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May 17 - Gold $379.20 up $2.50 - Silver $5.65 down 6 cents

Can It Get Any More Ridiculous?

He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all...Miguel De Cervantes

GO GATA!!!

Just when you think the antics of The Gold Cartel and Working Group on Financial markets can’t get any more absurd or blatant, they do! This morning’s pathetic effort to crush gold and prop up the DOW was ridiculous in so far as its obvious transparency.

As a result of the death of the interim president of the transition council in Iraq, financial markets were in turmoil around the world. The Nikkei fell more than 300 points, the European markets were sharply lower and the dollar was hit hard. Meanwhile, the Indian stock market tanked 11% and had to be shut down at one point.

When trading opened in the US, the DOW was hit for 140 points in the early going and a slow reacting gold market rallied $6.50 when The Gold Cartel implemented its $6 Rule for the umpteenth time. That was it for gold for the day. Then, out of nowhere the PPT began their usual PUPPET SHOW when the US stock market is in deep trouble.

From Sarge:

10:30AM: After setting new session lows over the past half an hour, the major averages have bounced off their worst levels of the morning on the heels of a Reuters report indicating that the U.S. Military has found an artillery round loaded with Sarin nerve agent in Iraq...

So how does finding a Sarin filled artillery shell translate into a 70 point rally in the DOW? This has to be the hokiest reason I have seen for a DOW rally (and HUI bashing and almost $1 drop in crude). Sheesh. This gets more unreal by the hour –END-

From Yahoo Market Finance:

11:00AM: The market continues to pare its losses, with the Dow and Nasdaq trading within only a short reach of their best levels of the morning... The timing of the improvement in the market's standing off its earlier lows coincided with the announcement that the U.S. Military has found Sarin nerve agent in Iraq, as well as some technical considerations. –END-

So, within two weeks we have:

*Bin Laden offering gold grams via a tape as a reward, which was never confirmed.

*Barton Biggs, formerly of Morgan Stanley, coming out on CNBC with the US market plunging and stating the market was the most oversold in 20 years. The stock market changed course dramatically and the DOW closed higher. Of course, Biggs' statement was incorrect as noted by Bill King in his commentary:

"Some technicians have challenged Barton Biggs for stating ‘the stock market is now more oversold than at any time in the last 20 years’ on CNBC last Thursday. The statement is preposterous. The ’87 crash, the ’89 mini-crash, Desert Storm, the Asian Contagion, the 9/11 aftermath and October 2002 were all far more oversold than the recent minor decline."

*The US claiming a Weapons of Mass Destruction find, a Sarin Gas artillery shell which happened to be laying on the side of the road just as the DOW was plunging more than 140 points. What timing! What a bunch of crap! The Working Group on Financial Markets has sunk to a new low as has the financial press for not questioning how so many miraculous and perfectly timed stories keep appearing when they are most needed by Wall Street.

Finding a WMD and reporting on it as Rumseld's credibility is under the severist scrutiny as a result of the New Yorker piece and the turnover plans in Iraq are on the shakiest of grounds as a result of the assassination. Too much of a coincidence for me, any way you cut it.

Oh yes, don’t forget the time they found Osama bin Laden’s number two man and surrounded him in Afghanistan. The markets rebounded on that one too. Course the guy escaped.

US financial markets become scarier and more Orwellian by the day. This hits home:

David Barsamian interviews Noam Chomsky
The Progressive, May 2004
http://www.progressive.org/may04/intv0504.html

Q: Why do so many people in the United States just go along with U.S. policy?

Chomsky: What's striking is that this view is accepted without coercion. If you're living in a dictatorship or under kings and princes or in a place run by murderous bishops, you'd better take that view or you're in deep trouble. You get burned at the stake or thrown into the gulag or something.

In the West, you don't get in any trouble if you tell the truth, but you still can't do it. Not only can't you tell the truth, you can't think the truth. It's just so deeply embedded, deeply instilled, that without any meaningful coercion it comes out the same way it does in a totalitarian state.

Orwell had some words about this in his unpublished introduction to Animal Farm. He says straight, look, in England what comes out in a free country is not very different from this totalitarian monster that I'm describing in the book. It's more or less the same. How come in a free country? He has two sentences, which are pretty accurate. One, he says, the press is owned by wealthy men who have every reason not to want certain ideas to be expressed. And second--and I think this is much more important--a good education instills in you the intuitive understanding that there are certain things it just wouldn't do to say.

-END-

The US is going disconnect, not only as far as the gold market is concerned, but in the way our country is conducting its financial markets and news related material. It really has gone Orwellian.

JUST IN, seems to clearly prove the point about the Orwellian bit:

From Sarge:

PEANUT GALLERY:

Did everyone happen to see this sentence in the Reuters report about that Sarin laced shell??

"A detonation occurred before the IED could be rendered inoperable. This produced a very small dispersal of agent," he said.

