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The John Brimelow Report

Tense moment for gold

Tuesday, September 28, 2004

Indian ex-duty premiums: AM $ 7.44, PM $ 6.46, with world gold at $409.10 and $410.50. Continuing above legal import levels, despite the rise in gold and a weakening of the rupee. Bad news for bears.

TOCOM traded the equivalent of 34,644 Comex lots, 115% above yesterday, with the active contract up 16 yen, back to the Feb 2003 peak. World gold rose $1.55 above the NY close. Open interest rose materially – the equivalent of 3,046 Comex contracts – to 89,552 Comex; but according to Mitsubishi, the Trade house net short fell further, which would appear to suggest that the "general public" long decreased. It is obvious from the TOCOM website that there is a public short position: this could be a support to the world gold price in the immediate future. (Gold traded 29,600 contracts in NY on Monday: open interest fell 905 contracts.)

The yen was weak today, and metal prices in general strong. TOCOM Platinum traded about 63% more by value than gold: there is only a slim oil products futures market in Japan. The new Japanese Financial Services Minister has asserted that bank demand deposit insurance by the State will be abolished next year. This is a situation worth monitoring.

The 12.5 tonne increase in gold holdings in August by the Argentine Central bank is interesting. Argentina, by virtue of the large quantity of euro bonds in the hands of ungovernable private sector creditors, has a big problem: litigation in overseas courts. Other states – like Arab countries – subject only to attack by foreign governments – might be expected to take heed.

AS ScotiaMocatta candidly observed, on Monday

Zitat

"Gold …began to work its way higher, influenced by oil …The metal reached the 410.00 where it ran into a wall of selling from New York dealers."

UBS notes

Zitat

"Comex option expiry did its job yesterday and kept gold between $405 / 410 as we expected."

To an equity-trained observer, the cheerfulness with which these observers stipulate to price-management is startling. The constantly gold -bearish Barclays Capital Research says:

Zitat

"The positive sentiment towards commodities is sweeping the white precious metals higher although gold is underperforming the rest of the complex… gold is not benefiting similarly given its poor physical fundamentals;"

The only identifiable "poor physical fundamental" is Central Bank selling.

Nevertheless, the widely-heralded presence of substantial speculative hedge funds, in the context of $50 Oil, adds some interest.

JB

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CARTEL CAPITULATION WATCH

The only market even more predictable than the gold capping was the PPT coming in to take the DOW back above 10,000, just as it looked ready to flush itself into the toilet. The DOW leaped 88 to 10,077. The only explanation for the gain is the Working Group on Financial Markets (PPT) said no way we are going to allow the DOW below 10,000 going into the Presidential debate on Thursday night. It certainly wasn’t an easing of the oil price which had the DOW roaring. Oil closed at $49.90, up another 26 cents per barrel, after taking out $50. It certainly wasn’t this disappointing news either:

10:00 September Consumer Confidence reported 96.8 vs. consensus 99.5
Prior reading was revised to 98.7 from 98.2.
* * * * *

The DOG was dragged higher, closing at 1870, up a weakish 10.

Crude oil was the talk of the town, as it should be after taking out $50 per barrel. The latest stimulus for the price of oil advancing:

NIGERIA REBEL CHIEF DECLARES ARMED STRUGGLE FOR OIL--AP
NIGERIA REBEL LEADER SEEKS CONTROL OF OIL REGION--AP
NIGERIA REBEL LEADER SAYS OIL WORKERS ARE TARGETS--AP
* * * * *

The bullish oil news was countered by the Saudis:

Saudi Arabia to raise oil prod uction to 11Mbpd from current 9.5bpd --

Dow Jones

The increase will take effect within weeks, according to an unnamed Oil Ministry official. November WTI crude is trading off the overnight highs, quoted last at $50.10.
* * * * *

Whether the Saudis can deliver is debatable. Even if so, word is the refineries who refine the heavy Saudi oil are already running flat out.

Mahendra this weekend:

WORLD EVENTS

Tuesday or Wednesday of this week does not portend good for the world. Some kind of natural disaster could befall us, though my vision is not clear concerning where it will occur and of exactly what nature it will be. Let us therefore be mindful and pray that the week may smoothly pass.

He came as close as you can get:

13:27 Follow-up: earthquake impact appears to have been minor in SF; may have been stronger in central CA
We heard several reports that an earthquake just hit SF, but that it appeared to be felt only modestly there. We have also heard that it was stronger to the south of SF, and Dow Jones is reporting that a strong earthquake struck central California.
* * * * *
13:53 Follow-up x4: USGS now lists Parkfield earthquake at 6.0
Newswires indicate that there are no reports of injuries or damage thus far. The USGS site indicates that there have been more than 30 aftershocks, with the strongest being 5.0.
* * * * *
One of the reasons the US consumer is struggling:

Health Insurance Costs Rise Faster Than Wages

WASHINGTON (Reuters) - Health insurance premiums for workers are rising around three times faster than their wages, and health costs eat up a quarter of earnings for more than 14 million Americans, according to a survey on Tuesday.

While benefits are being cut, health insurance premiums are rising, the report from the nonprofit Families USA found.

"Working families were squeezed by runaway health care costs over the past four years," said Families USA executive director Ron Pollack.

"As a result, workers are paying much more in premiums but are receiving less health coverage, wages are being depressed; and millions of people have lost health coverage entirely."

The cost of health insurance premiums rose by nearly 36 percent on average from 2000 to 2004 in 35 states, said the group, which bills itself as a nonpartisan watchdog on health care issues. Average earnings rose just 12 percent over the same time.

The Families USA report found that health insurance plans provided by employers are covering fewer health services and workers are paying higher deductibles and copayments.

"Family health premiums paid by employers and workers rose from $7,028 in 2000 to $9,320 in 2004. The average amount paid by workers for this coverage rose from $1,433 to $1,947 during that period -- an increase of 35.9 percent," the group said in a statement.

