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Gold, The Real Story This Month

By: David Morgan, Silver Investor, http://www.Silver-Investor.com

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Although silver got smashed this month the real story is in gold.

Let us restate and expand upon (as follows, below) what we published in our monthly report a scant three days ago.

First of all, as most are aware, the Rothschild interests are no longer “fixing” the price of gold in London. There has been much speculation about this event. Our view is the old adage that “he who owns the gold makes the rules” is still valid; and the Rothschild interests are moving away from the paper gold market but not necessarily the real gold market.

Of even more interest to us were documents provided to the Sierra Club that buttressed certain disturbing claims of former Echo Bay Mines employee, Allan Laird about Kinross, and the mining industry at large.

Laird says his elected representative and the Department of Homeland Security were indifferent to evidence he presented about Echo Bay — since acquired by Kinross —paying protection money to known terrorists linked with Al Qaeda.

Documents given to the Sierra Club show payments and supplies, including weapons, delivered to terrorists in return for unspecified security services at the Kingking project in the Philippines; equally disturbing, internal company memos reveal hair-raising conditions at the mine.

The most important point to be made is this statement, released to the general public on Thursday: “The US Department of Justice announced that it will in fact investigate Echo Bay.”

We immediately contacted our sources in Washington D.C. and asked if in fact an investigation would truly begin. The answer was yes.

Now comes word of an even more damning event — as regards gold — reported by the Associated Press:

Bin Laden Said to Offer Gold for Killings

CAIRO, Egypt - A statement attributed to Osama bin Laden offered rewards in gold Thursday for the killing of top U.S. and U.N. officials in Iraq.

The transcript of an audio recording dated Thursday appeared on a Web site known for militant Islamic messages. The Web site gave links to hear the statement, but none were working.

"You know that America promised big rewards for those who kill mujahedeen (holy warriors)," the transcript read. "We in al-Qaida organization will guarantee, God willing, 10,000 grams of gold to whoever kills the occupier Bremer, or the American chief commander or his deputy in Iraq."

He was referring to L. Paul Bremer, the chief U.S. administrator in Iraq, and top military officials.

The authenticity of the statement could not immediately be verified.

-END-

To be crystal clear we did not have inside information when we wrote three days ago that the next shoe to drop in the fight against gold would be an identifiable link with terrorism.

Sure, we didn’t like writing it, and our readers no doubt didn’t much like what we had to say. But the “reality on the ground” is what we need to deal with. Our long and continued study and participation in the precious metals markets led us to our conclusion. But even so, we were not sufficiently cynical to expect it would happen this rapidly.

ON FURTHER EXAMINATION …

Let us develop further what this means for the precious metals investor, and why certain bureaucratic forces would want to paint a picture of a world awash in gold and terrorism.

Gold is first and foremost a political metal in that it is fungible and leaves no tracks. Cash can be “laundered” — but, heck, gold is a virtual Laundromat. It is malleable, untraceable, easy to transport and extremely valuable.

You and I know that once upon a time, not so long ago, there was one currency, worldwide, and it came in the form of the yellow metal — gold. (Silver, my favorite, was a close runner-up.) But that wasn’t good enough for the internationalist crowd. They want a fiat money — paper — global currency, preferably not backed by gold at all. They want the flexibility to create as much debt-money as they want, when they want and to charge governments (you and I) massive amounts of interest for printing that money.

In the 1970s, they tried to control the price of gold and it got out of hand. They tamed the price and then instituted what some (correctly in my opinion) have termed a “conspiracy” to keep the price of gold down through the 1990s. This was accomplished through massive short selling of the metal, through the “carry trade” and by simply talking the price down. (For a while, in the late 1990s when the price of gold was threatening to rise, you couldn’t get through a month without one central bank or another announcing a phony “sale” of their gold assets to be held in the not-too-distant future — a future that often, unsurprisingly, did not come.)

There’s no gainsaying that gold has been on a tear these last few years, a powerful uptrend. Even though the short term technical picture looks blurry right now, gold very obviously has not lost its allure, especially not for Asia’s growing and powerful economies.