The incident occurred "a couple of days ago," he said.

The news was two days old!!!

http://news.yahoo.com/news?tmp…on_re_mi_ea/iraq_sarin_11

It would have been hard to concoct a more bullish gold scenario than we had this morning:

*The dollar sharply lower
*Sharply lower stock markets around the world, creating financial stability concerns
*oil climbing close to $42 per barrel
*Growing US inflation concerns
*An Iraq disaster which has longer term negative implications
*AND - "Physical demand is fantastic," said Bernard Sin, chief precious metals trader at MKS Finance SA in Geneva.

Before the Iraq disaster, gold was up $1.90 when I went to sleep last evening. Therefore, with all that transpired since last evening, gold managed to put on a whopping 60 cents. AND – this is with the specs having already reduced their positions dramatically over the past month, which has firmed up the technicals for gold.

None of this matters, of course, when the Orwellians running US financial markets want to denigrate gold as a go to vehicle when there is obvious stress in the financial markets. The "Reverse Gold Barometer" revealed itself once more. Just when gold ought to perform superbly, the bad guys sit all over it as they did today. "Massive trade selling" shoved gold down once the $6 Rule was put into effect. What trade?? Not gold producers. The Gold Cartel!

The gold open interest fell 1932 contracts to 253,299.

The silver open interest rose 775 contracts to 91,821.

Oil closed in new high ground by day’s end at $41.44, up 14 cents. The dollar was tagged for .62 points to 91.16, above its 200-day moving average of 90.92. The euro gained 1.28 to 119.98.

Silver was bombed and couldn’t recover. This market has been very difficult to play as the manipulators seem to be able to toy with it at will, at least for the time being.

Hello Canada. We are ripping you off too. We import a great deal of energy from you all and can’t have your currency going up while oil is soaring. So look what we did to you today even as the dollar was hit hard against most other currencies:

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

Take that!

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The John Brimelow Report

CFTC data votes up

Monday, May 17, 2004

Indian ex duty premiums: AM $8.27, PM $7.42, with world gold at $379.25 and $380. Comfortably above legal import levels. India experienced a wild day on the financial markets. The Bombay Stock Exchange closed down 11%, having been down 15% at one point, and the rupee had to be supported by the Reserve Bank. In the short run, any temptation by the moneyed classes to buy shares rather than gold must have been quenched.

Japan tolerated a quite rapid fall in the yen this morning quite well. Obviously supported by off shore gold buoyancy, the active contract rose 8 yen, with overall volume jumping 132% to the equivalent of 25,595 Comex contracts: $US gold was $2.80 above NY at the close. Open interest fell the equivalent of 1,091 Comex. (NY on Friday traded 44,807 lots; open interest fell 1,902 contracts.)

The more sophisticated observers are deeply impressed by the reversal in the net Spec positions on Comex as evidenced by the CFTC data. UBS says:

"Gold cotr showed an increase in gross shorts of 1.7moz and a fall in Gross longs of 0.7million ounces to leave the net long position at 8.08Moz, down 2.4Moz and the smallest net long position since July 2003 …The fall in the net long is at the high end of our expectations …we suspect that there has been more short selling and long liquidation since then…We now estimate that the net long position is between 7 and 8 million ounce."
(JB emphasis)

NM Rothschild observes:

"The CFTC figures showed a surprise 1.1 million ounce rise in the speculative… short position in the week to 11th May. …with the gold price now below the 200-day moving average it appears to have triggered new speculators to enter the market initiating short positions. With the gross speculative long position now at 14.14 million ounces against the gross speculative short position of 7.19 million ounces the extent of the over bought situation has been substantially reduced."

Readers of these pages know that a substantial short interest build has been apparent for some time.

The (in my view) most astute observer on these matters says:

At 118 tonnes the net long is smallest since 22 July last year. Gross large speculator shorts are at their largest since 17 April 2001. Since 6 April around 330 tonnes liquidated from large spec net long, and a price $43 lower is the consequence…That gold speculator sentiment is so far out of out-of-synch now with macro soul mates [euro and long bond…] is probably the deciding factor in favour of the [bold] presumption that the next very large move is up."
(JB emphasis)

JB

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CARTEL CAPITULATION WATCH

No late Hail Mary rally this time for the stock market. Instead, the Hail Mary was answered by the convenient find of Sarin at exactly the right time for the market, and the PPT managed to keep the US stock market from collapsing. The DOW closed down 106 to 9907 and the DOG fell 28 to 1177.

More negative US employment news is on the way:

By Eric Auchard

NEW YORK, May 17 (Reuters) - The movement overseas of U.S. white-collar jobs over the next few years is accelerating faster than previously expected, Forrester Research said on Monday, fueling a highly charged election-year issue.

Technology market researcher Forrester said in a report titled "Near-Term Growth of Offshoring Accelerating" that it expects the number of U.S. business service and software jobs moving offshore to reach 588,000 in 2004 from 315,000 in 2003….

