulates the amount of gold central banks can sell. Under the pact, Germany, the world's second-biggest holder of gold with reserves in excess of 3,000 tonnes, has an option to sell 600 tonnes of the precious metal over the five years. ((Writing by James Mackenzie, editing by Chris Johnson; Reuters Messaging james.mackenzie.reuters.com@reuters.net, Berlin Newsroom +49 30 2888 5230, berlin.newsroom@reuters.com)) I guess these German wise men want to make like the English who sold their gold at $280 so they could invest the proceeds in interest bearing dollar vehicles (nice move). No pretense of that here. Just sell the gold because it is going straight up and proving to be a very valuable asset. Wonder who got to these guys? What these wise men don't know is Germany's gold, or at least half of it, may already be gone, lent out at $150 below current prices. Perhaps some in the German political/banking world fear they will be found out and want to get these loans off the books by declaring them as sales and receive cash from the proceeds? What the GATA camp knows for sure is there is some 10,000 to 15,000 tonnes of central bank gold "officialdom" has not accounted for via sales and hedge book loans. Whose central bank gold is it? The US? Germany? The amount is so large some of it has to come from one of those countries as they supposedly account for 1/3 of the central bank gold reserves in the world. For reference on where I am coming from on this let us review the prescient work of GATA's James Turk in some excerpts from: Accounting
for the ESF's Gold Swaps Last April in "Behind Closed Doors", I presented evidence that the US government had swapped with the Bundesbank some 1,700 tonnes of gold stored at the depository in West Point. At the time, I wasn't able to figure out where the transaction was hidden in the US governments accounts, but I now have the answer. This 1700 tonnes at $280 per ounce is a $15.3 billion transaction. This accounting entry is in the $20 billion liability explained above, which at $280 per ounce allows for the possibility that the size of the gold swap has increased to $20 billion. I say 'possible' because the rest of this liability may have arisen from a currency swap. So here's the accounting. The US government swaps gold with the Bundesbank, which now owns the gold in West Point. Further, to secure this transaction, the Bundesbank receives SDR Certificates, which solves "The Mystery of the Disappearing SDR Certificates" (Letter No. 289, August 13th, 2001). The ESF gets the gold in the Bundesbank's vault, which it then lends to the bullion banks in an off-balance sheet transaction. Since I first reported that the Bundesbank owns the gold in the Treasury vault at West Point, I have been asked countless times, how can the gold still be reported as being held in the Treasury vaults and listed as a US Reserve Asset if it is really owned by the Bundesbank? Well, according to GAAP accounting it can't. And that is what I have now discovered in the 2000 CFS, which presents the offsetting gold liability in the IMA. This 2000 CFS footnote was changed from the 1999 CFS for a reason - to reflect new conditions in the accounts. As further confirmation of this point, we already know that on September 30, 2000 in its reports of the US Gold Reserve, the Treasury began labeling the gold in West Point as "Custodial Gold", changing it from its previous classification of "Bullion Reserve". This gold is being held in custody for the Bundesbank, its owner. It is worth recalling that all of these changes took place in the fiscal year ending September 30, 2000. That year began October 1st, 1999, just days after the Washington Agreement. There has been a lot of evidence presented that the Bank of England and other central banks intervened heavily in the gold market to cap the rally then underway to get the gold price back below $300 per ounce. See for example, Paragraph 55 of Reg Howe's Complaint against the Bank for International Settlements et al., at www.goldensextant.com. James Turk's original work on Germany's gold in this piece: Behind Closed Doors by James Turk, April 23, 2001, may be reviewed at http://www.fgmr.com/clsddoor.htm Now back to the latest. Of utmost significance to our camp is the mainstream investment world's (and almost all gold market pundits) lack of short-term bullishness regarding gold. It is extraordinary and bodes well for the few of us who have remained steadfastly bullish all the way up, as well as for those with gold share investments of any kind. As we all know, gold futures longs and gold bullion/coin holders are standing tall today, whilst gold shareholders are suffering and bewildered because of the pathetic performance of the shares. Sure, the world