I can only imagine the frustration of those who want to stomp on the price of gold. After all these years of price-fixing the “barbaric” metal, shorting it, selling it, damning it regularly in the press, gold just keeps popping back up like some kind of fiendish, glittery jack-in-the-box.

They just don’t get it. Gold’s allure is not the product of some irrational, historical hiccup. It’s the end result of thousands of years of money competition. It’s won its place because people liked to trade it better than salt, beads, sugar, spices and all the other things that have been tried through the ages. The marketplace chose gold (and silver). And what the marketplace chooses cannot easily be undone.

This has to be the latest gambit. They can’t fix it, short it or talk it down any longer. So make the link between gold and terrorism. Just come right out and tell people that those who own gold, trade gold and pay in gold are apt to be terrorists.

LET THE GAMES BEGIN

So let the congressional investigations begin into a “link” between gold and terrorism! The general public will soon be educated, no doubt (via massive media coverage) to associate the two. And this approach — if it happens as I suspect – will probably provide enough ammunition for one final washout in the gold market, meeting our expected low in July of 2004.

Please remember: Gold below $400 U.S. is a solid buy; silver at $7.00 or lower is also a steal. We have highly recommended to our readership that they finish their physical purchases over the next few months.

This mainstream financial media — in the service of their political and banking masters — may continue the effort to portray gold in the worst possible light, but the metal will continue to outshine most other investment choices in the longer term as it has for thousands of years.[/size]

David Morgan

Silver-Invesor.com

May 6, 2004

-- Posted Friday, May 7 2004

Website: Silver-Investor.com
Email: david@silver-investor.com

Mr. Morgan publishes a private newsletter for serious precious metals investors. He hosts the web site: Silver-Investor.com. He has been a private economist for over two decades his background in engineering , with an advanced degree in Economics/Finance. He has been interviewed on Don McAlvany's radio talk show, Financial Sense Newshour, Hard Money Watch, and appeared on television. Currently he does an internet radio wrap up each Friday discussing the economy and precious metals. Mr. Morgan was published in Global Investor regarding ten rules of silver investing. Currently, he is writing a book on silver.

Warren

Dein Gefühl trügt Dich nicht!

Der Dollar hatte gerade sein Tagestief erreicht, Gold war dabei massiv zu steigen, da fällt Gold plötzlich wie ein Stein runter. Erst mit zwei Minuten Verzögerung steigt nur plötzlich der Dollar kometenhaft an.

Wenn morgen in den Zeitungen stehen wird, dass Gold wegen einer erstarkten Dollar Nachfrage nachgegeben hat, darf man berechtigterweise fragen, warum denn der Goldpreis zuerst stark fällt, bevor der Dollar beginnt anzusteigen. Die Meldung von den zusätzlichen Arbeitsplätzen in Amerika kann der wirkliche Grund für den heutigen weiteren Goldpreis Rückgang auch nicht gewesen sein, weil darauf allenfalls Gold, und Dollar gleichzeitig hätten reagieren müssen.

Das Gold prozentual wieder bedeutend stärker gefallen ist, als Dollar angestiegen ist, liegt weit weniger an den heute überraschend "guten" Zahlen, sondern weit mehr am "Verkaufsverhalten" einiger "Primery Dealer" der FED.

Jetzt gehe ich Schlafen, bin zu müde um mir dieses "Preisgeschehen" weiter anzusehen.

Gruss

ThaiGuru

darkjedi

Zitat

Noch ein Gedankengang zum Gold. Je tiefer der Preis, umso weniger wird gefördert und um so mehr muß nachgeschossen werden. Umso schneller ist das Spiel vorbei! Oder

Genau das ist auch einer der Gründe wiso sich ein Goldbug keine allzu grossen Sorgen machen braucht.

Wenn die Gold Preise fallen, aus welchen Gründen auch immer, wird die Produktion sinken, die Nachfrage, wegen der tieferen Preise aber noch zusätzlich steigen. Nicht wenige Produzenten sind gezwungen unrentable Minen zu schliessen, und dadurch wird die Goldproduktion weiter reduziert.