-END-

GATA’s Mike Bolser:

Hi Bill:
The Fed added $9.5 Billion in repos today May17th 2004, an action that caused the repo pool to rise to $42.37 Billion. The DOW continues to weakly track side ways while the repo pool's 30-Day ma continues gently up adding support as it goes.

With the day's India stock market excitement the Fed added a modest bit of repos not appearing too concerned. The DOW is still headed up albeit flat for the moment. Even the Fed knows when not to fight and when to pile on.

The burgeoning geopolitical mess continues to encourage those looking to commodities for safety and especially precious metals. The big buying opportunity for gold and silver has waned a bit but the trend is clearly up with a low probability of any serious pull-back.

It is important to appreciate that during the gold cartel's counter attacks they expose them selves to the greatest vulnerability as they increase their selling. They not only face the prospect of a central bank member balking but they also face the likelihood of a refinery bottleneck delay that slips past the legal default limits of the LBMA or the COMEX. There are big potential problems when customers ask for but do not get their metal.
Mike

India share holders were battered:

May 17 (Bloomberg) -- India's biggest stock markets halted trading after record declines on concern that the nation is headed for political instability and a slowdown in its economic program, including delays to asset sales.
The National Stock Exchange and Mumbai Stock Exchange were shut for an hour, the first time the two Mumbai-based exchanges halted trading together, after stocks plunged on concern a new Congress-led government won't sell profit-making state-run companies…. – END-

Absurdity is running amok when it comes to US financial markets in almost all regards. Bill King from his King Report last evening on the CPI:

Because the calculation of CPI has been altered something like 9+ times over the past few years, any attempt to compare current CPI with prior CPIs is invalid. What CPI measured a decade or so ago is far different than what it measures today. This also makes GDP comparisons dubious.

BLS has gasoline prices falling 0.3% in April and energy increasing only 0.2%. BLS says ex-seasonal adjustments gasoline prices increased 3.7%. BLS has energy prices up only 5.6% y/y and food +3.4% y/y/. Apparel prices were +0.6% but after seasonal adjustments they are zero. Did you know that BLS has club membership fees down 1.5%, which keeps recreation costs benign?

Once again we must ask, ‘where can we get a seasonal-adjusted checkbook?’ At year end, seasonally adjusted and non-seasonally adjusted should be equal. They seldom are… For the first 4 months of 2004, BLS has CPI +4.4% SA; the core is +3% SA.

"Partially offsetting these increases were declines in the indexes for fruits and vegetables and for nonalcoholic beverages, each down 0.6 percent." How is that vegetables prices almost every month are down sharply? They should be free by now. http://www.bls.gov/news.release/cpi.nr0.htm

The 40%+ increase in dairy products to record levels is not reflected in the CPI. As we often note, the BLS in its CPI release admits that it can and will omit spike in prices. "Extreme values and/or sharp movements which might distort the seasonal pattern are estimated and removed from the data prior to calculation of seasonal factors…For the fuel oil, natural gas, motor fuels, and educational books and supplies indexes, this procedure was used to offset the effects that extreme price volatility would otherwise have had on the estimates of seasonally adjusted data for those series. For the Nonalcoholic beverages index, the procedure was used to offset the effects of labor and supply problems for coffee. The procedure was used to account for unusual butter fat supply reductions, decreases in milk supply, and large swings in soybean oil inventories affecting the Fats and oils series. For the Water and sewerage maintenance index, the procedure was used to account for a data collection anomaly and dry weather in California. For Dairy products, it mitigated the effects of significant changes in milk production levels and higher demand for cheese. For Electricity, it was used to offset an increase in demand due to warmer than expected weather, increased rates to conserve supplies, and declining natural gas inventories."

The above BLS admission alone is sufficient reason to discredit the validity of CPI.

Last week we tried to emphasize that although the market is priced for several rate hikes and commentary notes this each day, the behavior of Easy Al, as represented in the monetary aggregates, is diametrically opposite a tightening mode. We presented charts that show M2 is surging in 2004. The evidence strongly implies Easy Al is replicating the egregiously bone-headed policy of the late ‘70s when Art Burns tried to fool the markets by talking tough against inflation and marginally raising interest rates while he recklessly pumped out the credit…Last week M2 went postal, surging $41B and M3 exploded $58.3B. The media and The Street are quick to state M2 is growing 4.4% y/y, below the Fed’s 5% target. But they’re silent or ignorant of the fact that for 2004 M2 is growing at an 11.65% rate. Is that characteristic of tightening? Tax rebates could be 1.5-2% of the y/y increase. PS – Now there is no refi kick to M2.