"And, the number of Americans who had total health costs that consumed more than one-quarter of their earnings rose from 11.6 million in 2000 to 14.3 million in 2004 -- an increase of almost 23 percent. The overwhelming majority of these people (10.7 million) had health insurance."…

-END-

"What, Me Worry" Secretary Snow will have none of it. All is well:

Snow says no risk of sharp U.S. economic slowdown

WASHINGTON, Sept 28 (Reuters) -

Treasury Secretary John Snow on Tuesday said that, notwithstanding weaker consumer confidence, he did not think the U.S. economy was at risk of a slowdown.

"I think that's very unlikely," Snow said in response to questions on CNBC television. "I think we're going to continue on a good path with the American economy."

Snow was interviewed from Reno, Nevada, where he met local businessmen to say the economic recovery remained on solid footing….

-END-

While copper sold off a bit today on Comex, the copper shorts are gradually being decimated:

Sept. 28 (Bloomberg) -- Copper rose for the second day in London to its highest in five months as falling inventory and rising demand spurred hedge funds to buy the metal used in electric cable and water pipes.

Inventory monitored by the London Metal Exchange had its biggest one-day fall in 7-1/2 years yesterday. Consumers are withdrawing metal from storage amid surging Chinese and U.S. demand.

``We are seeing fund buying coming into the market supported by strong fundamentals,'' said Angus Macmillan, an analyst at Prudential Bache International in London, in a telephone interview.

Copper for delivery in three months on the LME rose $15, or 0.5 percent, to $2,968 a metric ton at 11:11 a.m. local time, its highest since April 19. It gained 1.4 percent yesterday.

Copper inventory in LME-approved warehouses fell 0.5 percent to 94,275 tons, the exchange said in a daily report, extending this year's decline to 78 percent. The stockpile fell 3.7 percent yesterday, the biggest drop since April 1997.

-END-

An interesting hedge move:

11:31 HNR's Venezuelan affiliate puts on 2005 crude oil hedge (16.41 +0.42)
Harvest Vinccler says it purchased a WTI crude oil put at $44.40, at a cost of $3.95/barrel, putting an effective floor price at $40.45. HNR says the put has the economic effect of hedging approximately 10.4K barrels of oil per day.
* * * * *

Sleuthing on The World Gold Council:

Hi Bill:

As you know the World Gold Council Website includes a Statistics section that among other things has a Table of World Gold Holdings. This table is quite useful in that it supposedly lists the Official Gold Holding of each reporting nation.

The archive at the WGC site goes back to March 2000. The Table of World Gold Holdings was updated every month from March 2000 until Dec 2002 except for July 2000, April and August 2001 and December 2002. In other words with the odd exception there were monthly reports.

Then things changed. During 2003 there were reports for only 3 months, February, July and December and this year we've only had reports for March and July.

Now there may be an innocent explanation for this change but at a time of great stress in the global monetary system, at a time when Official statistics of all sorts are either obviously doctored or completely suppressed, we might justifiably wonder if something more sinister is going on.

Bill, as you pointed out several weeks ago in a Sunday Special Midas, the Official Gold Holdings as listed in these WGC reports are obviously incorrect. The numbers do not add up or more precisely they add up to more than they should. Perhaps our Official friends are becoming aware that the game is ending and the less said the better. The less forensic evidence the better.

Cheers from Auckland

More on the World Gold Council:

Bill,

While this hackneyed story gets repeated once again I was surprised to learn the IMF wants to sell part of ITS 85 billion in gold? Isn't that about 6,641 tons at $400 an ounce? Is that a mistake? I wasn't aware they owned that much. This story always entertains me because of the simplicity of the deceit. If they truly wanted to forgive poor countries indebtedness why not merely GIVE them the gold and let them pay back the IMF with their local fiat. Then they would be free to rebuild their economy with a gold backed currency. Oops, that might piss off a few banksters.

James McShirley

Lease rates heads-up from Rhody early this morning:

Kitco finally updated their lease rate chart. There has been nothing since last Friday, and that data was rubbish, as it showed no change in silver, platinum or palladium for all terms.

Not bloody likely, so I have not commented on them lately.

Now we see a rise across all terms in silver so that silver lease rates are double to triple those of gold. This is more normal.

I notice that rates for gold declined across all terms. I think this is signalling a breakout for gold as borrowers abandon the leased gold market in anticipation of a rise in the metal's price.

We shall see if this trend continues for gold. The rise in silver on the other hand (and the increases across all terms rose by about one third, so it's significant) signals that the entities that are trying to cap silver still think they can, using leased metal.

Regards,
Rhody

Goldman Sachs is really going out on a limb these days. For three years they were neutral to bearish as gold rose from $252 to $430. Unreal! Today they really stuck their necks out with a bold call :

09:00 Goldman recommends buying gold stocks ahead of G7 meeting on 10/1
Firm believes any statement supporting flexibility in currency, mainly those aimed at Asia, could be construed as bearish for the dollar, and consequently positive for gold prices. Goldman sees Q4 forecast at $420/oz. for gold, mainly due to expectations of $1.32 price for euro/dollar.
* * * * *

Deutsche Bank was one of the defendants in Reg Howe’s suit against The Gold Cartel for gold price manipulation. They are pros at it. Now this:

Deutsche Bank under investigation - BBC News

Germany's biggest bank - Deutsche Bank - is being investigated on suspicion it may have manipulated its balance sheet.
The investigation is in connection to a long-running legal dispute with the now-defunct Kirch media group.
Deutsche Bank is alleged not to have set aside provisions to cover damages and compensation that a court ordered it to pay to Kirch.
Kirch imploded in 2002 shortly after Deutsche's former boss questioned its creditworthiness in a TV interview.

Violation

A probe had been launched against "Deutsche Bank officials", a spokesman for state prosecutors said, without providing any further details.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/3693122.stm

Published: 2004/09/27 09:34:34 GMT

-END-

Since we are on the subject of Germany, some MARVELOUS input from one of our GERMAN Café members:

dear sirs,

just seen in german bloomberg tv an interesting interview concerning the POG with martin siegel (peh investment).
(28.09 at ca. 15.30 local time)

some highlights:

- sees fair value at minimum 600 without the central bank sales (which are used to suppress pog - example gold sales of BOE)

- price target if central banks sell only 250-300 t/year ->500 usd

- he says that fed and the US would "punish" every other central bank who
would buy gold or even stop selling any further gold in fear of getting
out of control of the dollar devaluation.