Es ist also ein Trugschluss zu glauben, die Goldpreise würden jetzt nach den Gold Cabal Aktionen der letzten Wochen unendlich weiter fallen.

Das Gegenteil wird der Fall sein!

Wie schon von Dir absolut richtig erkannt, benötigt das Gold Kartell durch dieses gerade stattfindende "Gold Preis Killig" auch zusätzliches physisches Gold, um die wegen der jetzt um ca. 13% gefallenen Goldpreise (Ausgang Januar 04, 430.- Dollar), stark gestiegene physische Nachfrage zu decken. Dieses zusätzlich benötigte Gold, stammt aus Zentralbank Beständen, und wird vom physischen Gold Markt geradezu aufgesaugt.

Gruss

ThaiGuru

faszination

Toll, das "going public" von J. Sinclair, resp. J. Seligman.

Das wird gelesen von Wallstreet!

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May 7 - Gold $378.40 down $9.40 - Silver $5.56 down 24 cents

Bloodbath!

Zitat

"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity." - Irwin A. Schiff

It has been about a month now since the first inklings of an orchestrated massive attack on gold and silver first reared its ugly head. Even those of us who suspected something like this could be in the works (due to the unusual and concurrent amount of negative establishment commentaries) have a hard time dealing with this kind of a massacre. It has been calculated, ruthless and effective.

Once again it is Price Action Makes Market Commentary time. Gold is bashed as the dollar rises sharply and in fear of rising interest rates in the future. Well, if it weren’t for the cabal forces, gold easily could be $100 higher than it is today and it would be an entirely different commentary. It would, and will some day, read something like this:

Gold rallied sharply again today to $478 and has set its sight on $500 per ounce. Reasons cited were accelerated inflation in the US and to the market’s conception the Fed and Alan Greenspan have failed in their role in giving any kind of discipline to US financial markets. Oil traded above $40, closing at $39.98, up 61 cents, further increasing future inflation expectations. However, the Fed refused to raise rates at its meeting last Tuesday. This is in contrast to England, New Zealand and other countries who recently did raise their rates. The US bond market tanked once again, falling 1 17/32 to 104 17/17, as the bond vigilantes punished those who aren’t dealing with the developing inflation scenario. Bond yields, like gold, have historically risen as leading indicators of coming inflation. Soybeans and cotton ran higher in sympathy with the rapidly rising gold price. Beans surged, up 29 ½ to $10.30, and both cotton and pork bellies (another all-time high for bacon) went limit up. The dollar moved up too, like it did in the late 1970’s as investors jumped in to take advantage of the higher yielding note and bond instruments.

***

Get my drift?

With US short-term rates so low, real negative rates on the rise in the US, soaring budget/trade deficits, a catastrophe in Iraq, soaring oil prices, etc., one could not have drawn up a more bullish scenario than we have at the moment. In toto, the gold fundamentals may never have been so bullish, which is why The Gold Cartel has engineered this extraordinary market event.

How organized has it been? Even Greenspan was talking about metals prices retreating due to the Chinese slowing down their economic activity. Horse manure! One of the Café’s sources in the field had one of the largest Chinese mining groups in his office this week looking to secure metals supplies for the next few years. In copper alone, they are looking to double their production/supplies over the next few years according to this Chinese firm. When queried about the recent US commentary about a major slowdown, he replied, "You actually are listening to what Wall Street is saying?"

The Gold Cartel is petrified that if were gold were allowed to be doing what it should be doing, it could set off a neutron derivatives bomb in the bond market, which is already under severe pressure. The cabal has been so relentlessly aggressive with their gold selling it has turned the speculators bearish and set off one technical sell signal after another. The end result is a bloodbath, one engineered by the richest and most powerful people in the world, desperate to protect their financial interests.

Meanwhile, the physical gold market is on fire, which is further confirmed in John Brimelow’s commentary below.

Regardless of fundamentals, the technicals have the funds in massive sell mode. The gold open interest increased in yesterday’s tanking by 6207 contracts to 254,512.