The Chicago Department of Consumer Services shows a ‘basket of groceries’ in Chicago increased from $48.06 for the week ended 4/2/04 to $48.53 for the week ended 4/30/04, 0.98% increase for the month.

http://www.ci.chi.il.us/Consum…ceUpdates/foodbasket.html

A year ago the price was $47.62. But the inflation just showed up in the first week of May. For the week end May 7, 2004, the price has soared to $50.56. For the week ended May 9, 2003, the price was $45.84. Ergo food prices in Chicago by this measure are up 10.3% y/y. Looks like those escalating raw material costs are now being passed on to consumers.

http://www.ci.chi.il.us/Consum…eUpdates/foodbasket8.html

Fed officials and intractabulls profess to be unconcerned about oil and gasoline prices. However the only other times that oil has reached $40 hostility in the Middle East threatened to disrupt supplies. The 1979-80 oil spike was due to the Iranian Islamic revolution. Desert Storm in 1991 produced the second $40 spike. Oil prices quadrupled in 1973-74 on an OPEC embargo due to the 1973 Middle East war and general inflation in the US. This time it really is different; oil’s surging prices are demand driven.

News out of Russia:

Ufaleynickel -- the second largest nickel and cobalt producer in Russia
(after Norilsk Nickel) has stopped production. The reason - sharp deficiency
of coke. Coke prices in Russia have gone up fourfold in 2004 from $95 to
$380 per 1000 kilogram.
In 2003 Ufaleynickel produced 7,500,000 kilograms of nickel and 2,400,000
kilograms of cobalt. –END-

Monday, May 17, 2004. Page 5.
Transneft Warns of Export Peak

By Dmitry Zhdannikov and Richard Ayton
Reuters

Russian crude oil exports have hit a ceiling and after many years of growth, the world's second-largest exporter cannot raise shipments unless new pipelines are built, oil pipeline monopoly Transneft said on Friday.

Transneft head Semyon Vainshtok said in an interview that Russia, the only major non-OPEC producer to boost output significantly in recent years, may need to curb production growth very soon because of export pipeline bottlenecks.

Vainshtok, Russia's oil export chief, said Transneft was already delivering just over 4 million barrels per day of crude, and warned he needed to expand the system by at least 800,000 bpd to sustain growth. –END-……

This article is important enough to run the entire piece:

Will oil prices double this summer?

Saudi Arabia: Saturday, May 15 - 2004 at 08:48

At the end of last week Russian oil producers threw in the towel saying they could not deliver any more oil. Oil prices spiked to the highest levels in 21 years. But this may just be the start of an old fashioned oil crisis.

http://www.ameinfo.com/news/Detailed/39561.html

Over the past 30 years the world has been through several major oil shocks, or oil crises in which the cost of a barrel of oil suddenly shot up causing consumer and asset price inflation, higher interest rates, and then an economic downturn or outright recession.

Is that where we are suddenly heading in this optimistic summer of 2004 when all the world's economies are growing again after a major post-Millennium slowdown?

Certainly capital markets voted with their feet last week, and investors headed to the exit doors. But this may just a sign of things to come.

One statement earlier last week from Opec sent a chill down the spine of market watchers. This was a declaration from the oil cartels' president that there was nothing Opec could do about rising prices in current circumstances.

For those who respect the Saudi Arabians as the great swing producers of the oil market this is very sobering. If Opec can not release enough oil to satisfy the thirst of an expanding world economy led by China and perhaps India, then who can?

Russia? We got the answer on Friday last week. The Russians are up to 9.3 million barrels per day, and can add no more supply. They are at their physical limit.

Add in very real threats of supply disruption in the Middle East and we saw Iraq exports dip by 500,000 barrels per day last week due to another sabotage incident, albeit just for a few days and you have a very precarious supply and demand equation.

Now what can happen to reduce demand to meet available supply? Answer: higher oil prices.

Oil prices will therefore rise to such a level that the global economy contracts and the supply and demand equation is in balance. The mechanism involved in depressing global oil demand is consumer and asset price inflation caused by high oil prices which will necessitate higher interest rates.

In the interim period the question of how high oil prices go actually depends on how long the Federal Reserve keeps interest rates at their present ridiculously low levels. It was, after all, excessively low interest rates that sent demand for oil to present unsustainable levels in the first place.

Given that this is a US Presidential election year, and the Fed has no desire to dampen this year's economic success story, we might see oil prices surge a lot higher before the inevitable medicine of high interest rates is taken. And the higher oil prices rise the more aggressive those interest rate rises will have to be.

On the other hand, in order for the oil producers to invest in new capacity to meet rising real global demand for oil then we will probably continue to see oil prices well above the depressed levels of the 1990s. Otherwise, there will just be another supply and demand crunch, and another business slowdown or recession.

So higher oil prices are probably here to stay, and today's shock headline might be tomorrow's planning baseline. In the meantime, oil prices could double this summer.