- the rise in chinese demand

- he raised even some of the 3rd world issues concerning gold price
suppression (situation in SA as example).

cant remember ever seen such explicit lyrics in german bloomberg before.

i really appreciate your work!
regards

alexander scheid

Now that is commentary on the real gold market, not the drivel we receive here in the US from CNBC and Bloomberg. Martin Siegel sounds like GATA.

The gold shares went on a tear on HEAVY volume, confirming last week’s dramatic breakout. The XAU jumped 3.07 to 99.78, while the HUI rocketed up 7.89 to 223.89.

The HUI is running

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

While the big cap gold shares are on a roll, many of the exploration companies continue in the doldrums and can’t catch a bid. This has to change in the near future. It already has for one of the most outstanding gold exploration companies anywhere in the world – that being Seabridge Gold, a huge GATA supporter and a firm who has accumulated 14 million+ ounces of higher cost gold resources. Therefore, Seabridge(SA) will be one of the HUGE winners when gold takes out $430 for good. It is already shaping up for a monster run to the upside, closing today at $3.40, up 23 cents or 7.3%.

Seabridge

http://new.stockwatch.com/swne…utilit_snapsh_result.aspx

Taking the lazy man’s way out on my daily outlook. Same as it has been for three weeks. A review of my ending MIDAS commentaries over that period of time:

9/7 I expect gold and silver to take off from here in the weeks ahead and will be dead wrong if that doesn’t happen. Will I be shocked? Course not, we know who is out there doing all they can to keep this from happening and why. My bet is the physical market is going to give them fits and overpower them as September rolls on.

9/8 The incredibly bullish news brought to your attention over the past many days has not gone away. Neither have the Arab, Chinese and Indian cash market buyers. The case for owning old is going off the charts. I will be stunned and dead wrong if gold and silver are not FLYING by next week!

September 9 - Gold $397.90 down $1– Silver $6.14 down 2 cents

There is every reason for both gold and silver to be headed for the moon. ONLY the constant price-capping interference of The Gold Cartel and friends is keeping their prices from doing so. By next week we ought to see more signs the cabal is in trouble and gold and silver on their way to MUCH higher levels.

9/10 No change from me. The gold fundamentals remains a "10+++++." They don’t get any better, as brought to your attention the past few weeks. PRICE ACTION MAKES MARKET COMMENTARY. When gold does make its move, many of those fundamental reasons or market developments will be cited as reasons why.

9/13 Gold and silver share investments remain THE historic investments of a lifetime and few seem to notice or care.

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CARTEL CAPITULATION WATCH II

9/14 Major Gold Shares Close To Making Significant Breakouts!

The HUI closed right on its long-term downtrend line. Both indexes are close to blowing through resistance and breaking out, which could lead to significant advances. The reasons to be in the gold and silver shares have never been better, yet, very few are paying attention.

[/B]9/15 There are just so many times I can point out the gold fundamentals are "10+++++." Only the increasingly desperate antics of The Gold Cartel have kept gold and silver from really taking off. Our sources told us the physical market would be very firm this week because of the buying they knew was going to hit the market. This is just what we have seen. We are getting to the point where both gold and silver should finally come in sharply higher one morning and then run![/B]

9/16 Energy seems to be building everywhere to send the prices of gold and silver SHARPLY higher!

9/17 The fundamentals for both gold and silver remain outstanding. So do the technicals. The physical gold market is robust and we are hearing the same for silver, at least as far as Europe is concerned. The base in gold is an expanded one and can support a move to much higher levels. Seems to me we need a $3 higher gap opening with demand kicking in enough around the world to send The Gold Cartel into a backpedaling retreat. Could happen any day.

9/20 The gold fundamentals and technicals are superb. They manage little in a managed market. I keep expecting The Gold Cartel to be hit hard with the unexpected forcing them to sound a retreat for the time being. Hasn’t happened yet. Still, we stay the course.

9/21 For some time MIDAS has been pointing to the incredibly strong fundamentals and technicals in both gold and silver. They are even better today from almost every viewpoint.

Regardless of the very short-term, not a week goes by that our camp doesn’t receive some sort of indication we are winning the battle against the devious Gold Cartel and their cohorts. The progress has been tedious, yet definitive. These bums are on their own short leash. They might win a few more battles, but they will lose the war and it won’t be that far off. The heinous Gold Cartel is in serious trouble!

9/22 Only a matter of time before gold busts through $412. Gold, silver and the shares remain THE historic investment opportunity of a lifetime.

9/24 *Gold and silver are FINALLY going to take off out of nowhere and blow The Gold Cartel out of the water. The move will be dramatic and one which very few in the entire investment world are looking for. The clueless gold world will be even more surprised. More and more commentators are looking for gold to move after the US Presidential election (guess they must know about the manipulation bit too). It will catch many flat-footed if the move comes ahead of the election. The catalyst could come from anywhere – oil blowing through $50, Fannie Mae blowing up, etc.

*Out of nowhere, when gold takes out $430, gold investors all over the world will want in on the gold, silver and share move ALL AT ONCE. Those that missed out on the oil move, which is still on their radar screen, will want in on the gold and silver one. At the same time, those on board all this time, like us, won’t be selling. We will be buying more. This will lead to a frenzied buying panic with the prices of some of the juniors/explorations going berserk.

The timing of all of this is so, so difficult. Hopefully, the hurricanes battering Florida will end soon. The gold, silver hurricane season is still to come and they will all be of the "Category 5" variety!

9/27 Sticking to my guns. The smell is in the air for gold and silver to pop big time. The gold fundamentals are super, "10+++++."

GATA BE IN IT TO WIN IT!

MIDAS

Appendix

Stephen Roach (from Melbourne)

Global: Collision Course

The world economy is on a collision course. The United States -- long the main engine of global growth and finance -- has squandered its domestic saving and is now drawing freely on the rest of the world’s saving pool. East Asian central banks -- especially those in Japan and China -- have become America’s financiers of last resort. But in doing so, they are subjecting their own economies to mounting strains and increasingly serious risk. Breaking points are always tough to pinpoint with any precision. Most serious students of international finance know that these trends are unsustainable. But like any trend that has gone to excess, a group of "new paradigmers" has emerged with a compelling argument as to why these imbalances can persist in perpetuity. That is usually the sign that the denial is about to crack -- possibly sooner rather than later.