powers can intervene in the dollar at any time which could jolt the gold price. Yet, this is what the correction camp has been saying for weeks. Since the New Orleans Investment Conference on November 10th, with most every gold pundit in attendance looking for a correction, gold has rallied more than $20. Even if there is a massive intervention, gold would most likely (worst case) head back down to its break out point of $430. The cash market is just too strong for gold to deteriorate much further than that. Meanwhile, most of the pundits have their clients out of a market move of historic importance, and maybe the most historic investment opportunity of all time! To play for pennies makes no sense to me when there are SO many marbles (chips) are on the table. The irony is almost ALL the short-term gold bears think they are contrarians. They are the ones with almost ALL the company, and have been for some time! Even more ironic is the higher gold moves, the more company joins them from those leaving the bull camp. Right now who do you know out there who believes gold will rally from here? Almost no one is talking UPTOWN! To be lonely BULLISH soothsayers, as most of the GATA Camp is in at the moment, should be comforting, as it is commonly a winning viewpoint for true contrarian investors! In addition, here we have gold screaming into 16-year highs and there is nary a peep from the media. No hoopla at all, the kind one might normally expect at market turns. One could say the reaction to the gold surge is extremely bizarre - or more appropriately, like benign neglect. Take this Kitco, December 4 posting, for example: London gold closes at $444.70 US, down $0.47 LONDON (AP) - Selected world gold prices Friday in US dollars a troy ounce: Hong
Kong: $448.50 off $7.55 HUH?????? Selected prices - for what - to accommodate the bear's wishful thinking? We already know about Dennis Gartman's brash call to go short with impunity on Friday (he's already down $2 to $3 per ounce). Here are some comments from this Mineweb story, which can be read in full at: http://www.mineweb.net/sections/gold_silver/396837.htm Gold
takes a breather On Friday, after initially rising nearly $2/oz on a US new job creation number that was half that expected, the price dipped below $450/oz. A South African commodities trader says the market was expecting the numbers to be worse and, so, the price only rose slightly on the news. "For now I think we have seen the top, and maybe we will see a pull back on gold and the euro," said the trader. This pullback would see gold drop to around $445/oz and a euro back at $1.3280 to $1.3250, the analyst reckoned..... The trader says, gold should be at the $460/oz - $465/oz level at the moment, but added that the metal will test these levels within the next two to three months. "We shall maybe struggle around there again," he said...... Gregor Krall, technical analyst at BOE private clients, told Mineweb on Thursday that for the present gold could be a little overdone, but there is strong support at the $425/oz - $430/oz levels. At the other end of the scale, Krall said strong upper resistance was seen at $468/oz and the $503 levels..... Most market watchers remain cautious for the present, saying: "There is always the risk that the dollar whips back." Points to make:
Let us now switch to a Dan Denning (Daily Reckoning) article, sent to me on Friday, and posted at http://www.kitco.com/ind/Denning/dec032004.html. Kind of strange at it was sent out with a November 23 dateline. Some excerpts from GOLD AND GRAVITY written with Feb gold at $450 (nearly $8 lower than Friday's close): Is the gold price giving us a repeat performance of October's fake-out in the oil market? My suspicion is that gold is acting a lot like crude did last month...running up to fresh highs - and making headlines all the way... But this isn't the main event. Not yet. The day of reckoning for America, her deficits and her dollar is surely on its way. Investors who haven't yet bought gold as protection could be forgiven for thinking they've missed their chance. But we may see gold make the inevitable run up to $450 - as early as next week - and then experience a serious correction and consolidation...... With gold making 16-year highs, the dollar making fresh lows in euro and yen terms, I'm more inclined to take recent developments as a sign of a near-term top in the gold price. In contrarian terms, whenever the crowd is all on the same side of the trade, the trade is nearly over.... Dan Denning is a smart guy, I am sure. And his call could be right on the money too. However, to say his call is contrarian is "dead reckoning" wrong. The MOB calling for a correction has been howling for many weeks, gaining disciples on each $5 rally; leaving only a few lonely short-term bulls as gold grinds higher and higher, despite what the crooks are doing. What the correction camp may be missing: *Since the financial markets are so sanguine about a dollar drop, the central banks may have decided to let the dollar take its medicine right now, letting the dollar fall far more than anticipated in the near-term without any kind of meaningful correction. The longer the US bond and stock markets maintain their serenity, the more likely it is the dollar will fall. *GATA's Chris Powell sent out a dispatch last week re a Swedish central banker who stated he had information there would be no meaningful currency intervention at all in the near future. So far this has been the case, to the consternation of dollar correction bulls. *Chris then put out this dispatch yesterday which should send shivers to dollar longs and those gold bulls who are short or out of the market: 8:25p
ET Friday, December 3, 2004 The Reuters story about today's decline in the U.S. dollar, just dispatched to you, mentioned a report in a German newspaper quoting an unidentified U.S. Treasury official as saying that the U.S. government would not intervene in the currency markets to support the dollar until it fell to $1.45 to the euro. That newspaper was Boersen-Zeitung, a financial paper in Frankfurt, and the story at issue is appended for our friends who are fluent in German. The story is not terribly coherent when run through an automated Internet site translator, but it does say that the U.S. Treasury Department considers exchange-rate adjustments to be the best way of rebalancing international trade. If the story says anything of great interest, perhaps our German-speaking friends will let us know -- or at least send us some good sauerbraten and beer. You should see the slop some of us GATA drones have to eat in front of the computer on Friday night as we troll the Internet for clues to the truth. Truth may feed the soul but put ketchup on it and it's just ... ketchup! CHRIS
POWELL, Secretary/Treasurer USA wollen erst bei 1,45 Dollar intervenieren --Treasury: Auch kräftige Yen-Korrektur nötig US-Regierung sieht in weiterer Dollar-Abwertung "effektives Instrument" gegen Leistungsbilanzdefizit det Washington -- Die US-Regierung ist offenbar bereit, einen weiteren deutlichen Kursverfall der eigenen Währung in Kauf zu nehmen. Ein hochrangiger Mitarbeiter des US-Finanzministeriums, der namentlich nicht genannt werden wollte, sagte der Börsen-Zeitung, man werde frühestens dann an Stützungskäufe denken, wenn der Euro "die Marke von 1,45 Dollar überschritten hat". US-Finanzminister John Snow habe die langfristigen Gefahren der Defizite im Haushalt und Außenhandel der USA für die Konjunktur erkannt. Er akzeptiere, Auch wenn Snow und andere Regierungsvertreter zumindest in der Öffentlichkeit an der seit über zehn Jahren geltenden Doktrin des "starken Dollar" festhalten, hat sich diesen Aussagen zufolge hinter den Kulissen ein grundlegender Gesinnungswandel vollzogen. Wie der Treasury-Mitarbeiter weiter erklärte, will sich das Finanzressort in Washington von dem Säbelgerassel aus dem Ausland und den Aufrufen zur Dollarunterstützung keineswegs einschüchtern lassen. Die Äußerungen des japanischen Finanzministers Watanabe, der gemeinsame Interventionen der japanischen Notenbank und der Europäischen Zentralbank in Aussicht gestellt hatte, sofern Washington nicht irgendeine Bereitschaft signalisiere, die Talfahrt des Dollar aufzuhalten, stößt bei Snow offenbar auf taube Ohren. "Die Drohgebärden werden an unserer Politik nichts ändern", betonte sein Untergebener. "Sie sind aber auch nicht dazu geeignet, das Gesprächsklima zwischen Washington und Tokio zu verbessern." Zu den Wechselkurskorrekturen müssen nach Ansicht der Bush-Regierung insbesondere auch die asiatischen Länder beitragen. Auch wenn sich die US-Valuta mittlerweile der psychologisch wichtigen Grenze von 100 Yen genähert hat und ein weiterer Wertverlust den Konjunkturaufschwung in Japan bremsen könnte, geht Washington davon aus, dass Japan einen überproportionalen Anteil an den Korrekturen tragen wird und der Dollar im ersten Halbjahr 2005 auf 90 bis 95 Yen sinken könnte. Der Kursverlust des Pfund hingegen brauche sich nicht mehr fortzusetzen. "Die Engländer haben ihren Teil getan", erklärte der Treasury-Mitarbeiter. Die weiteren Beiträge "müssen zum einen von der Eurozone kommen, aber auch von Asien, insbesondere China". Eine Entkoppelung des chinesischen Yuan vom Dollar werde man zwar nicht verlangen, aber doch überzeugende Schritte hin zu einer Lockerung der Anbindung. *Recently, The Gold Cartel has prevented gold from moving up in anything other than dollar terms. What could change that in the near future?