-END-

The Netherland’s Eric Hommelberg:

Hi Bill,

Last Friday I send you some notes regarding the extreme oversold condition in Gold shares and the ‘big picture’ view. The main point is : An extreme oversold condition doesn’t last for a long period of time, no matter if the primary trend is up or down. History shows sharp HUI bounces after such extreme oversold conditions as we’re witnessing today.

An other graph which illustrates painfully clear the extreme oversold condition in Gold is the Gold/Oil ratio.

[Blockierte Grafik: http://www.lemetropolecafe.com/img2004/517.gif]

This ratio is at an extreme low right now and again, such extremities won’t stay for a long period of time ! So what gives ? Oil going down or Gold catching up ? I would like to remind people that such extreme bearish sentiment (panic, bullish consensus <10%) as we’re witnessing lately is typical bottom stuff. Remember the Gold sell-off in March 2003 ($390 to $320) ? Well, back then there was panic all over the place too. A good example of what pain people suffered in March 2003 is shown below : (taken from JSMineset.com)

Sunday, March 16, 2003, 9:18:00 PM EST

Too much pain from gold stocks

Author: Jim Sinclair

Q: Jim, I simply cannot take the pain in gold shares.

I have a lot of respect for your opinions. I still want to believe you that we are in a bull market for gold. But today I gave up. I sold all my gold mining stocks. There is only so much pain I can take.

A: I am so sorry, but I certainly understand. I feel your pain and wish you all the best whichever way you go. Please stay in touch.

Well, sounds familiar right ? Remember, March 2003 was a bloodbath for Gold shares as well as it is today ! Remember that the time to buy is when blood is in the streets (Nathan Rothchild). Remember that extreme overbought/oversold conditions don’t stay there for a long period of time (Jesse Livermore). Remember that de HUI bounced off like a rocket (>50%) after previous bloodbaths. In March 2003 I suggested in my piece "Nasdaq vs XAU" that : "one should expect then a sharp upside reversal of the XAU. Downward risk is extremely low:" END. Well, that was March 2003, today I would suggest the same !
Best,
Eric

Auckland Ed over the weekend:

Hi Bill:
I finally decided to bite the bullet and update my portfolio today.
Interesting findings compared to last year.
Date Gold Shares Silver Shares
Last Year 1/1/03 to June 1/03 -19% -7.5%
This year 1/1/04 to today -25% -9.0%
Then look at this!!!!
Last Year June 1/03 to 1/1/04 +72% +91%
In other words we went through the same thing last year and then the shares took off on a huge tear. This year is marginally worse but I expect the coming gold rally will make us forget last year. I'm projecting 400-425 on the HUI from 177 today. No one believes that's possible, but then again many "goldbugs" have sold their shares.
I think we should keep track of the gold advisors. Let's see WHEN they turn bullish. So far NONE of them (as far as I know) have called the bottom and said BUY BUY BUY.
Cheers from Auckland, Ed

Saturday, May 15, 2004
Copyright © Las Vegas Review-Journal

For tax break, senators put peddle to the metal

STEPHENS WASHINGTON BUREAU

WASHINGTON -- Investors selling gold, silver and other precious metals would pay fewer taxes on their profits under legislation approved this week by the Senate.

A corporate tax bill lowers the capital gains tax on precious metals from 28 percent to 20 percent.

The Senate approved the bill 95-3 and sent it to the House, where negotiators will try to work out differences between the Senate and a House versions.

The metals tax break would apply to "collectibles" such as gold, silver, platinum and palladium. Sens. Harry Reid, D-Nev., and John Ensign, R-Nev., sought the change, arguing that investors in precious metals should be subject to the same lower rate as holders of stocks and bonds.

"Many people avoid investment opportunities in precious metals because of the extra tax burden," Reid said in a statement.

Ensign said the provision would level the playing field for investment in the mining industry. "This bill is based on the principles of fairness and healthy economic growth," he said in a statement.

Nevada is the third-largest gold producer in the world, after Australia and South Africa.

-END-

When the precious metals financial market scandal breaks in the future, CFTC Commissioner Gorham should be held to account:

Dear Bill,
This morning's Orlando Centinel (financial page) contains an article on "Silver" from the Commodity Futures Trading Commission.
In response to more than 500 letters to the Commission that alleges a handful of big players colluded to keep silver prices lower than they should be. Michael Gorham said in a letter to silver investors, " the CFTC has closely monitored the silver market and we have found no evidence of manipulation. Those making the allegations have provided no proof of manipulation", Gorham said.
At least someone felt the need to respond.
Sincerely,
Lee Waite

A Café member sees it this way:

Bill,
talk about adding insult to injury. The cabal went to work on both gold and silver exactly 12 minutes after the London market closed. Both metals went straight down before rebounding a bit at almost the exact time. Can you find the e-mail of that guy who published that response to the complaints about the manipulation in the silver. Either that guy is a total moron or totally corrupt. Most likely both. I don't understand how the authorities can let this problem persist.
Dave K.