Unfortunately, the case for mounting US imbalances is easy to document. Reflecting an unprecedented shortfall of domestic saving -- a net national saving rate that fell to 0.4% in early 2003 and since has rebounded to just 1.9% in mid-2004 -- the US has turned to imported saving in order to finance economic growth. And since it must run external deficits to attract that capital, it should not be surprising that the US current account deficit hit a record 5.7% of GDP in 2Q04. Yes, America has had a current-account problem for quite some time. But there has been an ominous change in the character of these external deficits. For starters, the US current-account deficit is no longer the means by which America funds investment-led growth that drives increases in productive capacity. In 2003, net investment in the business sector -- the portion of capital spending left over after allowing for the replacement of worn-out capacity -- remained an astonishing 60% below levels prevailing in 2000. Meanwhile, the government’s overall saving rate -- federal and state and local units, combined -- went from a surplus of 2.4% in late 2000 to a deficit of 3.1% in mid-2004. Over the same period, overly-extended US consumers have wiped out any vestiges of saving -- taking the personal saving rate down to a rock-bottom 0.6% in July 2004. In short, America is no longer using surplus foreign saving to support "good" growth. Instead, it is currently absorbing about 80% of the world’s surplus saving in order to finance open-ended government budget deficits and the excess spending of American consumers (see my 23 August dispatch, "The Funding of America").

The international financial implications of America’s mounting imbalances are equally astonishing. It wasn’t all that long ago that the United States was the world’s largest creditor. In 1980, America’s net international investment position -- the broadest measure of the accumulated claims that the US has on the rest of the world less those that the rest of the world has on the US -- stood at a surplus of $360 billion. By the end of 2003, that surplus had morphed into a deficit of -$2.4 trillion, or 24% of US GDP. This transformation from the world’s largest creditor to the world’s largest debtor is, of course, a direct outgrowth of year after year of ever widening current-account deficits. Moreover, reflecting the particularly sharp widening of America’s current-account deficit in the past year -- an external shortfall of 5.7% at mid-2004 that is already running 1.2 percentage points above the 4.5% gap prevailing at year-end 2003 -- America’s net international indebtedness could easily hit 28% of GDP by the end of this year.

Unless the US quickly addresses its current-account deficit problem, foreign debt is set to rise for as far as the eye can see. The best forecasts I have seen of this possibility are presented in a recent paper by Nouriel Roubini of NYU and Brad Setser of Oxford (see "The US as a Net Debtor: The Sustainability of the US External Imbalances," September 2004). Under three alternative saving and current-account scenarios, Roubini-Setser bracket America’s net indebtedness in a range of 40-50% of GDP by 2008. This is hardly a result to take lightly. As scaled by exports -- a good way to measure the ability of any economy to service its external debt -- Roubini and Setser point out that US international indebtedness could be closing in on 300% of exports by the end of 2004. By way of comparison, pre-crisis debt-to-export ratios hit about 400% in Argentina and Brazil. Of course, America is far from a "banana republic" -- or is it?

Zitat

But this is only half the story. For every debtor there is always a creditor. Popular folklore speaks of a return-starved world that has an insatiable demand for dollar-denominated assets as a claim on America’s productivity-led miracles. But in fact, private demand for most major classes of dollar-based assets has been on the wane. Foreign direct investment into the US has fallen off sharply; outward FDI exceeded inward FDI by $134 billion in 2003 -- a dramatic reversal from 2000, when inward FDI flows exceeded outward flows to the tune of $160 billion. Moreover, foreign buying of US equities has also dried up. During the first seven months of 2004, foreigners bought an average of just $0.6 billion of US equities -- well short of the bubble-driven peak of $14.6 billion but also a significant shortfall from the post-bubble period 2001-2003, when foreign equity inflows averaged $5.7 billion per month. In addition, there is even a case that can now be made for a slowing of US productivity growth in the years ahead (see my 17 September dispatch, "Productivity Endgame?").

By default, that leaves foreign demand for US fixed income securities as the principal conduit of external financing. Contrary to widespread belief, it is not an open-ended "buy America" campaign by enthusiastic private investors from abroad. Instead, it is increasingly a policy decision by foreign officials with very different motives. Over the 11 months ending in July 2004, foreign official buying of US securities accounted for 35% of net inflows into dollars -- more than double the longer-term norm and 4.5 times the 7.6% share of 2000-02. In this case, there’s no deep secret as to the identity of the Great Enabler -- Asian central banks. The rationale is clear: Lacking in domestic demand, Asia needs cheap currencies in order to subsidize its export-led economies. Given the massive overhang of excess dollars that have arisen from America’s ever-widening current account deficits, Asian central banks must recycle their equally massive accumulation of foreign exchange reserves back into dollar-denominated assets. If they don’t do that, the dollar will fall and their currencies will appreciate. It’s as simple as that.

Asian central banks currently hold about $2.2 trillion, or 80% of the world’s official foreign exchange reserves. As of year-end 2003, BIS data reveal that dollar-denominated assets made up about 70% of these reserves -- an astonishing overweight considering America’s 30% share in the world economy. Moreover, given the likelihood of persistent US current-account deficits, there is every reason to believe that Asian currency reserves -- as well as the dollar exposure of such holdings -- will have to rise sharply further in the years ahead. Nor should it be surprising as to who is driving Asia’s demands for dollars. Japan’s currency reserves are now in excess of $825 billion, whereas those of China have now exceeded $480 billion; collectively, these two nations account for more than half of Asia’s total foreign exchange reserves. Needless to say, should the dollar ever fall in the face of such a massive overhang of dollar holdings, portfolio losses -- the functional equivalent of an enormous welfare decline of foreign creditors -- would be staggering. America’s role as the world’s reserve currency offers no special dispensation from dollar depreciation or the staggering portfolio losses that Asian central banks would face in the event of such an outcome. That was the case in the latter half of the 1980s and is likely to be the case in the not-so-distant future, as well.