Morgan Stanley was the featured gold seller today.

Silver continues to be battered. As in gold, the fundamentals don’t matter. We are in a margin call, money market game. With bonds going up, stocks going down, and the cabal sitting all over gold/silver, investment managers are selling what they can to stay in line with their own capital standards, etc. This selling is feeding on itself.

The silver open interest fell 442 contracts to 93,617.

The bond market is trading as it should in this environment:

http://futures.tradingcharts.com/chart/TR/64

Yet, the gold market has been sent into the dumpster by The Gold Cartel crooks for the same reasons bond yield are going UP:

http://futures.tradingcharts.com/chart/GD/64

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The John Brimelow Report

Why is open interest rising?

Friday, May 07, 2004

Indian ex-duty premiums: AM $8.79, PM $8.77, with world gold at $386.50 and $386.20. Lavish for legal imports. Reuters from London quotes a trader saying:

Zitat

"… the physical market has been quite good for the last couple of months…It is actually quite hard to get bars in places like India and Dubai, the refineries are working flat out."

Japan found little of interest in gold today. TOCOM volume slipped by 14% to equal only 21,401 Comex, with the active contract down 8 yen. World gold was down $1.40 from NY’s close at the end. Some commentators claim there has been selling from Tokyo on the two days they have been open, but today’s open interest increase equal to 662 Comex lots offset yesterdays decline, and the member’s open interest position does not suggest liquidation by the public either. Weakness in the yen, of which there has been a good deal since Tokyo closed, usually triggers TOCOM buying. Shanghai continues closed.

With open interest in NY yesterday rising 6,207 contracts to 254,512 on volume of 50,204 lots some serious short selling seems to be underway. Estimated Comex volume at 11 am today was a steep 60,000. With noisy bears all over the tape, apparently the only party seeing utility in gold is O. Bin Laden.

JB

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CARTEL CAPITULATION WATCH

Perhaps all the market shenanigans and doctored inflation reports (CPI and delayed PPI) are finally catching up to the Working Group on Financial Markets.

The DOW fell 124 to 10,117 and the DOG sank 20 to 1918. The stock market action is terrible and likely to get much worse. The bond market action suggests inflation is far worse than what is acknowledged and likely to have a severe impact on the US economy in the months to come.

The good news:

May 7 (Bloomberg) -- U.S. companies added 288,000 workers in April and the unemployment rate fell to 5.6 percent. April's gains brought the increase in the last two months to the most since March and April of 2000, providing President George W. Bush with evidence that his economic policies are working.
The increase exceeded the highest forecast and follows a revised gain of 337,000 jobs in March that was larger than estimated last month, the Labor Department reported in Washington. Services added 246,000 jobs and manufacturers added the most jobs since July 2000. –END-

Another view on the real jobs picture, perhaps what the stock market players sense is the real deal:

From George Ure at http://www.urbansurvival.com:

Decoupling from Reality

The report on jobs came out on schedule this morning, but while it showed healthy job growth on paper, the administration has a couple of problems with the report. First, even with the gains, Bushco is still down 1.5 million jobs during their term by their own numbers, and by our reckoning, at least twice that in real life. The spin sounds good (and example at http://biz.yahoo.com/rb/040507/economy_3.html ) but the harsh reality shows up when you really tear into the numbers. For one thing, the number of severely under-utilized people has dropped to 9.3% in table U-6 (Alternative measures of unemployment) but again, it depends who's doing the measuring. The number of people falling off the rolls has continued unabated. so as benefits run out, people are not counted.

Now let me point out a few glitches in today's data:

The labor participation rate actually got worse. Down to 65.7% of the workforce from 65.8 last month. Don't ask me to explain how the participation rate can go down when jobs is up - and the workforce is essentially flat - because I can't justify the penciling at BLS anymore than I can explain Biblical miracles.
About half a million more people (~475,000) disappeared as not in the labor force.
It's still a "shop-keeper economy" with few goods producing jobs. The services sector was up 409,000 jobs compared with a year ago.
The good news for me is that I am employed again - but on a personal services contract for now - and while I'm working this way, I'm not paying into the state unemployment comp funds, which means I'm not able to recharge my unemployment benefits. Still, it's good to be working - and I have to assume there are perhaps a hundred thousand or more folks like me out there.