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CARTEL CAPITULATION WATCH II

From Dave Lewis in his "Morning Thoughts" commentary:

One of the elements of Lemetropolecafe's daily Midas report I find most helpful in my own analysis is John Brimelow's coverage of the physical demand for gold in India, China and other regional centers. Lately, Mr. Brimelow's commentary has been pointing to heavy Indian Gold imports and the collapse of India's main stock market over the past few days has proven, at least thus far, the virtue of those Gold investments.

According to press reports the catalyst for the sell-off was the surprise loss of the BJP incumbents to the Congress Party led by Sonia Gandhi. Given the recent loss of support, according to recent polls, for the Bush administration here in the US I can't help but wonder if this change of sentiment might have financially ominous implications for our markets here at home. The initial response of the Indian authorities was to shut down stock trading, which reminds me of the virtues of holding assets, like the precious metals, which aren't tied into the system. As savers found most recently in Argentina, the virtue of Gold sometimes isn't apparent until you really need, by which time it might be too late.

From a broader perspective, the ever increasing reliance of the financial intermediation process on political support and vice versa lends itself to volatility of this nature. While unfortunately, to borrow a well worn economic metaphor, the horses are long gone from the barn and thus closing the door will do little, the importance of a separation of financial and political power may now become more evident, particularly if the current, in my view, faux attempt to limit credit growth continues to weigh on global stock markets.

With US authorities apparently willing to try to hold up the US$, inflation will, to an extent, be exported. However, the willingness of foreigners to take this bitter economic medicine is not infinite. Having, quite successfully, urged the adoption of US style financial markets ideology, US policy makers may soon find that their foreign counterparts are caught in exactly the same trap that they are trying to avoid. To the extent that political support is generated, in part, through the financial markets and to the extent that democracy has spread sufficiently such that a stock market swoon invites political change, inflationist policy makers seems caught on the horns of a dilemma.

That is, they can try to rein in the credit creation process to contain rising inflationary pressures but at cost of a stock market decline and by extension loss of political control. Alternatively, they can ignore the inflationary pressures and keep the markets up while the loss of purchasing power of the currency foments more political dissension. Milton Friedman's answer to the dilemma in the arena of wages was to take advantage of the common man's lack of understanding of the inflationary process and its causes and let inflation run.

While there are still a few months before the November election, the writing may already be visible on the wall. Attempts to jam the markets to inspire a ballot box result can go horribly wrong, particularly if the incumbent party loses. I'm quite interested to see the response of the new Indian government to this equity market decline. It seems to me as if the race to devalue fiat currencies just got a bit hotter. It is, I believe, worth noting that every fiat money scheme in history has eventually collapsed for just such reasons. The power to create money, as opposed to earning it, is always eventually abused. Got Gold?

Dave Lewis
http://www.chaos-onomics.com

From Richard Russell, sound familiar?

Question -- "Russell, with galloping inflation in prices and the money supply, why isn't gold going through the roof?

Answer -- When gold hit its highs during the first quarter of 2004 too many people got aboard. Ads for gold dotted the newspapers. A lot of weak hands moved into gold. The decline in gold that began in March washed out most of the speculators.

A second possible reason for gold weakness is as follows. Almost every central bank in the world has been printing paper money. Just as the central banks and the various governments don't want their constituents to know they are debasing their currencies, they also don't want gold to rise. The one thing that tells the public that inflation is raging is steadily rising gold.

Therefore, the central banks, their "friends" in the commercial banks, and the brokers with close government connections have done everything possible to keep gold from rising. But holding the natural forces down is like stepping on a spring. When the foot is taken off the spring, the compressed energy is released. Somewhere ahead, gold will fully express itself. But it will happen without the blessings of the central banks or the various governments.

-END-

In other words, gold will explode when The Gold Cartel is blown out of the water and carried out on GATA’s stretchers.

The gold shares came out of the block like gangbusters and then sold off when gold was pummeled on the instructions of The Gold Cartel. The XAU only ended up with a pitiful .25 gain to 81.46, while the HUI gained 2.70 to 180.88. It could not get through key resistance at 184, making a 183.83 high for the day.

HUI

http://bigcharts.marketwatch.c…&o_symb=hui&freq=1&time=8

The big picture for our camp continues to improve in almost every way imaginable. We know why gold is not streaking for $500 and who has knocked it down to these levels. With the cash market so strong, their efforts to keep gold down have to be strained somewhat. All we can do is monitor the situation and stay positioned for the historic move which is on the way.

GATA BE IN IT TO WIN IT!