A new-paradigm crowd now argues that these trends are a manifestation of a new world order. They refer to it as a new de facto Bretton Woods II Agreement -- or a new "dollar bloc" zone that includes the dollar-pegged countries of China, Hong Kong, and Malaysia, along with "soft-pegged" economies such as Japan, Korea, and Taiwan. The argument is based on the premise that it is in Asia’s best interest to keep funding America’s current account imbalance. To do otherwise would run the risk of Asian currency appreciation -- tantamount to economic suicide for these export-led economies. And, of course, there is an added twist in an increasingly China-centric Asia. As long as the RMB peg remains unchanged, other Asian economies -- including Japan -- have no desire to lose competitiveness with China. That puts China in the role as being the linchpin of the broader pan-Asian approach toward funding global imbalances. Lacking in domestic demand, export-led Asia simply can’t afford to go it alone. Like most things in the world today, dollar buying is made in China, and the rest of Asia is going along for the ride.

This approach has the added advantage of also providing a subsidy to US interest rates that would undoubtedly rise sharply in the absence of this Asian dollar-support program. And, of course, those low interest rates provide valuation support for US asset markets -- first equities and now property -- that US consumers lever to reckless abandon (with cut-rate refinancing deals) in order to fund current consumption that then gets directed at buying cheap goods from Asia. In my view, this is an insane way to run the world. But the new paradigmers believe that this is the true "miracle" of international finance -- binding an unbalanced global economy together in a fashion we have never seen before.

There is a huge flaw in this so-called miracle, in my view. Just as America is putting itself in grave danger by squandering its national saving, America’s Asian financiers are running equally reckless policies in providing open-ended funding for these imbalances. China is a leading case in point. I have been a diehard optimist on China for over seven years. But now I am worried that China is at risk of making a series of major policy blunders that are tied directly to its role in leading the new Asian way. It was one thing to maintain the RMB peg in the face of mounting world pressures to do otherwise in recent years. I still feel this was the right thing to do on a stop-gap basis -- in effect, providing China’s undeveloped financial system with an anchor during a critical phase of its integration into the global economy and world financial markets.

But now China is digging in its heels on interest rate policy -- refusing to deploy the conventional policy instrument that is widely accepted as the principal means to restrain an overheated economy. China, instead, prefers to use the administrative edicts of its central planning heritage -- controlling the quantity of credit and project finance rather than its price. The combination of these two policy rigidities is especially worrisome. China’s central bank must keep creating RMB in order to recycle its foreign exchange reserves back into dollars; this runs the grave risk of undermining China’s ability to control its domestic money supply. But now, by holding its interest rates down, China is encouraging the very excesses that are driving its overheated economy -- a massive investment overhang and mounting property bubbles in several important coastal markets, especially Shanghai. By freezing the currency and its interest rates, China is, in effect, forcing its own imbalances to be vented in increasingly dangerous ways. This is not sustainable.

In the end, sustainability will probably be challenged by the unintended consequences of this new arrangement. Several potential implications of this new world order worry me the most: First, there is the growing risk of politically-inspired protectionism in the US. A saving short economy will continue to suffer from large current-account and trade deficits -- putting unrelenting pressure on job creation. Washington -- even though it is creating these problems with a penchant for deficit spending -- will look to scapegoats in the arena of foreign trade. US Treasury Secretary John Snow’s recent broadside aimed at Chinese currency policy is especially worrisome in that regard. Second, China is hurtling down an increasingly unstable path by mismanaging its domestic and international finances. Inflation is now on the rise in this overheated economy and could well continue to accelerate until China shifts its macro policy settings (monetary, fiscal, and currency) into restraint. A failure to do that is a recipe for the dreaded hard landing. Third, Europe is being squeezed harder and harder. Asia’s dollar pegs means that the euro has to bear a disproportionate share of any dollar depreciation -- a depreciation that is a perfectly normal outgrowth of any US current-account adjustment. Europe’s economic malaise is a source of considerable political angst in that region. As a consequence, continued Asian currency pegging and dollar-buying could raise the likelihood of European protectionism -- especially toward Asia.

In contrast with the claims of the new paradigmers, the stresses and strains of an unbalanced world are growing worse by the moment. These imbalances can be sustained only if the major nations of the world all march to the same beat. With the world’s growth dynamic now being effectively driven by just one consumer -- America -- and just one producer -- China -- the odds are growing short that such an increasingly tenuous arrangement can be sustained. China is probably the weakest link in this chain. That’s where I would look first as the potential trigger of the coming global rebalancing. I now suspect that China will flinch sooner rather than later.

LUPO

Willkommen im Thread Du alter Schwätzer, und möchtegern Gold Bug!

Dreimal, unter 3 verschiedenen User Identitäten, haben sie Dich bereits bei W:O wegen Deinen verbalen Ergüssen gesperrt.

Nach einer längeren Pause glaubst Du nun wieder einmal mehr, Dich als Poster beweisen zu müssen.

Hast Du Dir das auch wirklich vorher gut überlegt?

Deine Qualitäten als Fachmann und Dein Umgang mit Dir unangenehmen Usern, sind in Deinen Threads bei W:O dokumentiert.

Dein "My Casino" Thread, einer unter vielen, belegt eindrücklich wo Deine Quallitäten liegen.

http://www.wallstreet-online.d…tore+Lupo&timeframe=-3650

Was ich Dich noch fragen wollte Lupo!

Hast Du eigentlich diese drei Aktien die Du im März 2001noch auf Deiner Watschliste hattest, schlussendlich auch wirklich gekauft?

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LUPO

Was mich noch brennend interessieren würde!

Ist es Dir als "Gold Fachmann" schlussendlich gelungen, alle Deine Australischen Minenaktien, die Du im Juni 2001 rausgeschmissen, und verkauft hattest, inlusive der Kingsgate wieder 25% billiger zurückkaufen, wie Du damals gross verkündet hattest?

Noch was zur DROOY Lupo!