A lot more to bring your way on this early December weekend: From a fellow Café member: "I found Brimelow's explanation of the Indian "ex duty premium" to be very helpful and thought I'd ask you to do those of us who are not traders (professional or otherwise) a favor and give us as good an explanation of a "commercial signal failure.'" A Commercial Signal Failure is when the so-called commercials, or "physical trade" players, continue to build their positions as the market goes against them. On the other side of the trade the specs continue to increase their positions. The commercials, used to winning, keep expecting a correction. Sometimes the fundamentals are so extreme the commercials get buried. When their losses become too painful, they are forced to cover, usually in panic market conditions. This is when the failure occurs. What is fascinating to me is NO ONE outside of the GATA camp is dealing with the unprecedented gold short position, which may be as high as 16,000 tonnes. This has never been the case throughout all of gold market history. Much of this position is related to leased gold used by The Gold Cartel to artificially suppress the price all these years. Sure, a good deal of these short gold positions might be forgiven by the US Government, Bundesbank, etc., but no way all of it will be. If only a fraction of these "commercial" shorts run for the hills at the same time, gold will go parabolic. Then, there are some of the big hedgers who put on short positions with gold $100 to $150 lower than today's price levels. With costs rising in local currency terms, many have to be choking on the hedged prices they are forced to live with. One of these days soon we are going to hear about another Daughters of Gwalia nightmare. Such an event could kick off my long-awaited "Commercial Signal Failure." The fact that NO ONE OUTSIDE OF THE GATA CAMP even mentions such a potential happening is mind-boggling. Once again, this gold market is the least understood (by the industry itself and the investing public) and worst reported on one than any other in history. Speaking of John Brimelow, his BRILLIANT explanation of the Indian premiums, so key to our understanding of why gold has acted so well for so long, has been posted at: http://www.vdare.com/jb/041130_indian.htm What fun for our team to know that JB's diligent work has been key to understanding why gold has done what it has done for so many months. As reported, via John Brimelow, the cash market has been extremely strong on gold's current move higher. The Gold Cartel has been unable to flush out the specs as they have done so many times in years gone by. As John has pointed out so often the past months, NEVER before have the Indian bullion dealers paid up like this on price strength to satisfy local market demand. The latest on The Café Sentiment Indicator: Boy has this been a winner. Been low all the way up and still is. Only a 5 at best. It was A NINE a year ago when gold was $422, $32 LOWER than it is now! Next to John Brimelow's cash market, this has been the most significant indicator I have ever come across. The beauty of it is, I have presented it to you for the entire bull move up and expounded all the time why I thought it was so important. From my standpoint, what fun. It has been a HOME RUN indicator for gold futures players. The savvy Chuck Cohen checked in on Saturday: Bill: Two straight days of huge share liquidation in the Rydex and the Central Fund is down to almost zero, the first time since the first time since the beginning of 2002. This portends something very large, as the last time this occur was at the very bottom of the HUI move up. We'll know soon......... Who later followed up with: I have to say that I am a little freaked as I went through some of the internet pages. First, the Times is reporting that the retailers are panicking already because of the tepid season so far. But even more so here are my observations of the confluence of very extreme technical stuff. First, the Rydex PM has had a dramatic drop the past two days even with gold up. Usually VERY bullish. The Central Fund is now down to almost a zero premium. The last two times it was this low was at MAJOR lows in the gold indices. The tremendous drop in the price of oil which has brought only a yawn to the street and a disconnect with gold. One would think that gold would have some kind of sympathetic response with it. Plus, the weakness in the dollar hasn't elicited any mention of gold or that it's sickliness might cause rates to shoot up. Finally, check out the Times today on the plight of the Asian traders in dollars. What are their choices? NYTIMES.COM. Conclusion. If we aren't near something pivotal, then we might as well close down the shop and sell real estate. Chuck This report is hard to swallow after GATA catching the US Treasury in so many lies about gold over the years: US Treasury report finds no forex manipulation By