The problem for the Fed, of course, is that this means the economy really is heating up in some fashion - and that will drive oil upward, I expect beyond the $40/barrel level and then rates will go up and we will have experienced a complete non-recovery "recovery" before the next downturn sets in. Meanwhile, the price of gold took another hit today, which is damn curious because gold is a hard asset and ought to be going up in value as general prices paid rise, and even more so because if the increase in employment becomes robust, rate hike or not, people might be able to buy jewelry now and then.

-END-

Inflation, inflation, inflation:

The Weekend Journal says expect to pay more for summer fun

After several years of holding prices steady, retailers and others across the country are rising prices in the face of an improving economy. Some of the increases reflect the increase in the cost of underlying commodities, such as oil approaching $40 a barrel. But some of the increases come after several years of lower or steady prices. DIS' Disney World will cost 5% more than last year and Universal Studios is increasing its price to match DIS. Some national parks are increasing fees to make up for lost public funding. Refreshments at sporting events are going up as well. But the news is not all bad, many items cost the same or less than last year, such as chlorine for the pool. (fwiw last statement not true, 50lbs chlorine up $8.00 at BJ's)

-END-

GATA’s Mike Bolser:

Hi Bill:
The Federal Reserve added $3.5 Billion in temporary repurchase agreements today May 7th, 2004, an action that moved the repo pool up to $31.67 Billion. Yesterday the Fed to action later in the day (which it sometimes does) and added $3.5 Billion. The new total $31.67 represents the current pool total, with corrections (including those brought to my attention by a thoughtful reader. I welcome participation by readers as the calculations aren't straightforward and the Fed acts at different times. The trends remain in place.

Exits?

As mentioned yesterday the Fed seems to have no exit strategy from their sell gold and now mute, "Strong dollar" policy. Although many readers are hurting as the precious metals shares slump and are gaining new appreciation for the Fed's guns, the gold cartel is actually still retreating. Their gold supplies will run out, even larval gold bugs quickly come to that conclusion. Professor Fekete warns us that our opponents aren't stupid nor are they suicidal. We accept that the Fed isn't stupid, where I disagree with professor Fekete, is in the Fed's particular type of suicide.

There are many forms of suicide. "Base jumping" (leaping off low cliffs with parachutes), cave SCUBA diving, bungee jumping and many other potentially lethal "sports" and they all infect their adherents with a special delusion. A flawed belief mechanism that they think renders them immune from harm.

The Lusitania

Such warped belief mechanisms infect everyone to some degree but it takes a great tragedy to disclose the really big failures in thinking. In Diana Preston's Lusitania, the awful reality of a new chapter in submarine warfare, an Admiralty in denial about it coupled with naval architects who couldn't conceive of a ship sinking in 18 minutes that left 1201 of 1959 on board dead including 94 of 129 children and 34 of 36 babies.

Only one of 26 large (high side) port-side life boats were launched successfully with chaos sweeping all through the boat. The safety procedures were poorly organized through inept training and lack-luster lifeboat drills. The large immediate list following the single torpedo hit caused the remaining starboard side efforts to save women and children first, ended up killing them instead. The frigid 52 degree water did the damage, only 10 miles from the Irish coast which was in full afternoon view. Boats couldn't be lowered because the tackle fouled as well as the complicating factor that the forward motion of the ship caused the boats to land on one another, crushing those in them.

The storied naval architects of Great Britain never envisioned a scenario in which such a fine ship would sink so rapidly nor did they conceive that life boats would need to be lowered in conditions of 15 degree list and considerable forward motion. They had assumed, by their planning, that all ships sunk vertically and with no motion.

The ultimate blame, of course, is placed on the German high command for targeting civilian passengers (despite their warnings to Cunard) but the disaster could have been mediated by proper design and reasonable thinking.