Es muss Dir in Deiner Aufregung entgangen sein, dass ich die Drooy in meinem Thread bei W:O zum ersten mal

***DROOY !!!! Strong bullish 3 day chart pattern !!!!***

http://www.wallstreet-online.d…ru&timeframe=-3650&page=0

bereits am 10. Januar 2002 bei einem Preis von 1.54$ zur Beobachtung empfohlen hatte! Danach ist Durban dann ruckzuck auf über 5.50$ gestiegen. Das waren über 260% Gewinn in weniger als 6 Monaten gewesen Lupo.

Dass die DROOY nun wieder für 1.85$ zu haben ist, das liegt hauptsächlich daran, dass der Rand sich innert kurzer Zeit im Wert mehr als verdoppelt hat, und dadurch die Durban nur noch mit Verlust produzieren kann. Falls Du dies alles vorhergesehen hast, wäre das einfach grossartig, nur frage ich mich dann, warum hast Du das nie geschrieben? Vielleicht habe ich's ja überlesen, dann kopiers doch bitte mal hier rein.

Gewettet habe ich mit Dir übrigens auch nie. Du wolltest zweimal mal vergeblich, mit mir eine Wette eingehen, das ist auch schon alles.

Nur im Nachhinein blöd rumzuschwatzen bringt gar nichts Lupo!

Den Göbbels gebe ich Dir hiermit wieder zurück, der passt viel besser zu Dir.

Gruss

ThaiGuru

Die Richtung stimmt!

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http://www.instock.de/Nachrichten/10147054.html

Die Chinesen und das Gold

Von Michael Vaupel

[Blockierte Grafik: http://mdb.instock.de/files/1155.jpg]

Die aktuellen Gold-Notierungen von gut 411 Dollar sind keine zwingenden Kaufkurse mehr (wegen der nächsten Widerstandszone bei 415/418 Dollar), aber grundsätzlich wird Gold seinen Weg nach Norden gehen, davon bin ich überzeugt.

Ein wichtiger Grund dafür: Wieder einmal China!

Der "World Gold Council" ist nämlich der Ansicht, dass der chinesische Appetit auf Gold dazu führen wird, dass der chinesische Goldkonsum von aktuell 200 Tonnen pro Jahr auf 600 Tonnen pro Jahr steigen würde. Das würde einem Anstieg der aktuellen weltweiten Nachfrage um 12 % entsprechen.

Hauptgrund dafür ist die letzte Phase der Deregulierung des chinesischen Goldmarktes. Denn wenn erst einmal die letzten Hürden für Goldkäufe von chinesischen Privatpersonen gefallen sind, dann wird deren Nachfrage nach Gold einen Sprung nach oben machen.

Warum sie Gold kaufen sollten? Nun, zunächst einmal sind die Chinesen weltweit DIE Sparer überhaupt. Sparquoten von 30 % des verfügbaren Einkommens sind keine Seltenheit (zum Vergleich: Im trotz aller Konsumaufrufe immer noch relativ sparsamen Deutschland liegt diese Quote bei rund 10 %, in den USA schwankt sie zwischen 2 % und leicht negativen Werten). In was für Anlagekategorien können die Chinesen ihr Geld anlegen?

Die Zinsen für Ersparnisse auf der Bank sind in China niedrig. Der Immobilienmarkt ist heiß gelaufen, hier könnten wir es sogar mit einer kleinen Blase zu tun haben. Bleiben Aktien - aber da können die Chinesen selbst nur in chinesische Aktien der Kategorien A und B investieren. NICHT in die von mir favorisierten H-Aktien (Unternehmen mit Sitz in Hong Kong, aber Geschäftsfeld in Festlandchina). Diese H-Aktien sind nur ungefähr halb so hoch bewertet wie die für Chinesen kaufbaren Aktien. Irgendwann einmal werden sicherlich auch die H-Aktien für Chinesen kaufbar sein, und dann werden sich die Bewertungen schlagartig angleichen (das ist auch mit ein Hauptgrund
dafür, dass ich das Setzen auf H-Aktien empfehle).

Da ist Gold eine gute Anlagealternative. Vergessen Sie nicht, dass Gold der chinesischen Tradition nach mit Reichtum, Glück und Glücklichsein assoziiert wird (ist ja ähnlich wie hierzulande). 20 % der Bevölkerung würden gerne in Gold investieren, wenn Sie es denn dürften, und zwar zwischen 10 %-30 % ihres Vermögens.

Klingt nicht viel? Naja, vergessen Sie nicht, dass "20 % der Bevölkerung" bei 1,3 Milliarden Chinesen rund 260 Millionen Menschen sind. Und die Chinesen haben mittlerweile laut Schätzungen rund 12 Billionen Yuan (gut 1,3 Billionen Euro) auf der hohen Kante, sprich gespart.

Fazit: Mittel- bis langfristig wird der Goldpreis weiter steigen! Deshalb hoffe ich darauf, dass der Goldpreis beim Anklopfen an die nächste Widerstandszone scheitert und dann noch einmal bis in den Bereich 400 Dollar zurückkommt. Das wären dann perfekte Kaufkurse für eine LONG-Positionierung. Alternativ dazu bietet sich zum sofortigen Kauf ein Gold-Discount-Zertifikat mit Cap bei z.B. 400 oder 420 Dollar an. Mit einem solchen Schein erhalten Sie bereits dann, wenn der Goldpreis am Laufzeitende nur diesen Cap erreicht hat, die Maximalauszahlung. Dafür sind hier natürlich nicht die großen Gewinne drin, sondern nur Zuwächse von maximal 10 % pro Jahr.

Michael Vaupel ist Autor des kostenlosen Newsletters "Trader's Daily". Weitere Informationen finden sie hier.

[ Mittwoch, 29.09.2004, 12:22 ]

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http://news.silverseek.com/TedButler/1096474594.php

China Confirms The Obvious

By: Theodore Butler

Once again, the COTs correctly depicted the market structure and foretold the price direction in silver. Following the tech fund long liquidation and sharp sell-off, the silver market rallied smartly once the tech funds were cleaned out, as suggested in last week’s article, "The Set-Up?" While it remains to be seen if this move turns into the "big one", where the dealers don’t sell short and we hit a selling vacuum to the upside, we will know soon enough.