Laura MacInnis In its semiannual report to Congress on international economic and exchange rate policies, Treasury urged Asian countries with fixed exchange rates -- including China -- to institute more flexible, market-based mechanisms. The Treasury said China's fixed exchange rate regime has made the country's macroeconomic policymaking more difficult. It also said accumulation of foreign exchange reserves had fueled both credit growth and inflationary pressure in China... -END- Hello Japan, China???? FROM
THE OFFICE OF PUBLIC AFFAIRS Report to Congress on International Economic and Exchange Rate Policies This report reviews developments in international economic policy, including exchange rate policy, focusing on the first half of 2004. The report is required under the Omnibus Trade and Competitiveness Act of 1988, which states, among other things, that: "The Secretary of the Treasury shall analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade." http://www.treas.gov/press/releases/js2127.htm -END- Pot pourri: Catherine Austin Fitts on the new World Gold Council ETF: PS...speaking of the ETF, according to Money Laundering Alert, Bank of New York is back in negotiations with prosecutors to make a deal to avoid criminal prosecution again (as they did in 2000 for the Russian money laundering). Are they not the ETF trustee? Nice trustee. -END- Some thoughts on the gold share action from a fellow Café member: Hi
Bill Just
thought I would add my two bits as writing this tends to consolidate the
thinking process. To "rap" up for this Sunday, none of us know what The Gold Cartel will do to us on any given day, or over a short-term time frame. What we do know is the price action tells us they are fighting a losing battle. They are using up too much physical gold to keep it up for too much longer. My bet is they will lose the battle for $450 like they did at $430 and $330. Even if they do win this battle, they are losing the war. The large cabal shorts are on borrowed time. For suffering gold/silver shareholders, it is my belief the quality junior and gold exploration companies are in the process of putting in a major bottom here and will double to quintuple, or more, by December 2005 as The Gold Cartel goes down to a brutal defeat. GATA BE IN IT TO WIN IT! MIDAS Appendix On my friend Dan Norcini's superb work at The Little Bear Table: Dan, Curiouser and curiouser is my daily mantra. This bond and currency disconnect is especially bewildering. As is the disconnect between the price of gold bullion and the mining shares. It is as if the world is now run by kindergarten children, running and screaming in the playground, attracted to one thing, then bored with it, running in senseless, illogical directions, content that as long as they're moving it is fun. There is no sense of value or premise of investment anymore. The act of chasing the moving asset has become the objective. It doesn't matter what it is, GOOG, SIRI, TASR; it's a game of "tag, your it." Gameboy mania on Wall Street. Intervention and market commentary are the deciding factors for value. Perhaps we contrarians are dinosaurs that can't adapt to the changing environment. That proposition mortifies me. The idea that the world as I know it no longer exists is chilling. Are hard asset investments just another old shoe? I lost 7% in four trading sessions, even though the value of the represented commodity continues to rise. That loss follows an already dismal year's performance in which the disconnect has been even more significant. I know there are many others experiencing this frustration. Reality is losing out to hype and false prognostication. The pundits and media have created a reality akin to the Mad Hatter and Dormouse. My
worst fear is that the tiny precious metals sector can not handle this
madness and will self destruct. Game over for us; but, the momentum
traders will merely run along to the next game of "tag, your
it." Surviving alone in this hostile and alien wilderness is an
impossible challenge. Knowing guys like you, Bill Murphy, Jim Sinclair,
and GATA are out there howling back brings hope that the pack can
survive. Thanks to all of you for being there. Copyright
(c) Le Metropole Cafe, Inc.
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