The Federal Reserve has constructed a towering edifice of market manipulations designed, they think, to withstand everything. As so many before them, they can't know, let alone plan for the un-intended consequences of their interventions. They can't know about all the hidden dangers. They are working against the powers of price discovery and the powers of many individuals seeking protection in the aftermath of the Fed's looming man-made disaster.

The Federal Reserve is committing slow-motion suicide.

Mike

Something to keep in mind and probably a reason The Gold Cartel and Working Group on Financial Markets has savaged gold. This is one of the derivatives neutron bombs they don’t want to go off:

Fed Official Warns That Housing Finance Giants Pose Systemic Risk
Fed's Poole urges end GSE Treasury credit lines

Thu May 6, 2004 (Reuters)

St. Louis Federal Reserve President William Poole on Thursday called for the elimination of government lines of credit to mortgage finance giants Fannie Mae and Freddie Mac to reduce risks to the U.S. financial system in the event of a crisis at either company. "There is no question but that a crisis affecting either Fannie Mae or Freddie Mac would have widespread effects because these firms are so large," Poole said in remarks prepared for delivery to a banking conference organized by the Chicago Federal Reserve. Poole said elimination of the ability of both companies to tap the U.S. Treasury Department for emergency loans of $2.25 billion each would make clear to markets that the government does not stand behind the companies' debt.

"Investors have priced these obligations under the assumption there are no possible risks that might strain (government sponsored enterprise) capital positions," he said. Poole said that while there is no crisis evident for the obligations of the housing government sponsored enterprises, their capital positions were "undesirably thin" and leave the firms "unnecessarily vulnerable to surprise shocks."
Poole's comments come amid an ongoing debate about toughening supervision of Fannie Mae and Freddie Mac after an accounting scandal at Freddie Mac last year rattled investors. He said an assumption that the government stands behind the GSEs was typical of the type of behavior that has preceded past financial crises.
Fannie Mae and Freddie Mac pose risks because they pursue a strategy of borrowing for the short term while lending for the long term and maintain a thin capital margin, Poole suggested. He said clear procedures for closing either company in a crisis should be established. "Should a crisis occur, it will take hold so quickly that GSE obligations will in a matter of hours, or days, become illiquid. While any one holder of GSE debt can exit, not all holders can exit at once," Poole said.

-END-

One more country has no gold left:

Armenia raises $5.6 mln from gold reserves sale

Yerevan. (Interfax) - Armenia raised 3 billion dram (about $5.6 million) in net profit for the country's budget from the sale of gold reserves, Central Bank of Armenia Chairman Tigran Sarkisyan told the press.

Armenia sold its entire gold reserve of 1,396.5 kilograms, estimated at $17.1 million on October 1 2003 and forming part of the country's international reserves, at the end of 2003.

The sale was made in accordance with the international reserve management strategy and had the approval of the Central Bank of Armenia board, Sarkisyan said. The Armenian government made transaction through international dealers when the price of gold topped $400 per troy ounce.

When foreign debt is double the volume of international reserves, there is no need for a gold reserve because debt payments are made in dollars, euros or SDR, Sarkisyan said.

-END-

The perennial Barclay’s bear growls as usual:

LONDON, May 7 (Reuters) - Gold's 4-1/2-year bull trend may be over as investors begin to turn their back on commodities, leaving the precious metal vulnerable to otherwise weak fundamentals, analysts at Barclays Capital said on Friday

In a special report, precious metals analyst Kamal Naqvi said the end of the "reflation trade", where investors put cash into commodities as they believed these markets would benefit from low interest rates, money supply growth and a weak U.S. dollar, was over. –END-

The gold shares were slaughtered again as the XAU dropped 4.30 to 78.03 and the HUI sank 9.60 to 168.80. Its Fibonacci 62% retracement number is 168.38. The HUI low today was 168.37.

This is painful for all of us. However, knowing why this has occurred has me saying, "This too shall pass." You could not ask for a more bullish gold scenario. I’m hanging on and letting this play out. The Big Picture gold/silver play has not diminished one bit.

GATA BE IN IT TO WIN IT!