It is encouraging that the 10 percent rally from the lows, so far, does not seem to be attracting big tech fund buying and, therefore, dealer short selling. Of course, that can change in a heartbeat, but daily volume and open interest changes suggest no worrisome buildup of tech fund longs and dealer shorts to date. This will remain good news as long as it continues. While this has nothing to do with real developments in the world of silver production and consumption, it is what moves prices. It is manipulation, but it is also reality.

Somewhat unusual in the encouraging lack of tech fund buying and dealer selling in silver, is that the tech funds have been buying in gold, with commensurate dealer selling. Therefore, the risk of a sell-off is growing in gold but not, yet, in silver. Perhaps, just perhaps, this might be signaling the certain coming divorce in the price action between gold and silver. Please be sure that this COT structure can change quickly and must be monitored daily.

Not surprisingly, it appears that the silver mining companies, specifically PAAS, CDE, HL and SIL, have missed a wonderful second chance to step up to the plate and buy some real silver on the telegraphed recent sell-off. At the very least, they could have used the occasion to speak out against the increasingly obvious silver manipulation. I’m afraid the managements of these companies just don’t get it. The feedback I get is that the vast majority of their shareholders are disappointed that management does nothing and pretends that all is well with how the price of silver is set on the COMEX.

While the shares of these companies should move in the same direction of silver itself, especially considering how few choices are offered to investors interested in silver mining equities, managements’ blind eye to the shenanigans in silver can have long term negative results. One of the key concerns for equity investors is confidence in management. It may prove hard for confidence in management not to be undermined given their current refusal to openly address the issue. Nothing is more important to the profitability of a resource company than the price of the resource. Shareholders know this simple fact, but it appears management has other thoughts.

While silver mine managements continue to under-appreciate the true value of their resource, they appear to be increasingly isolated. Others are coming to recognize just how valuable industrial resources will be in the future. Just this week, the state-owned mining company of China, Minmetals, announced it was interested in buying all of Canada’s largest mining company, Noranda, for roughly $7.5 billion (including existing debt). Make no mistake; this is a very significant acquisition. Noranda is a large world producer of base metals, including copper, zinc and silver. China is, or soon will be, the largest consumer of these and other commodities. China has also been on a shopping spree for Canadian energy supplies and other world producers of natural resources.

I would like to make a couple of observations and I would ask you to use your common sense to judge if my thoughts are on the mark. First, it should be clear that China sees that it will need increasing amounts of raw materials for as far as the eye can see. While we fret (in the US) about the current economic status and micro-analyze the latest statistics, China is putting vast amounts of cash on the table, betting in the strongest possible terms on continued world economic growth and long term demand for all industrial commodities.

Second, China is now buying resource producers or resources in the ground, because they have reached the limit for buying the resources themselves. They know they will need industrial commodities of all types, and while they certainly have the money to buy these commodities, they know they have a problem. There are not enough available raw materials compared to the Chinese buying power. China could not buy $7.5 billion of any commodity, because that dollar amount of any commodity simply does not exist. Furthermore, even though China buys very large amounts of all commodities, to aggressively purchase more would drive prices even higher, definitely counterproductive from China’s viewpoint. Buying producers and resources in the ground would appear to be their only alternative.

I find it interesting that China is attempting such a large acquisition of a Canadian producer. I think this has to do with the strong rule of law in Canada, compared to other areas in the world. I think China is taking a very long-term view and has thought-out the issue of nationalization or confiscation, in what may be a future world free-for-all for vital natural resources. I think China is smart to choose Canada, rather than Peru or Bolivia, for example.

Sometimes, messages are delivered in a plain, blunt manner. I think this acquisition of Noranda by China is such a blunt message. There will be a struggle over scarce and vital industrial resources from now on. No resource is more scarce or vital than silver. No resource is more "buy-able" than silver. No resource is cheaper. China has too much money, as do very many world entities, to buy a significant chunk of real silver without sending the price skyward. Unless you have hundreds of millions, or billions, of dollars to invest, you won’t get a clearer message for what to buy – real silver.

-- Posted 29 September, 2004

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Der wohl wichtigste Bond Manager der Welt , Bill Gross, bricht sein Schweigen, und wirft der US Regierung und der FED Zahlen Manipulation der Inflationstatistik, und GDP Zahlen vor!

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http://news.goldseek.com/GATA/1096470071.php

Bond Manager Bill Gross Joins the konspiratorial Kooks

By: Chris Powell, Gold Anti-Trust Action Committee Inc.

Dear Friend of GATA and Gold:

Add to the list of respectable people who are
starting to sound like GATA lunatics the
managing director of Pacific Investment
Management Co. (PIMCO), Bill Gross, who
is said to be the most important bond
manager in the world.

In commentary just posted at the PIMCO
Internet site, Gross addresses the fraud of
U.S. government inflation and productivity
statistics, an issue that, he writes, "no
rational money manager or economist wants
to answer for fear of becoming a fool, or a
conspiratorial kook."

There, there, Bill -- it's not all so bad.
Short your bonds, buy gold and silver, and
be called a kook all the way to the bank --
or, since the bank may not be there anymore,
all the way to the vault you've buried in the
back yard.

Excerpts from Gross' commentary:

Zitat

"Which brings me to a question that no rational
money manager or economist wants to answer
for fear of becoming a fool, or a conspiratorial kook.
Why do the U.S. government and the Fed
continue to foist this hedonic/substitution mantra
on a gullible public when they should know better
and when, by the way, no other government does
it in the same magnitude and with the same
conviction?

Alles anzeigen

Zitat

"Let me just answer it this way -- and hopefully not
seem foolish (or worse) in the process. Alan
Greenspan has a dual prerogative at the Federal
Reserve. He is charged with keeping inflation low
and economic output high. The magic of
hedonic/substitution adjustments keeps both of
these birds flyin' at the same time, one UNDER the
magical 2 percent radar, which marks the dividing
line between benign and worrisome inflation, and
the other (real GDP), OVER the hurdle of 3 percent
that suggests the continuation of high productivity,
along with its concomitant implications that the
stock market should be healthy, the dollar strong,
and all's well with the Greenspan legacy.