Appendix

Mahendra was right on about predicting a big surge today. He wasn’t counting on The Gold Cartel stopping it cold in the most blatant of fashions... (Written to his members yesterday)

Dear Members,

At this current stage investors are confused by very many issues like: -

The USA trade deficit
Stock market uncertainty
The impending rise in interest rates?
Housing market bubble; more rise or collapse?
Currencies uncertainty and the question of real value
Higher oil prices and its impact
USA elections, Iraq war and falling metal prices etc.
What to do with money if one has cash or what decisions should be made at this point when things are not clear and one has already invested money in any sector.
Yes, I will presently come onto these points but first let me start with the good news concerning metal prices because I owe a lot (love and support) to the metal community and would like to give them the right path and guidance at this point. Metal prices have suffered quite heavily in the last 32 days even when oil prices were going up and the stock markets started trading in the zone of uncertainty. Economically, the USA is entering into a worst period and I hope that Greenspan and other key economists are aware of this. If however they don't know or are trying to ignore it, then I think that we are going into a most unfortunate economic melt down period and people's wealth (that is paper currencies that are factory made but not gold since it is part of nature) will be wiped-out. Soon gold will become the most powerful currency and finally the US$, the EURO and the POUND (paper currencies will lose the battle against Gold. In fact I will use a strong word and say that paper currencies will SURRENDER to gold.

The astrological wave is indicating the way to go but if we chose to go against it then we shall be entering into a major crisis: Here is small note on what I see.

All metals should rise (they are down because of external forces or the use of shorting gold on paper contract by key bank or authority with support of big trader. They can short gold because they don't care even if prices goes up because they can print more Dollar to short more gold on the trading floor or computer. They want to make sure that gold must stay down. They can keep running a factory 24 hours and printing more and more - may that be the reason why paper prices are going up???????.......). But this is ending soon because they want go with wave, they want to hold the hand of gold and that is what Jupiter is indicating. Why upward trend will come read below statement.

Oil should rise (prices are rising). There must be some connection with the Iraq war and indeed that is why the war was started in the first place. I see biggest supply threat is coming from middle east.

If you read my 2002, 2003 and 2004 World and Financial prophecies, I have very clearly stated in the USA sections that the country can only survive if it is in control of both OIL and GOLD. I think that the USA is unfinished in the battle to control oil. Let us also see what they will do with gold.

Today my comments will surprise everybody. In my prophecy, I clearly discern that the reason behind the current downward trend in gold prices is neither speculative nor is it that people have lost faith in it. I see the commencement of a big game plan in gold instituted by the higher authority (may be Federal Reserve) in which they will play a key role. I see before they can start, they want to first throw out the common investor from the metal market.

The oil prices rise of 2004 which I predicted last year is coming true. Therefore, the gold and silver prices rise is definitely on the way and I am 100% sure that I will soon pass this final test of my work.

Stock market – As you all know, my predictions on the USA and the world markets are very negative from the Middle of 2004 (you can find more details in my book) and this will bring about a major crisis in the BANKING AND FINANCIAL INSTITUTIONS SECTOR. Next year many big ones may be forced to close down.

Housing Market – A major downward trend will soon start in the USA and EUROPEAN house markets. Many will decide to give back to banks and this will result in a major negative impact on the banking sector.

Currency Meltdown – Paper currency will lose its charm like the Zimbabwean Dollar did in the last four years, sliding from 8 to 5000 against a US Dollar. I see the same scenario unfolding for all key (including US$, Euro, Pound) currencies against GOLD.

There will be a rise by Asian countries and Russia and they will adopt a negative attitude towards the super power and also strive to acquire oil and gold because they shall come to the realisation that their economies cannot be sustained without both these natural products. If you didn’t know, then you better be informed - Two years back I made the prediction that an oil war would be waged (USA-IRAQ) and that soon after this a great war for GOLD would begin and last 40 years.

I don’t want to write much more because I know that my English is not that good but I am sure Bill Murphy will better explain to you in further details on http://www.lemetropolecafe.com on 27th of May. This is because I am going to see him in Dallas on 27th MAY (any date change we will let you know) and we have plenty to discuss.

If you want to read in detail on all these areas you can go through my book "2004 World and Financial prophecies".

Let us now see what this week says:

GOLD:

I am still very upset with my India trip because it was due to this that I was unable to properly guide you on the short term. While in my book I have said "get out from metal and metal stocks around 28th March and re-enter on 12th of May", I never indicated it in my newsletter in regard to gold though I did it on silver. I know it has cost you a lot but I hope that you will forgive me for that mistake and I am sure that my advice and guidance will play a key role in recovering your loses.

During this week Gold will steadily go up except for one day when it will have a scary downward trend. It will however strongly recover on the same day or the next. Those who don’t like uncertainty can buy gold on FRIDAY and hold for 42 days.

SILVER:

Silver is still trading at sale or discounted prices. Obtain it because below $5.80 is almost like getting it for free. NOW FIRST TARGET IS $6.38.

PLATINUM AND PALLADIUM:

For the last one month I have been advising you to stay away from these metals but we are now very near to an upward trend. Those who want to start putting money in these metals should try their luck on Friday.

OIL:

After having achieved the predicted price target in the first quarter of 2004 in Silver, gold and currencies, last week oil also fulfilled the first target of $40. Last week I recommended that one could hold up to $42 but then it would go down thereafter for some time before starting the journey for $50. This week I hold the same predictions as last week concerning oil.

CURRENCIES:

Last week I took a break and did not give predictions on currencies because after three years of 98% accuracy on currencies I went little bit wrong in the last six weeks. But all price predictions will be fulfilled. My astrological calculations say that for this week there will be signs of a bit of a downward inclination in the US Dollar but from next week the downward journey will start for sure.

COFFEE:

Prices should start moving up anytime now because news of bad weather is on the way.

WORLD EVENTS:

After undergoing a harmful phase in the last 40 days of uncertainty in middle-east and Iraq, I now see the start of a more positive and peaceful period for the world. The first good news I foresee and which will surprise many concerns the USA- it will start calling back its soldiers from Iraq.

Many people are asking what I see regarding India’s future after the election results because last year I saw and predicted the events unfolding currently. I predicted that Sonia Gandhi/Congress party would win and that Vajpayee would face defeat. Many of my friends warned me ‘MAHENDRA you are taking a big risk’ but my response was as always- that I only predict what I see. I never go along with the flow of the current trend or laws of probability. This is why I am predicting a great rise in metal prices though many are warning me that I am committing a big mistake.

I see a smooth period for India and there is nothing to worry about. Relations with Pakistan will improve more.

FINAL NOTE:

After achieving success in one’s career, one should always start to search for her/himself. This can be achieved through meditation and good Karma because each day we are getting closer and closer to the final destination. We are powerless regarding this and have got no choice but to depart. Time will remain constant, always there and everything else will remain but we won’t be here. Know yourself therefore and enjoy life by way of good Karma, love and peace. Hate, war, anger and ego shall not result to any good but only serve to bring evil closer to you, your family, society and country.

Once again I exhort you to enjoy peace and love….

Thanks & God Bless
Mahendra

http://www.mahendraprophecy.com

Hi Bill Murphy!

More and more I'm coming to regard this life and death struggle to survive the coming man-made financial holocaust as a gigantic game of chess. (Did you read the 2nd.half of my last memo, after the bit about abbreviations?) Feel free to quote any of this stuff I send you and I'm happy to be counted as a GATA committee-man or Crusader! I was in my local coin shop yesterday buying $300 worth of silver rounds - an Australian 50c piece struck in 1968 - and Steve (the owner) was saying that although 50 million coins were minted only 32 million were issued because on the opening day they already had 58c worth of silver in them! So the Government immediately began buying them back! (It takes 3 silver "rounds" to make an ounce of silver and last week they were AU$10 for 3 and this week AU$9 or $3 each or $300 for my 100 coins.)

With the Aussie dollar at US.68c and silver at US$5.70 = AU$8.87 it's about the most efficient way to buy silver right now here. Now here's the interesting bit: Steve said he sells thousands of these coins every week in the trade and they are going to melt to make up bars of silver for the futures business! He guesses there are only about 5 million left and at this rate they'll start to have numismatic value. Oh! that the rest of our currency held its value like our humble 50c round! (Our 50'c are now the same large size but hexagonal and cupro-nickel clad silver look-a-likes.)

Even a mint condition silver round is only a $1 so he's going to get me a couple. The beauty of these coins is they will always be coin of the realm and therefore can't go below 50 cents. If you want me to source you some I'd be happy to arrange it for you.

Getting back to the great game: I can't believe these very rich and powerful people don't know exactly what they are doing. They know the fate of the Weimar Republic - they won't be running around with wheelbarrow loads of paper money to buy loaves of bread! They'll be alighting from their regular limos with bars of gold buying up bakeries! The only way we can beat them is to get there first - to the gold and the silver. Which means the futures market is possibly already too risky - but how else can we leverage our meagre funds?

The GATA army should, I believe, use silver futures to make thousands but every so often, as profits build up TAKE DELIVERY. I'm fearful they'll change the rules, as they did with the Hunt Brothers. So we should taper off our futures trading. If I'm right, right now both gold and silver will start roaring up and it will be us competing with these bastards to buy the stuff! They'll still short it massively from time to time to scare the price down - we should spot these times and short it also with tight stop-losses in place, then double our longs at the bottoms and ride them up and keep taking delivery!

You and GATA have been like Noah building the Ark. It's too late to save those who won't listen. They are doomed. We should seriously consider where to go apres le deluge.America is not going to be a pretty place. Australia perhaps? New Zealand? I don't care to think of 240 million Americans baying for your blood because you were right! It would be ironic for you to be killed by a mob you tried to help after surviving assassination by the Reserve Bank's hit men....It really will be like Atlas Shrugged with the looters and moochers. Wasn't Ayn Rand prescient about gold?

Love, Roger.