Alles anzeigen

Zitat

"Granted, Greenspan doesn't run the BLS, but he
pounds the table hard for hedonically adjusted
statistics. They might serve HIM well, but they do
a disservice to those grounded in the reality of
stretching a paycheck for new cars, laptop
computers, and cell phones that somehow haven't
gone down as much in price as the government
says they have.

Alles anzeigen

Zitat

"Deceptive hedonic/substitution adjustments also
serve a government burdened not only with hundreds
of billions of annual deficits as far as the eye can
see, but ladened with a demographically aging U.S.
workforce rapidly approaching Social Security time.
By fudging on inflation, they pay less and the
amount could cumulatively run into the hundreds of
billions over the next few decades. They disserve, of
course, all of those who receive Social Security, as
well as other private pensioners dependent on an
accurate accounting of prices paid. They disserve
buyers and holders of TIPS -- inflation-protected
securities -- which adjust inadequately to a faulty
and near fraudulently calculated CPI that one day
could total billions of dollars per year for TIPS
holders. And they disserve all owners of U.S.
Treasury obligations -- including foreign central
banks and institutions -- who mistakenly assume
that they are earning a real return over and above
inflation, and that the dollar upon which they are
denominated is justifiably strong because of GDP
growth and productivity numbers that are pumped
by hedonic magic to resemble the Arnold
Schwarzenegger of 1980 instead of his verbal "girlie
man" analogy of today.

Alles anzeigen

Zitat

"No I cannot sit quietly on this one, nor as I've
mentioned, have other notables in the past few
years. The CPI as calculated may not be a
conspiracy but it's definitely a con job foisted
on an unwitting public by government officials
who choose to look the other way or who convince
themselves that they are fostering some logical
adjustment in a New Age Economy dependent
on the markets and not the marketplace for its
survival.

Alles anzeigen

Zitat

"If the CPI is so low and therefore real wages in the
black, tell me why U.S. consumers are resorting to
hundreds of billions in home equity takeouts to
keep consumption above the line. If real GDP
growth is so high, tell me why this economy hasn't
created any jobs over the past four years. High
productivity? Nonsense, in part -- statistical,
hedonically created nonsense. My sense is that
the CPI is really 1 percent higher than official
figures and that real GDP is 1% less.

Alles anzeigen

Zitat

"You are witnessing a 'haute con job,' and one day
those gorgeous statistics, just like those gorgeous
models, will lose their makeup, add a few pounds,
and wind up resembling a middle-aged Mom in a
cotton skirt with better things to do than to chase
the latest fad or ephemeral fashion.

Zitat

"If those Moms are holders of government bonds based upon a benign outlook for inflation, they had
better cash some of them in, especially at today's
4.0 percent yield for 10-year Treasuries."

You can find Gross' commentary at the PIMCO
site here:

http://www.pimco.com/LeftNav/L…y/IO/2004/IO_Oct_2004.htm

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

----------------------------------------------------

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

----------------------------------------------------

-- Posted Wednesday, September 29 2004

Previous Articles by Bill Murphy

http://news.goldseek.com/GATA/

[Blockierte Grafik: http://wwwi.reuters.com/comX/images/reuters.gif]

http://yahoo.reuters.com/finan…15-13-16_wat001874_newsml

IMF calls on China to drop yuan currency peg

Wed Sep 29, 2004 11:13 AM ET

By Tim Ahmann

WASHINGTON, Sept 29 (Reuters) - The International Monetary Fund on Wednesday called on China to drop the yuan currency's tight peg to the dollar to help keep domestic inflation under control and bring more balance to the global economy.

Just days before a meeting between top Chinese economic officials and their counterparts from the Group of Seven rich nations, the global lender said the time was ripe for greater currency flexibility in Asia.

Zitat

"From both an external and a domestic perspective, the strong regional and global recovery, combined with buoyant export growth, would seem to provide near-ideal conditions for such a move," the IMF said its twice-yearly assessment of the global economy.

The call for currency reform steps up pressure on China to move away from its policy of holding the value of the yuan at 8.28 to the dollar, a peg U.S. manufacturers and labor groups have charged gives Chinese producers an unfair advantage.

In its World Economic Outlook, the IMF said dropping the peg could help keep inflation from knocking China's fast-growing economy off the rail.

Zitat

"Risks of overheating have not yet abated," the fund warned. "Further monetary tightening is likely to be needed, which would be aided ... by greater exchange rate flexibility."

The IMF said increased currency flexibility in Asia was one of three steps needed to improve the global economy's health. "Little progress has been made," it said.

REFORM PACE

Chinese Premier Wen Jiabao pledged on Tuesday to push ahead with efforts to make the yuan more flexibile, but his comments left analysts guessing as to how quickly Beijing might move.

China has repeatedly said its first focus needs to be on cleaning up its banking sector, turning around ailing state-run companies and creating jobs.

Chinese Finance Minister Jin Renqing and central bank Governor Zhou Xiaochuan are expected to defend that go-slow approach when they meet with G7 finance officials in Washington on Friday. A Finance Ministry official who declined to be identified said China was unlikely to announce any policy changes.

The meeting, a recognition of China's growing economic clout, will follow a formal gathering of officials from the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan.

Early this year, the G7 called for greater foreign exchange flexibility in Asia. A German delegation source said last week the G7 would likely reiterate that call on Friday.

The case for flexibility has been pushed with special vigor by the United States and U.S. Treasury Secretary John Snow has said he plans to press it again this weekend.

The U.S. Treasury has said, however, Snow is not planning to hold a bilateral session with the Chinese officials.

SLOWING DOWN

While raising the prospect of an economic overheating in China, the IMF said "a soft landing, which would maintain underlying growth momentum, appears achievable."

It said the Chinese economy was likely to grow 9 percent this year, just a touch below last year's pace, and slow further to register a 7.5 percent advance in 2005. In April, the fund had forecast growth of 8.5 percent this year and 8 percent in 2005.

The lender noted that economic growth had moderated in the second quarter in response to tighter monetary policy, but said activity remained strong and noted that business investment picked up again in June and July.

Although it warned on inflation risks, it said consumer prices should advance just 3 percent next year, after a 4 percent rise this year.